III.

Economic Activities

Nunavut’s economy is extremely small, contributing less than one-tenth of a percent to Canada’s gross domestic product. In 1996 the average personal income in Nunavut, based on tax returns, was C$26,680. Although this per capita income is higher than the Canadian average of C$25,952, it must be discounted somewhat because of the much higher cost of living in Nunavut and the higher level of unemployment and underemployment (people of working age who are not seeking work). Consequently, C$11,000 is a more realistic estimate of the per capita income of the Inuit residents in Nunavut. In addition to these income figures, approximately one-third of the population receives social assistance payments.

Nunavut’s economy has three sectors: traditional Inuit hunting and trapping, mining, and the service industry. There is no commercial agriculture or forestry in Nunavut because of the extremely cold environment, but locally caught fish and game, known as country food, are extremely important. Aboriginal families consume large quantities of fish and game that they obtain themselves; hunting, fishing, and gathering activities provide about 40 percent of the food consumed by Inuit residents. Hunting for caribou and seal is a traditional aspect of the Inuit culture that provides fresh meat for Inuit families. Estimates show that replacing country food with store-bought food would cost millions of dollars.

Nunavut is an expensive place to live and conduct business. Building costs are at least 60 percent greater and food costs at least 30 percent greater than they are in southern Canada. Costs are higher because building materials and foodstuffs must be transported to Nunavut from the south. Foodstuffs flown to remote communities, such as Pelly Bay in the northeastern central portion of Nunavut, cost nearly twice as much as they do in southern Canada. Food costs in the capital city of Iqaluit are 1.7 times higher than those in southern Canada. The Nunavut government administers a public housing program that owns more than 80 percent of the housing stock. Without such a program, less than 20 percent of Nunavut’s population could afford decent housing.

To offset the high cost of living, wages are higher in Nunavut. Additionally, government employees living in remote communities receive an isolated-post allowance payment. Such payments are necessary to lure skilled and professional workers to Nunavut from southern Canada. However, if the Inuit workforce develops the necessary labor and professional skills, southern workers will no longer need to be enticed to move north.

Because Nunavut has a weak economy, it is unable to generate sufficient jobs or sufficient tax revenue. Consequently, Nunavut is troubled with a high unemployment rate and depends heavily on financial support from the federal government. In 1999 the territory’s revenue was $620 million, 90 percent of which came from the federal government.

A.

Employment and Labor

In 1996 the size of Nunavut’s labor force was 9,595 people. About 85 percent were employed in the service sector, primarily as public employees. This underscores the central role of government in Nunavut’s economy and Nunavut’s dependency on federal funding. Construction and processing activities account for about 10 percent of the labor force, while about 6 percent of the labor force works in mining and trapping. The production of Inuit sculptures and prints provides a form of self-employment and an important source of income.

Together, the Nunavut and federal governments employ close to 60 percent of all workers, while the private service sector accounts for 24 percent. The dominance of the government in Nunavut’s economy goes beyond direct employment. For instance, building contractors and private service firms depend heavily on government business and contracts. With indirect employment by the government of Nunavut possibly as high as 25 percent, direct and indirect public employment totals about 85 percent.

Unemployment poses a serious problem and contributes to the social ills found in Nunavut. Without government activities, none of the communities, with the exception of Nanisivik, has a strong economic base capable of employing most people. The official unemployment rate of 15.3 percent in 1996 compared rather well with the rate of 11.7 percent in the Northwest Territories and Canada’s overall rate of 10.1 percent. However, these figures do not count people living in communities without any chance of employment, so the unofficial unemployment rate in Nunavut is much higher, perhaps double.

In the past, many of the mining and public sector jobs have gone to workers from southern provinces who had the necessary education, skills, and job experience. As a result, unemployment rates have been highest among Inuit workers, who often are qualified only for the less-skilled and lower-paying jobs. A major task confronting the government of Nunavut is to break this cycle of poverty.

B.

Fisheries

In 1996 commercial fishing in Nunavut was valued at around C$300,000 per year. Arctic char is the most important commercial fish. Most commercial fishing takes place at the mouths of the main rivers flowing into the Arctic Ocean and Hudson Bay. Cambridge Bay on Victoria Island and Rankin Inlet on Hudson Bay are major fish processing centers. Some fish are sold locally to retail stores, but most go to the Freshwater Fish Marketing Corporation, a publicly operated agency that sells fish to retail stores in Canada and the United States.

C.

Furs

The fur industry in Nunavut is based on seal and white fox. Trapping, once the core of Nunavut’s economy and the primary source of income for the Inuit, has lost much of its commercial importance. Seal hunting remains a major source of food, but demand for seal pelts in the world market has decreased. In 1983 and 1984 the value of fur production in Nunavut was C$700,000, but by 1995 and 1996 it had declined to C$300,000.

