Informetrica on Manufacturing
The United Steelworkers have put out the following press release:
Research confirms value of manufacturing to Canada’s economy
TORONTO, Oct. 4 /CNW/ – An interim report on manufacturing prepared by Ottawa-based econometrics firm Informetrica shows that manufacturing plays an important role in supporting all sectors of the economy, and has been hurt by both the recent appreciation of the dollar and by increased offshore imports.
The United Steelworkers (USW), the Ontario Federation of Labour (OFL) the Quebec Federation of Labour (FTQ) and the Canadian Labour Congress (CLC) retained Informetrica to examine the impact that manufacturing has on the economy. The initial phase of the research is now complete.
The research indicates that economic activity in manufacturing makes a huge contribution to the service sector, the high tech sector and to government revenue. In other words, a strong manufacturing sector is good for all Canadians.
“The research so far confirms what we have said all along about the need for an industrial strategy that preserves a value-added manufacturing economy,” said USW National Director Ken Neumann.
Wayne Fraser, USW Director for Ontario and Atlantic Canada, said the Ontario Liberal government of Dalton McGuinty “has wasted four years while jobs have drained out of the province and the country.”
OFL President Wayne Samuelson added, “Something is seriously out of whack when statistics show that the unemployment rate is low but poverty is increasing. It means good jobs are quickly being replaced by very bad jobs.”
The Informetrica data prove that a strong manufacturing sector creates not only manufacturing jobs, but service sector jobs too. The study shows that if conditions were created so that manufacturing exports over the last four years had increased by roughly 3.3 per cent, about $10 billion in each year, there would be the following impact on employment:
<< 1. a total of 134,000 manufacturing jobs would have been created directly; 2. another 134,000 would have been created indirectly as the exporting manufacturers buy other manufactured inputs; 3. 49,000 jobs would have been created in resource and other goods sectors; 4. some 144,000 service sector jobs would have been created; 5. total jobs created would be 462,000. >>
From 2002 to 2006, manufacturing accounted for between 55-61 per cent of all business spending on research and development. Manufacturers in Canada make up over half of all business spending on R and D even though, as a group, Canadian manufacturers lag behind most of their counterparts in other developed countries. If the future of work is in high-tech jobs, Canada should not only work to strengthen manufacturing, but create policies to encourage manufacturers to do more R&D.
The study shows that a strong manufacturing sector provides a boost to social programs. That same 3.3-per-cent increase in manufacturing exports would have increased government balances by $4.4 billion per year. The balance benefit for the federal government and public pensions would have been $2.5 billion, with the improvement for provinces and municipalities amounting to $1.9 billion. The increase in the amount of money available to the provincial and municipal governments balances in Ontario would be $900 million per year.
Offshore imports replacing North American made products
The two markets that matter most to Canadian manufacturers are the Canadian market and the US market. China’s share of Canadian imports increased from 4.6 per cent to 8.7 per cent from 2002 to 2006. Their share of manufactured imports rose from 5 per cent to almost 10 per cent. At the same time, the US share of Canada’s manufacturing imports went from 65.1 per cent to 58.4 per cent. In the US, Canada provided 18 per cent of imports in 2002, but only 16.4 per cent in 2006. Meanwhile, imports to the US from China increased from 10.8 per cent to 15.5 per cent.
The dollar problem
The rapid increase in the value of the Canadian dollar, especially relative to the US dollar, has been the other big factor. Informetrica simulated the Canadian economy assuming the exchange rate stayed at the 2002 level. There would have been some negative effects, as inflation would have been higher than it was, but there also would have been many positive effects. Corporate profits would have been higher, wages would have been higher and unemployment would have been lower. Their analysis shows there would have been 355,000 more manufacturing jobs today and there would have 582,000 more total jobs.
Job creation in a global economy
Manufacturing jobs can be created in Canada in a global economic environment. In fact, there have been three periods of strong growth in manufacturing jobs in the last 30 years.
In the late 1970s, the late ’80s and from 1995 to 2002, Canada had strong growth in manufacturing employment. In the last period of growth, which ended just five years ago, manufacturing employment grew by 2.7 per cent a year.
Government is not powerless to act, but they must choose to act. There are many ways to encourage a stronger manufacturing sector:
<< 1. Ensure that the “macro” economic environment is growth oriented. There are some drivers of the exchange rate that are beyond the control of the Canadian government, but since monetary policy is a contributing factor – government should keep interest rates low. Canada could also work with other countries to encourage upward revaluation of the Chinese Yuan.
2. Develop a “manufacturing strategy” to encourage value added production by:
a. Providing tax incentives for business investment in plant & equipment and research and development;
b. Strengthening workplace training and education;
c. Developing transportation and communications infrastructure;
d. Implementing “buy Canadian” programs at the provincial and municipal level;
e. Implementing energy policies that ensure low-cost supplies to industrial users.
3. Develop trade strategies that will create more jobs at home.
a. Negotiating measures in trade agreements that encourage value added production of resources before they are exported.
b. Tougher application of anti-dumping and countervail laws,
c. Aggressive application of environmental and health related standards on imports.
d. Negotiate trade agreements with requirements that exporting countries must meet ILO Labour Standards.
e. Create domestic trade laws that allow Canada to define unfair trade in broader terms.
For further information: Ken Delaney (USW), (416) 544-5952; Mike McCracken (Informetrica), (613) 238-4831