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The early economics of the Yukon a product of isolation

As a cost-cutting measure, the federal government has decided to stop producing the penny - it's too expensive to manufacture, they say.

As a cost-cutting measure, the federal government has decided to stop producing the penny - it’s too expensive to manufacture, they say. It won’t be the first time that the penny was absent from the currency of the territory, but most readers are not old enough to recall the original circumstances.

In the early days, elder John Gould told me, there was no coin smaller than a quarter circulating in Dawson City, a result of the high cost of goods, and transportation back then. So the disappearance of the penny from the tills of Dawson City businesses should be no great surprise to older Klondike residents.

The economic practices of Dawson City were dictated by its unique circumstances. It was separated from civilization by distance and extreme weather. Once winter wrapped her icy cloak around the little town at the mouth of the Klondike River, it was cut off from the Outside. The only way out in the winter was for a traveller to sit in an open sleigh, exposed to the weather for a week or more, as a team of horses (later replaced by Caterpillar tractors) pulled it over the winter road to Whitehorse. All supplies were ordered in bulk, and delivered to the town before the last steamer of the season departed in the fall.

Food of the highest quality could be found on the shelves of the stores in Dawson. Before the highway was built, the cost of transportation was high, and because of this, it was too expensive to ship goods (except gold, of course) to the Outside. Once the cost of transportation was factored in, the difference of a penny or two between mediocre and good-quality products wasn’t important to the shelf price of the goods, as long as they came in a box or a can.

That is also the reason why the silent movies shipped to the Dawson theatres in the early days ended up buried in permafrost below the community hockey arena, to be recovered 50 years later with much fanfare, rather than being shipped back to the southern distributor.

The early economy of Dawson City was peculiar in other ways. Unlike major communities in southern Canada, it was in a state of population decline. From a peak of perhaps 15,000 inhabitants during the gold rush, it sank to 5,000 people, and then 2,000, and then a 1,000. Like the population, the property values were on the decline until recent times. Abandoned buildings were not torn down; they became an integral part of the urban landscape of the northern town.

For the same reasons of isolation and distance, Dawson old-timers assured me, when someone purchased a home in the early days, it often came completely furnished. The people departing town took only the essentials when they left. The arriving tenants would frequently be greeted upon entering their new home by a cheery fire in the stove, and the kettle on top of it boiling for tea.

In 1943, a bow decker for the YCGC tried to ship his washing machine outside when he left for the winter after working for the dredging company. Since it was cheaper to buy a new machine in Vancouver, suspicious officials inspected it and discovered that the man had filled the inner workings of the machine with $12,000 worth of gold that he had stolen from his employer. He received four years in the slammer for his trouble.

Most of the working people in town were in some way influenced by the YCGC, which was the biggest employer in the territory for decades. Due to the extreme weather changes, dredging was a seasonal activity and most of its employees were laid off in the fall and hired back in the spring.

The economy of the entire community was predicated by these seasonal fluctuations. Credit was extended to families through the winter months, in the full knowledge that the debt would be repaid in the spring when the men were hired back to work out in the goldfields.

Many men remained out of town all summer working seven days a week. They assigned power of attorney to one of the two banks in town, which received invoices from local businesses and paid the bills on their behalf from their accounts, into which the YCGC deposited their monthly paycheques. All of this was done entirely in the men’s absence.

While that may seem to be an odd way to handle finances, at least there were jobs. The dire effects of the Great Depression did not have an impact on Dawson City, where there was employment for anybody hardy enough to live through the long, cold, dark winters and willing to work hard seven days a week in the summer.

The town was well aware, and usually accepting of, the peculiarities of its citizens, but this intimacy sometimes intruded into the personal realm. The water and sewer system, and the electrical system were both operated by the YCGC for many years. Under the eagle eye of the woman who managed this operation and ran the accounts, customers might find their water bills increasing without explanation.

When an occasional irate customer confronted her about the increased water bill, she would simply point to a next-door neighbour, who had just returned to town, and having no water service of his own, she reasoned, had to be getting his water from somewhere. Consequently, the customer with the hook-up to the water supply next door was charged for double usage!

Technology has changed and Dawson City is in closer touch with the Outside than it used to be, so I can’t foresee a return to these unusual practices - except for the penny, of course!

Michael Gates is a Yukon historian and sometimes adventurer based in Whitehorse. His new book, Dalton’s Gold Rush Trail, will be available in May. You can contact him at