• I looked at the effects of the shift from manufacturing on wages a while ago (here).

    I think an interesting question to ask is the counterfactual: what would average wages look like if the distribution of employment across sectors had stayed constant? If manufacturing jobs pay better than average, and if its share is decreasing, then does that compositional change drag down the average? Or are workers finding even better paying jobs, bring up the average? If you use 1987 as the base, then sectoral shifts generated a wage increase of about 2% between 1987 and 2004. Not spectacular, but not negative.

    I just spent some time looking at the data in CANSIM tables 282-0022, 282-0026, 282-0070 and 282-0072, and tried calculating the average hourly wage we’d have seen in 2005 using the relative weights of hours worked by sector and again by occupation type from 2002. I got tiny (less than .5%) increases both times. Strictly speaking, I should have got the *same* answer both times, so there may be a mistake somewhere – I’me not going to go to the wall with those numbers. But at least I got the same sign both times, so it might be a point worth exploring.

  • I suspect a lot of manufacturing job loss to date has indeed been offset by gains in some above average pay sectors and occupations – particularly finance and construction. However, few would anticipate the housing boom to have a continuing offset. Unfortunately, we seem to lack and evidence on what is happening to displaced manufacturing workers – who may not be experiencing what is happening in terms of changes at the margin in the total job market.

  • One thing that is a bit of a warning flag is the jump in the percentage of people working in the very lowest-paying occupations. The story may not be one in which the decline in manufacturing is reducing the average wage, but it’s very likely that it’s contributing to the increase in income inequality.

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