The reasons for the decline in the fur economy are complex. Fluctuations in the size of animal populations and in the prices for pelts played a role in the decline. In addition, the Inuit were relocated to settlements in the 1950s, and thereafter were less involved in land-based activities. Wages and transfer payments, including welfare and unemployment compensation, became more important sources of income than trapping.

Living in settlements had other negative impacts on trapping and sealing, as well as important social changes. Trappers had to travel long distances to traditional trapping and sealing grounds, which meant time away from their families. The nature of hunting also changed. Trappers began to use snowmobiles instead of dog teams, increasing costs. Trapping became an enterprise undertaken by a group of adult men, rather than a family enterprise in which each member had specific duties.

The major factor in the decline of the fur industry is the animal rights movement. International animal rights groups have worked to stop commercial seal hunting on the ice around Newfoundland and Labrador. These groups convinced the European Union to ban the importation of seal pelts, thus destroying the main market for these pelts. While the animal rights groups did not specifically target the Inuit hunters, seal hunting in the Arctic declined sharply. At the end of the 20th century, one source of income from hunting was the sale of polar bear licenses to wealthy big-game hunters from the south seeking to hunt these big game animals.

D.

Mining

Minerals are a nonrenewable resource, and mining is therefore subject to boom-and-bust cycles. When the ore is eventually exhausted and the mine closes, the loss of jobs severely affects the community and the region. Rankin Inlet suffered from such a closure when the North Rankin Nickel Mine shut in 1962. Now Rankin Inlet’s economy is almost totally dependent on the public sector—less than 30 percent is privately operated. Even the community-run fish-processing plant that handled 13 tons of fish in 1995 and 1996, with a commercial value of C$129,000, is part of the public sector.

In 1999 Nunavut had two lead and zinc mines. The Nanisivik mine on the northern tip of Baffin Island began production in 1974. Seven years later, the Polaris mine commenced mining operations on Little Cornwallis Island in the central part of the Arctic Archipelago. In 1996 these two mines generated C$300 million worth of the two metals. Both mines are troubled by transportation difficulties because a thick sheet of ice covers the waters surrounding these two islands most of the year. As a result, these remote mines receive supplies of equipment and materials by ship once every summer. On the return voyage, these ships transport the ore to smelters in Europe and the United States.

Most of the miners are flown into the mine sites from other parts of Canada. They work long hours for two weeks and then are flown back home for a week. This system, often called air commuting, is the preferred method of securing labor for remote mines because building a town is too expensive, and the mining operation often has a short projected life span (20 years or less). While air commuting has many advantages, it reduces the economic benefits of the mining operations for Nunavut.

E.

Manufacturing

Very little manufacturing takes place in Nunavut. Most manufacturing involves the processing of lead and zinc ore to remove waste ore and thereby produce a higher grade ore. Such processing is necessary because it costs less to ship the higher grade ore to smelters in Europe and the United States.

F.

Services

The service sector, which includes both private firms and public agencies, employs the largest number of Nunavut’s workers—about 8,500 in 1996. Most service-sector jobs are in the capital city of Iqaluit and in regional centers such as Rankin Inlet and Cambridge Bay. In 1996 the public service sector employed 4,175 people, or 44 percent of those in the labor force, including administrators, nurses, and teachers. The private service sector is primarily personal service, retail, and restaurant businesses. In total, the private service sector employed about 4,040 people (42 percent) in 1996.

G.

Energy

Large oil and gas reserves have been discovered in the Sverdrup basin in the northern part of the Arctic Ocean, but these reserves have not been developed commercially because of the high cost of extracting and transporting the oil and gas to southern markets. Until world oil prices reach US$40 per barrel, oil in the Sverdrup basin will remain untapped (the price of oil was less than US$15 per barrel in 1998).

H.

Transportation

The airplane is the main vehicle of transportation in Nunavut since no highways or railways extend from southern Canada into the territory. Air service reaches all communities as well as the two isolated mining sites. Ocean ships bring food and building supplies to about 80 percent of the communities and both mines; these ships also transport ore to foreign markets.

The transportation system has three main functions. The primary role is transporting people between communities in Nunavut as well as to places outside the territory; most of this is done by air. The secondary function is exporting minerals to Europe and the United States and importing the equipment and supplies required for mining. The third function is shipping consumer goods and foodstuffs from southern Canada to retail stores in Nunavut. Perishable foodstuffs are shipped by air, while nonperishable items can be transported by either air or supply ships.

I.

Tourism

Nunavut attracts many tourists, especially in the summer. The territory has two national parks: Quttinirpaaq National Park at the northern tip of Ellesmere Island, and Auyuittuq National Park on the eastern coast of Baffin Island. As part of the land claims agreement, Nunavut will obtain three new federally funded national parks. In addition, there are more than a dozen territorial parks, historic parks, and national historic sites. The national and territorial parks attract hikers, climbers, sport fishers, and others seeking the wilderness experience. Hunters also come to Nunavut for the unique experience of hunting polar bears.