III.

Economic Activities

The economy of the Northwest Territories is based on nonrenewable resources. The territorial economy is small, contributing less than 1 percent to the Canadian gross domestic product (GDP) in 1996. The small size of the economy and the high cost of delivering services to the residents of the Northwest Territories means that the federal government must provide around 90 percent of the territorial government’s budget. In 1999 the Northwest Territories had a budget of C$742 million, of which the federal government provided C$690 million.

Gold was discovered near Yellowknife in the mid-1930s, marking the beginning of the development of nonrenewable resources. Oil, gold, and diamonds are exported to markets in southern Canada, the United States, and other industrial nations. Oil production accounts for 20 percent of the territory’s GDP. Indirectly, these primary industries generate another 20 percent of the GDP by paying for construction work and transportation services. This narrowly based economy is subject to cyclical swings in global demand, making it vulnerable to a boom-and-bust type of economic instability.

In sharp contrast, renewable resources play a minor role, accounting for less than 1 percent of the GDP of the Northwest Territories. Trapping, once the core of the northern economy and the primary source of cash for indigenous peoples, has become much less important. Tourism, on the other hand, is a growing service industry. In 1996 the leading commodities by value were oil, gold, sand and gravel, natural gas, silver, fish, timber, and fur. In 1998 another mineral, diamond, was added to the leading commodities produced in the Northwest Territories.

Northern Canada, including the Northwest Territories, is an expensive place to live. Housing is at least 60 percent more expensive in the north than it is in southern Canada. Food prices are also higher, by at least 20 percent. Since building materials and foodstuffs are imported from the south, the higher prices are primarily due to transportation costs. Communities far away from Yellowknife have higher costs, and communities served only by aircraft have the highest food and housing costs. For example, foodstuffs shipped by air to remote communities such as Sachs Harbour on Banks Island are 80 percent more expensive than they are in Yellowknife. To offset these high food and housing costs, wages are higher than those in southern Canada. In addition, most people live in public or staff housing, where rents are subsidized. Government employees living in remote communities receive an isolated-post allowance payment to help offset the higher cost of living.

A.

Employment and Labor

The labor force in the Northwest Territories is made up of about 18,000 people. This labor force is divided into three parts: primary (mainly oil production and mining), secondary (processing and construction activities), and tertiary (government and private firms providing services to the public). The largest employer is the tertiary sector (82 percent), followed by the primary (16 percent) and then the secondary sector (2 percent). The federal, territorial, and local governments employ about half of the service workers, and others are employed by private businesses such as restaurants, hotels, retail stores, and transportation firms. In 1996 the unemployment rate in the Northwest Territories was 12 percent, but this figure does not reflect wide variations by community. Lower rates occur in the larger towns and mining centers, and higher rates exist in smaller settlements, especially those inhabited mainly by indigenous peoples.

B.

Agriculture

Agriculture is almost nonexistent in the Northwest Territories. Except for a few small vegetable gardens south of Great Slave Lake, there is no commercial agriculture. The reason is simple: The Northwest Territories has an extremely cold environment, making agriculture extremely difficult and costly. As a result, the north is a food deficit region. Almost all food products available in northern stores are imported from southern Canada, with the main exceptions being locally caught fish and game. Indigenous families continue to consume large quantities of fish and game that they obtain by fishing and hunting. This food is known as country food.

C.

Fisheries

Most commercial fishing takes place on Great Slave Lake. The main commercial species are lake trout, whitefish, and pickerel; other fish caught include arctic char, arctic grayling, and northern pike. People sell these fish to the federally operated Freshwater Fish Marketing Corporation, which sells them to retail stores across Canada and the United States.

D.

Furs

The fur trade was once the dominant economic activity in the Northwest Territories (see Fur Trade in North America). However, fur trapping declined in the mid-20th century for a number of reasons. One major reason was the relocation of indigenous peoples into settlements in the 1950s. Since then, fewer and fewer young people have chosen trapping as a way of life, partly because they have lost the skills of their ancestors and partly because they prefer to remain in settlements, where they can find employment or receive welfare. Other factors include low and fluctuating fur prices and the actions of the antifur movement, which have had a negative effect on the fur market in America and Europe. In 1983 the number of pelts produced was 200,000; by 1997 the figure was 50,000. The total value of furs trapped has declined over the same time period, from C$3 million in 1983 to C$1.5 million in 1997. Despite this decline, fur trapping remains an important activity for indigenous peoples living in remote communities. The three top fur animals by value in 1997 were marten, wolf, and beaver.

E.

