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Explanations of the Decline in Manufacturing Employment in Canada

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  • Evan Capeluck

Abstract

The objective of this report is to examine the reasons for the decline in manufacturing’s employment share in Canada, with particular attention paid to the roles of labour productivity growth, demand-side factors, and outsourcing. The results of the report suggest that above average labour productivity growth explains most of the decline in the manufacturing employment share before 2000, while below-average real output growth explains most of the decline after 2000. The slowdown in real output growth after 2000 reflects the sector’s poor export performance which is related to many factors, including: a loss in cost competitiveness linked to an appreciation of the Canadian dollar; increased competition in the U.S. import market; and a slowdown in domestic demand growth in the United States. However, the story becomes more complicated when manufacturing employment is broken down into its various components. In particular, the evolution of manufacturing employment was, in different periods, largely driven by the fortunes of specific industries.

Suggested Citation

  • Evan Capeluck, 2015. "Explanations of the Decline in Manufacturing Employment in Canada," CSLS Research Reports 2015-17, Centre for the Study of Living Standards.
    • Handle: RePEc:sls:resrep:1517
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    File URL: http://www.csls.ca/reports/csls2015-17.pdf
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    References listed on IDEAS

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    1. Giuseppe Berlingieri, 2013. "Outsourcing and the Rise in Services," CEP Discussion Papers dp1199, Centre for Economic Performance, LSE.
    2. Evan Capeluck, 2014. "Convergence Across Provincial Economies in Canada: Trends, Drivers, and Implications," CSLS Research Reports 2014-03, Centre for the Study of Living Standards.
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    10. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
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    15. Evan Capeluck, 2015. "The Evolution of Manufacturing Employment in Canada: The Role of Outsourcing," CSLS Research Reports 2015-18, Centre for the Study of Living Standards.
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    Cited by:

    1. Alexander Murray, 2017. "The Effect of Import Competition on Employment in Canada: Evidence from the 'China Shock'," CSLS Research Reports 2017-03, Centre for the Study of Living Standards.
    2. Evan Capeluck, 2015. "The Evolution of Manufacturing Employment in Canada: The Role of Outsourcing," CSLS Research Reports 2015-18, Centre for the Study of Living Standards.
    3. Matthew Calver & Evan Capeluck, 2016. "Further Evidence on the Contribution of Services Outsourcing to the Decline in Manufacturing’s Employment Share in Canada," CSLS Research Reports 2016-11, Centre for the Study of Living Standards.

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    More about this item

    Keywords

    Manufacturing; Employment; Productivity; Canada; Demand Growth; Competition;
    All these keywords.

    JEL classification:

    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • N62 - Economic History - - Manufacturing and Construction - - - U.S.; Canada: 1913-

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