Whither manufacturing in New Brunswick?

From a recent TJ column:

In 1978, according to Statistics Canada’s Labour Force Survey, a total of 156 out of every 1,000 workers in New Brunswick were employed in the manufacturing sector. By 2013, the percentage of the province’s workers employed in manufacturing had been cut in half.   

In just the last decade, the statistics agency’s survey of employers shows a 35 per cent decline in manufacturing employment in New Brunswick.

Wage rates in the industry are stagnant. Between 2007 and 2013, average weekly wages in the manufacturing sector increased by only 1.3 per cent per year compared to 2.4 per cent across the total economy. Food manufacturing witnessed an absolute decline in average weekly wages over the six year period. This means that adjusted for inflation, the average worker in food manufacturing has taken a significant pay cut.

There are several big challenges holding back the manufacturing sector.

One challenge is the relatively low level of labour productivity. Historically, the availability of cheap labour in New Brunswick (relative to the North American labour market) and employment growth-based government incentive programs led to labour-intensive manufacturing firms.  With the increase in global competition, firms had a harder time making a decent profit in New Brunswick. Either they found ways to become more productive through investments in equipment, technology and training or they went out of business.

Last week I had a conversation with a guy who provides equipment to the manufacturing sector and he is quite concerned about the state of the industry. In his opinion, few firms are upgrading their equipment or investing in new technology. For him, the sector is in a holding pattern.

Another challenge is firm size in the manufacturing sector. According to Statistics Canada’s business registry, out of the nearly 1,000 manufacturing establishments across the province, there are only 77 with more than 100 employees. If you remove the forest products and seafood production sector there are only 27 establishments with 100 or more employees.

Only three of the furniture and related manufacturing establishments have more than 100 employees. None of the 29 firms involved in plastics-related manufacturing have more than 100 employees. Of the 52 firms in the printing sector, 47 have fewer than 20 employees and none have more than 50 employees. Twenty-one of the 22 retail bakeries in the province have fewer than 20 employees. It’s pretty hard to imagine these small firms dominating national let alone global markets.

What would it take to see another 15-20 manufacturing firms break out and become globally competitive champions?    Do we need more of our manufacturers to take on external growth capital?  Do we need more mergers and acquisitions? 

It’s not all doom and gloom.

There are some encouraging signs in the forest products manufacturing sector. Employment is starting to rebound. Average weekly wages for both wood product and paper product manufacturing have been increasing well above the manufacturing sector as a whole. With the recent announcement of expansions in the sector, the outlook is quite good.

Employment in the fabricated metal product manufacturing sector is up by nearly 500 workers in the past two years.  Machinery manufacturing exports are up by 50 per cent in the past two years.

Some people think the manufacturing sector in New Brunswick is destined for the scrap heap. I am not in that camp.

Adding value to our natural resources, renewable and non-renewable, should be an area of opportunity. Saskatchewan and Alberta are the only two provinces in Canada to witness a rise in manufacturing employment over the past decade mainly as a result of the value added processing of non-renewable natural resources.

Value added and time sensitive manufacturing for the North American market is showing more potential. The advent of 3D printing opens up a world of mass customization that favours a place like New Brunswick versus the remote factories in Asia.

We need to focus on getting investment flowing back into the manufacturing sector.