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And you thought that we were losing manufacturing jobs to low-wage, mega-menacing China? Try persuading China -- a country that lost more manufacturing jobs in the past decade than all the rest of the world put together. China hit its labour force peak in manufacturing in 1995 at almost 100 million men, women and children. It has since relentlessly shed manufacturing jobs. By 2005, 82 million remained, a loss of 18 million jobs in a decade. By contrast, Canada increased its manufacturing jobs in the same period (according to the International Labour Organization) by 400,000. Unfortunately.

The United States hit its labour force peak in manufacturing in 1979, sixteen years earlier than China. The number of manufacturing jobs at this pinnacle: 19 million. By 2005, only 14 million remained, a decline of 25 per cent in 25 years. Remarkably, though, U.S. production of manufactured goods doubled in these years -- the best productivity performance in the world. The productivity of the U.S. economy increased 53 per cent in this quarter century; manufacturing productivity increased 109 per cent.

China, too, has increased production, but not nearly as much, per worker, as the U.S. With 80 million manufacturing jobs, China produces 8 per cent of the world's manufactured goods. With 14 million manufacturing jobs, the U.S. produces 22 per cent. In this competition, China will need to shed many millions more jobs, and simultaneously double production, to begin to rival the U.S. as a global force in manufacturing.

All of the sinophobic squawking on this particular issue aside, China has yet to take even a fraction of global market share from the U.S. Chinese gains have come entirely from the Japanese and European markets. In fact, the U.S. share of the world market for manufactured goods increased from 20 per cent in 1980 to 22.4 per cent in 2005. Why the slippage in Europe? The answer, as always, is productivity. On an index that arbitrarily measures U.S. productivity in manufacturing at 100, Germany now gets a 70, Britain a 50.

In manufacturing, you measure success by the number of jobs you eliminate, not the number of jobs you create. No country has eliminated more jobs (proportionately) than the United States. Canada hasn't done nearly as well, especially in the past decade; indeed, and alas, it (for a few years) added jobs. In 1960, Canada employed relatively fewer people in manufacturing: 24 per cent of the labour force here, 26 per cent in the U.S. For three decades, the two countries shed jobs (and increased productivity) in an orderly way. By 1992, manufacturing jobs accounted for 14.3 per cent of Canada's labour force; in the U.S., for 17.0 per cent At this point, Canadian progress ended abruptly. Protected from global competition by cheap-dollar subsidies, Canada's manufacturers coasted through the 1990s and the early 2000s. Big mistake. Our prime competitor remains the U.S., which now needs only 11.8 per cent of its labour force to manufacture goods. Canada needs 14.4 per cent -- a labour-factor disadvantage of 25 per cent.

The remarkable thing is that the deeper the job cuts in the U.S., the faster flowed the rewards. The Bureau of Labour Statistics reports that manufacturing productivity grew 4.0 per cent in 2005 and 5.5 per cent in 2006 -- after increasing through the 1990s by an average annual rate of 3.7 per cent. The U.S. Department of Commerce reports that profits for manufacturers have quadrupled since 2001 -- and now exceed the profitability of the boom of the 1990s.

It's not useful to lament the lost jobs. Through increased productivity, lost jobs finance new jobs -- most of them paying higher wages. It's a post-industrial world out there. More and more, people consume services, not things. In 1950, people spent roughly 70 per cent of their disposable incomes on goods, 30 per cent on services. In 2005, people spent roughly 60 per cent on services, 40 per cent on goods. Jobs in manufacturing must necessarily give way to jobs in education, in health services, in financial services, in entertainment and leisure services.

With the more recent restoration of the loonie, Canada has shed 6 per cent (or 150,000) of its manufacturing jobs. Yet we still have more than two million. If the global past is domestic prologue, this number will decline by another 15 or 20 per cent. Don't blame China. Don't blame the U.S. Remember this: The Canadian dollar traded in 1992 for 88 cents (U.S.), in 2001 for 64 cents, a devaluation that obliterated the country's productivity gains for a decade.

Former prime minister Jean Chrétien promised to devalue our currency -- a loony way to protect jobs. Lamentably, he succeeded.

nreynolds@xplornet.com

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