Manufacturing and Construction

Recent commentaries from CIBC and Export Development Canada argue that the manufacturing crisis is not eroding job quality. Both note that a surge in construction employment, added to the relatively few new jobs in non-renewable resource extraction, nearly equals the number of manufacturing jobs lost in recent years.

As emphasized on the front page of yesterday’s Financial Post, this argument contradicts what the Canadian Labour Congress has been saying. It also contradicts a previous CIBC study that linked an overall decline in job quality to reduced manufacturing employment.

The more recent CIBC document and Export Development Canada’s document overlook a critical fact: average hourly wages (for hourly-paid employees) are more than 10% higher in manufacturing than in construction. Including overtime, manufacturing paid $23.61/hour and construction paid $21.20/hour in May 2007. Excluding overtime, these figures were $22.90 and $20.46 respectively.

Certainly, increased construction employment is good news. The building-trades unions, supported by the labour movement in general, are working to improve construction wages. However, the fact remains that replacing manufacturing jobs with construction jobs tends to reduce average wages.

Another important difference is that, whereas manufacturing employment is rooted in particular communities, construction employment is temporary because it is tied to particular projects. Construction and non-renewable resources are notoriously volatile. Canada’s current position at or near a cyclical peak in these sectors does not compensate for the underlying loss of stable manufacturing jobs.

One must also ask why Export Development Canada would seek to downplay the manufacturing crisis. Could it be because the federal government is currently negotiating a “free trade” agreement with Korea that would eliminate even more Canadian manufacturing jobs?

The loss of jobs in manufacturing, an industry heavily engaged in international trade, reflects poorly on Canadian trade policy. It seems odd that Export Development Canada’s countervailing success story is construction, the classic non-tradeable industry.

UPDATE (June 28): The following letter was printed in yesterday’s Financial Post:

Job quality declining (June 27, FP 17)

Re: Most New Jobs Full-Time, High Pay, June 25

Contrary to statements in Jacqueline Thorpe’s article, declining job quality is not a myth. The article presents Stephen Poloz of Export Development Canada as arguing that the manufacturing crisis is not eroding Canadian job quality. This analysis misses at least two important points.

First, over the past year, more Canadians have taken up self-employment than have found jobs paid by an employer. While rising self-employment may reflect ingenuity and a strong work ethic among Canadians, it also implies that Canada’s labour market is not creating enough paid positions.

Second, construction and non-renewable resources (mining, oil and gas) are notoriously volatile and cyclical. Canada’s current position at or near a cyclical peak in these sectors does not compensate for the underlying loss of stable manufacturing employment.

Given CIBC’s conclusion that Canadian employment quality has fallen to its lowest level since the early 1990s, why would Export Development Canada seek to play down the manufacturing crisis? EDC’s argument mirrors the federal government’s denial that the trade agreement it is negotiating with Korea would eliminate even more Canadian manufacturing jobs.

Ken Georgetti, president, Canadian Labour Congress


  • This all seems to boil down to an argument for taxing the non-manufacturing part of the economy in order to subsidise manufacturers. Offhand, this looks like an impossible case to make.

  • The question to my mind is to what extent cdn manufacturers are using the high dollar as an excuse to geographically reallocate production. It may be that the high dollar simply accelerated existing plans for off shoring. If such is the case then even sans a high dollar we would be eventually witnessing a hollowing out of manufacturing. This creates a real policy problem because any industrial policy requires that cdn manufactures intend / want to stay in Canada.

    That said, I just do not see why the BOC is so intent on solving Alberta’s inflation problem by stalling growth in the ROC and encouraging the savaging of manufacturing.

  • If you examine the LFS and compare say the period of april 2002- May 2007, using an annualized average for both the base 12 months of 02/03 and last 12 months of 06/07 results in the net employment level changes as follows. I choose this period as it is the one that seems to follow the dollar’s rise and is demoted a the beginning of the manufacturing hollowing out, it also lines up with the latest monthly report.

    construction 208,800
    manufacturing -211,000

    So at one level the report is accurate. However, comparing the two in some kind of substitute employer dimension is quite simply wrong, and on many levels.

    1) employment in construction is non-sustainable, it is not an original wealth creation activity, therefore it must ride on the back of something, potentially in this era it is debt financing and the sustained low interest rate policy that we have benefited from over the last several years, that seemingly has come to an end.

    2) The construction industry is highly seasonal.Just look at the following chart for evidence of the annual swings in employment counts. I recently looked into the EI statistics and the construction industry is by far the biggest net gainer of transfers from the EI fund. I am not looking at number of workers here, although that would probably hold as well, but from an employer perspective. If you add up all the money put into the fund by employers and then look at the NAICS that employees are predominantly attached to the construction industry receives the largest slice of the EI pie by far. Even larger than the fishing industry. So as far as the quality of employment issue goes, if seasonal work rates high on your assessment or scoring criteria then construction work is definitely of that nature.

    I could go on…

    and maybe I will later.

  • sorry that last item I was referring to claimants not employees who make a claim at some point through the measurement time line and the NAICS that the Employer, in this case construction, is attached to. I am sure there is a report laying around somewhere that supports and documents the extent of seasonality within this industry and some of the intricacies and unevenness experienced by workers within this space. (especially with the reduction in EI benefits from a few years back)

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