The death (or dearth?) of manufacturing

Stats Canada came out yesterday with a study on the decline of manufacturing in Canada.   Being the lemmings that we are and the fact that the media in Canada is edited by Geraldo these days, this type of study leads the ‘experts’ to predict the fall of manufacturing in Canada and they tell us to embrace the ideas economy.  Forget manufacturing, ideas and creativity are the engine of the 21st century economy.  Richard Florida has got himself a new castle from which to convince us all that the future is in creative food service workers.

But I wouldn’t ring the death knell on manufacturing just yet. From 1998 to 2004 Canada added 200,000 new manufacturing jobs.  It is true that we lost more from 2004 to 2008 than were created from 1998 to 2004 but look at the sub-sectors.  Forestry manufacturing jobs are down 57,000 – the largest decline of any industry.  That is tied almost exclusively to the U.S. housing market and recession.  When that turns around – many of those jobs will be back (you can’t move the trees to China).  Clothing and textile products manufacturing is down and that is likely not coming back.  Auto is down but certainly not out.

How this translates into public policy is a serious concern to me.   First, there will be manufacturing in North America.  Millions of jobs over the next generation will be created in manufacturing in Canada and the United States.  If economic development policy makers start taking Richard Florida seriously they will ignore these jobs and let them all go to Alabama with serious economic consequences.  There will be many jobs in green energy, aerospace and defence, computer equipment, heavy industries, etc. that will be created.  The growth rate may be slower than in the past but they will be there.

And you can’t forget the economic multiplier on manufacturing.  A call centre agent needs a telephone and a computer to do his/her work (imported from China).  That’s it.  An automobile assembly plant needs mining, steel and aluminum production, metal plating, coating, bashing, oodles of transportation, painting and then assembly.  For every paper mill job gone, drop 3 in the rest of the economy.  That multiplier goes up to 4 or 5 with auto manufacturing.

The silver lining here, if there is one, is that if Ontario and Quebec decide to ignore manufacturing in favour of merging food service workers with the Cirque du Soleil, that should leave opportunities for places like New Brunswick.   Virtually all of the non-natural resources based manufacturing growth has been in Ontario and Quebec over the past 20 years – and more.  If NB can become a hub of green energy systems manufacturing because the big provinces don’t care than that might be a win.  But it would be a win-lose.  Ontario’s amazing economic growth for almost a century has been driven in large part by manufacturing. 

Lastly, don’t take me to the opposite extreme.  I love creative industries and think there are tremendous possibilities (although Richard Florida’s pollyannish ideas of making all work meaningful and exciting are poppycock).  I would love to see New Brunswick build up its ICT and life sciences industries and create high value ideas-based work that attracts skilled workers to the province.  But not at the expense of other important sectors.

4 thoughts on “The death (or dearth?) of manufacturing

  1. I agree with your skeptical view of Florida’s theories but I’d like to point out another aspect of this story. Florida is a disturbing example of what happens when someone with a bit of ambition lands on easy street in the Canadian university system.

    Professors have their salary and benefits paid by the taxpayers (through the university) and then the taxpayers provide them with access to billions in research dollars through a variety of grant programs. Then professors have the opportunity to make extra income with sideline businesses.

    Think about it David. Where else could you get a healthy full time salary, be afforded time and access to special funding programs designed to facilitate your research interests then, if you do something relevant, your employer allows (even encourages)you to run a business so you can profit from your research.

    My point is not to beat up the professors; who can blame them for taking advantage of such a sweet deal. My point is the price for this is being borne by our students. Our university students have it all wrong looking to the taxpayers to dig deeper to further subsidize their tuition fees. How much lower could the tuition fees be if the profits from publically funded research were used to offset university costs? While our students struggle to get their education and graduate with $60,000 student loans, their professors can buy castles with the profits earned from publically funded research. Isn’t something wrong with that situation?

  2. I suspect in Florida’s case, however, he makes the bulk of his money from book sales and speaking engagements. He also has a consluting firm that bills top dollar for his words of wisdom. The first time I saw him speak in Halifax, he looked to me like a rock star.

  3. I think you are right about Florida’s funds coming mainly from books, etc. No doubt he get paid a good dollar as well.

    I don’t think that the ‘Florida problem’ is, in general, a consequence of the academic way-of-life. He is really a product of the business school mentality. There a lot of bright people in business schools; trouble is, for the most part, they just were not very well schooled in data analysis. A great many of them went thru faculties where opinions mattered more, or as much as, good data. As a result, rhetoric and the ability to present a ‘novel’ approach (often done thru media rather than scholarly publications) are the dominant forces in many business schools. Marry that with the funds from the business community and you have a toxic mess. I was very disappointed to learn recently that the feds seem to be directing more funds into these business schools and away from R&D. That’s bad, very bad.

    Normally, when donors give universities funds for this or that subject area, that is taken as a sign that the universities (and governments) should also invest in those areas. As a result, lots of money has flown into business schools, ‘prosperity institutes’, etc over the past few decades. Money ill-spent, IMHO. We’d all be better of today, if those dollars has been spent on real innovation in science and engineering.

    The firs poster does have a point, tho, regarding the position that tenured staff find themselves in these days. There will always be a certain percent who ‘game’ the system. I’d say that we need to be demanding more evidence of excellence from uni staff.

    Re the potential benefit to NB if ON and QC jump onto the Florida bandwagon, perhaps we should be getting our business faculties here to train thousands of little Floridas. With the proviso, of course, that they move to ON after graduation. We’d get the training dollars, plus we’d get manufacturers moving here in desperation.

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