EclectEcon

Canada's manufacturing labour force has declined by over 11% in the past three years. Nevertheless, our unemployment rate is as low as it has been for decades and income per capita has continued to grow. The reason? Growth in high-paying jobs, especially in the oil patch but also in the finance and insurance industries. Steve Poloz has the details:

Nearly 260,000 manufacturing jobs have been lost since May 2004, a drop of 11.2%. Manufacturing output has fallen only 0.7% in the same three years, implying that average productivity per worker is up, but that is no consolation for the unemployed. Meanwhile, since May 2004, the non-manufacturing economy has created 1.1 million new jobs – which means that, after taking account of manufacturing job losses, the economy has added 860,000 new jobs.

Some treat non-manufacturing jobs with scepticism, describing them as part-time, low-paying and less value-creating than manufacturing jobs. These concerns are clearly worth examining.

First, consider the part-time/full-time split of the employment growth that has occurred. Of the 860,000 jobs created on net between May 2004 and May 2007, 750,000 are full-time, an increase of 5.8%. Part-time jobs are up 3.8%, so the share of full-time jobs is rising, not falling.

Second, consider the claim that new non-manufacturing jobs do not pay as well as the lost manufacturing jobs. The average manufacturing wage in Canada is about $936 per week, which is good money. Manufacturers of durable goods earn more, $978, while non-durables workers earn $851. What about the new jobs? Construction jobs are up by 187,000, and weekly wages are $919. Jobs in mining and oil and gas are up over 63,000 and pay $1,386 per week. Those two categories alone are roughly enough to replace the high-paying manufacturing jobs that have been lost since May 2004....

Of course, there have been new jobs created in the service sector of the economy as well. Finance and insurance are up by 108,000, at $985 per week. Professional and technical jobs are up 101,000, with an average wage of $978 per week. Education and health care have added 232,000 positions, at pay rates of $700-800 per week. And there are some 250,000 new jobs in retail trade, wholesale trade and the hospitality sector, where there is a wide range of salaries, but most of which would be quite a bit lower than those in the manufacturing sector.

Even a cursory glance at these numbers can explain why Canadian income growth has been strong despite the losses of manufacturing jobs. The claim, made by some, that non-manufacturing jobs are less value-creating....

The bottom line? The Canadian manufacturing sector has a good future, but it will look different from what it does today. The share of total employment in fabrication is declining, as in other countries, and as it has done for the last 50 years. The key is to ensure that both companies and workers have the tools they need to help them adapt to these challenging conditions.

I would add that they also need flexibility to adapt, and an important part of that flexibility comes with freedom from burdensome gubmnt restrictions that impede the flow of resources, especially labour, from declining to growing sectors of the economy.