Trends in Manufacturing Employment

From 2004 to 2008, more than one in seven manufacturing jobs, nearly 322,000, disappeared in Canada. At the same time, job growth in other industries has been relatively strong. In fact, from 2004 to 2008, over 1.5 million jobs were created in the rest of the economy — a growth of 11%. The national unemployment rate through 2007 and 2008 was also regularly among the lowest in the past 30 years. Manufacturing is clearly faring worse than the rest of the economy.

Canada is far from being the only country having to deal with a downturn in its manufacturing base. The United States, which continues to be Canada’s largest trading partner, lost close to one-quarter (4.1 million) of its manufacturing jobs between 1998 and 2008.

The vast majority of other Organisation for Economic Co-operation and Development (OECD) member countries have also recorded major job losses in this industry in the past few years.

From 1990 to 2003, employment in manufacturing decreased by 29% in the United Kingdom, 24% in Japan, 20% in Belgium and Sweden, and 14% in France.

Ireland was the only country to experience impressive growth (25%). However, this growth was in the specific context of an influx of foreign investment and a service sector that grew even more rapidly than manufacturing. Mexico, Spain, and, to a lesser extent, Canada and New Zealand were the only other countries to increase manufacturing jobs from 1990 to 2003. The last available year for purposes of international comparisons being 2003, the result for Canada does reflect the significant job losses since 2004. The share of manufacturing in total employment has regressed persistently in almost all OECD member countries. This is not a recent trend. For example, in the early 1970s, more than one in five jobs in the United States were in manufacturing. In 2003, this proportion barely exceeded 11%. In the United Kingdom, over 30% of jobs in the early 1970s were in manufacturing. In 2003, this proportion dropped to 12%.

Over the long term, the proportion of service-sector jobs has increased while manufacturing’s share has declined in almost all OECD countries. This phenomenon, if it can explain the long-term trends in the relative share of manufacturing jobs in total employment, does not explain the decline in the absolute number of manufacturing jobs.

As manufacturing activity has declined in relative importance in OECD countries, China has become the world centre of manufacturing employment. In fact, the number of workers in manufacturing in China was estimated at 109 million in 2002, which represents more than double the combined total (53 million) in all of the G-7 member countries.

Demographics (in particular the aging of the population observed in almost all developed countries) contribute to the increase in demand for services at the expense of manufactured products. In fact, the total final demand in numerous OECD countries shows a progressive decrease in the demand for manufactured products.

When productivity growth in manufacturing is greater than that in the services-producing sector, a reallocation of manufacturing jobs to the service sector can be expected. In the United States, for example, labour productivity growth in manufacturing was far greater than that in the entire non-agricultural economy since the 1970s, contributing to a decrease in the importance of the manufacturing industry in employment. Increased productivity means that a firm can produce the same quantity of goods with fewer workers, which can lead to job losses.

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