Manufacturing Does Matter
Andrew Sharpe has published an interesting new study on the marked slowdown in Canadian labour productivity growth from the early 200s.
He decomposes the decline in productivity growth into changes at the detailed industry level, and finds that the majority (53%) of the slowdown in productivity growth between 1997-2000 and 2000-2007Â is attributable to changes in manufacturing, with the lion’s share of that being the result of large declines inÂ transportation equipment and computers and electronics. (By extension, the productivity decline was hugely concentrated in Ontario.)
The major explanation put forward is that large drops in capacity utilization in these sectors – mainly caused by a marked fall in exports as the exchange rate of the Canadian dollar rose against the US dollar – resulted in significant declines in overall efficiency and loss of economies of scale.
It is pretty striking that manufacturing, which now employs just 10% of workers, can be responsible for such a large share of the widely lamented fall off in productivity growth.