Forestry

The boreal forest stretches across one-third of the landmass of the Northwest Territories. In area, this forest makes up 6 percent of the forest lands of Canada, but it makes up less than 1 percent of the country’s commercial forests. The reason for this difference lies in the cold environment that turns much of the forest into scrub that is suitable only for firewood. One exception is the stands of black and white spruce that grow in the river valleys of the upper Mackenzie River and the Slave and Liard rivers. Within the valley environment, the deeper soils and warmer summer temperatures combine to produce mature stands of timber. From these stands, logs, lumber, and fuelwood are produced for local markets.

F.

Mining

Gold and diamond mining forms the backbone of the mineral industry in the Northwest Territories. Three gold mines are in operation: the Con and Giant mines at Yellowknife, and the isolated Lupin mine 400 km (250 mi) northeast of Yellowknife. In 1998 the value of gold production was C$53.8 million. Miners working at the Con and Giant mines live in Yellowknife; miners at the Lupin mine may also live in Yellowknife, but some live in Edmonton, Alberta, and are flown to and from the mine on a weekly basis.

Diamonds were discovered in 1991, starting one of the largest staking rushes in Canadian history. Within seven years the Broken Hill Proprietary (BHP) mining company had built two diamond mines just south of the Lupin gold mine. The value of diamond output is expected to exceed the value of gold production in the Northwest Territories.

Mining is a nonrenewable industry and subject to a boom-and-bust cycle. Eventually the mined product is exhausted, and the mine closes. In some cases the mining town is abandoned and becomes a ghost town. For example, from 1965 to 1987 Pine Point, south of Great Slave Lake, was an important lead- and zinc-mining town with a booming economy. In 1987 the mine closed, and the town was abandoned.

G.

Manufacturing

Very little manufacturing takes place in the Northwest Territories. Most manufacturing involves the processing of mineral ore; that is, separating gold and other valuable minerals from the mined ore. Gold is melted and poured into brick-shaped containers. The gold bricks are then shipped by air to southern buyers. A new manufacturing business—diamond cutting and polishing—began in Yellowknife in 1999.

H.

Services

The service sector consists of private firms and public agencies. Together they employ the largest number of workers in the territory. Both have most of their office staff in Yellowknife. Federal and territorial government agencies are also located in regional centers such as Hay River, Fort Smith, and Inuvik, and in smaller administrative centers such as Fort Simpson and Norman Wells. Government agencies employ 7,000 civil servants, teachers, and hospital workers. The private service firms employ a similar number, particularly in the personal services (such as accounting, dentistry, medicine, and real estate), retail, and restaurant businesses.

I.

Energy

Oil is produced at Norman Wells, located on the east bank of the Mackenzie River, and natural gas is produced in the southwest corner of the Northwest Territories. In 1997 the value of oil and natural gas production was C$235 million and C$10 million, respectively. Pipelines transport both oil and natural gas to southern Canada, where they are distributed to markets in southern Canada and the United States. Large oil and gas deposits exist in the Beaufort Sea and near the Mackenzie River delta. Because the cost of producing and transporting Beaufort oil to world markets is well above the world price for oil, these oil fields remain undeveloped.

J.

Transportation

The transportation system of the Northwest Territories has three main functions. The primary function is to allow people to travel between communities in the Northwest Territories and to other regions of Canada and the world. The secondary function is to export the region’s oil, gas, and minerals to southern Canada and the United States and to import equipment and supplies needed by the energy and mining industries. The third function is to ship consumer goods and foodstuffs from southern Canada to retail stores in the Northwest Territories.

Air transportation reaches all communities and isolated mining sites, and riverboats service about 80 percent of the communities, primarily those along the Mackenzie River and the Arctic coast. Highways and roads that can be used in the winter extend to more than half of the settlements, and rail transportation ends at Hay River on the south shore of Great Slave Lake. Pipelines ship oil and gas to southern destinations. Aircraft are used to transport miners to and from the isolated Lupin gold and BHP diamond mines on a weekly basis. Food, equipment, and supplies are trucked to the mine sites along a winter road that begins at Yellowknife.

K.

Tourism

The Northwest Territories attracts many tourists, especially in the summer. Tourists come for a variety of reasons. Hikers are attracted to Nahanni National Park Reserve in the southwest, where they can explore the wilderness. Sport fishers and hunters seek the experience of catching arctic char or hunting a polar bear. Other tourists just come to see this unique part of the world. Many tourists are fascinated by the aurora borealis (northern lights), an electric discharge in the atmosphere powered by solar wind and Earth’s magnetosphere. Japanese tourists, especially young couples, come to Yellowknife in the winter to enjoy the northern lights, which they believe will bring them good luck and increase their chances of having children.