Trends in employment and wages, 2002 to 2007

by J. Lin*

In 2007, Canada had the highest proportion of people employed in at least three decades and the national unemployment rate sank to a 33-year low of 5.8%. While the 2002 to 2007 period was marked by strong gains in employment, some concerns have arisen over the quality of these new jobs.

Historically, manufacturing employment in Canada, as in the United States, has been on a long downward trend. Once-prominent manufacturing industries such as steel, autos, textiles and clothing, and furniture have been shedding jobs, while employment is increasing in the service sector. In 1946, manufacturing accounted for an estimated 26% of total employment. In the ensuing decades, the economy shifted its focus towards more service-oriented work in health care, education, public administration, trade and finance. By 2007, manufacturing’s share of employment had fallen to just 12%. The industry previously faced massive layoffs and factory closures in the recessionary periods of the early 1980s and early 1990s. In 1982, Canadian factories lost 208,000 workers and then, between 1990 and 1992, they lost another 315,000 workers. Even though the 2004 to 2007 period was a non-recessionary one, manufacturing endured three successive years of employment losses totalling 247,000, for a net decline of 241,000 since 2002.

Overall employment and earnings grew between 2002 and 2007 despite the declines in factory employment. While domestic demand remained robust, the appreciation of the Canadian dollar that began in 2002 rendered ‘made in Canada’ exports less competitive globally. Displaced factory workers have endured hardships in adjusting to the restructuring—some laid-off workers undoubtedly faced a steep drop in earnings when moving into other types of work. One previous study found that laid-off workers from the late 1980s and early 1990s suffered an 18% to 35% decline in wages five years after being laid off (Morissette et al. 2007). At the same time, however, other parts of the economy, particularly those based on natural resources, were facing boom times and could not find enough workers.

This article uses the Labour Force Survey to document trends in employment and pay by broad industry and occupation groups. More detailed industry breakdowns are provided by the Survey of Employment, Payrolls and Hours and the Census. Because these surveys are cross-sectional, they provide no information on any flows between industries or occupations. Even so, they point to a labour market undergoing major structural shifts.

While important, pay is not the sole indicator of job quality. Non-wage benefits, work arrangements and skills development and training are also important factors. Other indicators of employment quality include the safety and ethics of employment, work hours, stability and security of work, and social protection, social dialogue and workplace relationships, as well as the intrinsic nature of work.

Recent employment gains spread across several industries

In 2007, employment increased in every major industry, except manufacturing. Construction saw the largest increase, a net of 64,000 additional workers, followed clo­sely by 61,000 in health care and social assistance. These two industries employed an estimated 125,000 more workers in 2007 than they did in the previous year. For every job lost in manufacturing, nearly two were gained in either construction or health care and social assistance. Accommodation and food services, professional, scientific and technical services, and information, culture and recreation also had large employment gains, as did retail trade, from 2006 to 2007. What is notable about retail trade, however, is that the boost of 32,000 workers in 2007 coupled with the loss of 74,000 factory workers put the two industries at the same employment level, each with 2 million workers.

Figure 1

The industry shifts in 2007 are part of a longer-term trend. Over the six-year period from 2002 to 2007, more workers found positions in construction and health care and social assistance than in retail trade. The recent manufacturing downturn began in 2004, reversing the trend of the early 1990s when manufacturing was one of the primary drivers of employment growth. However, in hindsight, this can be seen as a blip in the long-term downward trend. Natural resources also saw very rapid employment growth because of oil, gas and metals, but it remains a small employer relative to other industries.

More higher-paying jobs created

The employment increases from 2002 to 2007 were skewed toward the upper end of the pay scale (Figure 2). Workers in the top two of five pay ranges saw the largest gains in numbers. In addition to the increase in their numbers, workers in the top group saw their median pay jump 3.4% from 2002 to 2007. In contrast, workers in the middle group saw a decline of 0.1%. In 2007, overall average hourly pay stood at $20.41 compared with $19.69 (in 2007 dollars) in 2002, representing a real growth of 3.7% over the period.

Real earnings increased between 2006 and 2007, continuing a trend evident since 2004. Several factors could explain the successive wage increases even as manufacturing jobs were being cut. Wage growth was not distributed uniformly across the country and Alberta’s 5.6% hike played a large part in pushing up the national average, although the province’s residents also contended with inflation as high as 5% in 2007. Workers in higher-paying occupations such as managers in primary production (excluding agriculture) saw an increase of 33% between 2000 and 2005—the highest of all occupations (Frenette et al. 2008). Similarly, the natural resources boom also stimulated an increase in pay for supervisors in mining, oil and gas, as well as service workers and operators in oil and gas. According to the 2006 Census, these occupations also had a large influx of workers.

Figure 2

Other managers such as those in business, finance, health, education and government saw an increase of 127,000 in their numbers over the six-year period. They earned an average of $31.40 per hour in 2007, much higher than the overall average. Schools and universities also added 100,000 teachers and professors over the period, paying an average hourly rate of $28.84 in 2007. Natural and applied sciences and related jobs encompass a diverse range of workers, from engineers, architects and scientists to user support technicians—they added 143,000 to their ranks over the period, and earned $28.62 per hour on average in 2007. Jobs in social sciences, government services and religion also got a boost of 97,000 over the six years. In 2007, they earned an above-average $23.42 per hour.

Figure 3

About 180,000 more clerical jobs were also created since 2002; these workers earned $17.10 on average in 2007. Retail salespersons and sales clerks had a lower average hourly pay of $11.61 in 2007; this group of workers grew by 89,000 over the six years. Sales and service jobs not elsewhere classified, like those in travel or accommodation, gained even more workers, adding 93,000 over the period with an average hourly rate of $12.30 in 2007. The biggest gains in health care came from the addition of 73,000 technical, assisting and related workers, which includes medical laboratory technicians as well as nurse aides and pharmacy technicians. On average these workers earned $20.14—about the average wage of all workers. Registered nurses and others in professional occupations in health experienced a more moderate increase of 22,000 between 2002 and 2007; however, their hourly pay was significantly higher at $29.75 in 2007.

The boom in construction also increased demand for workers at all skill and pay levels—just as in health care. Other trades added 56,000 members to their ranks and in 2007 they were paid a higher-than-average $22.06 per hour. This occupation includes residential and commercial installers and service people (such as window and door installers). In contrast, trades helpers, and construction and transport labourers, increased their numbers by 69,000 but earned only $16.46 per hour in 2007.

Declines in manufacturing employment

According to the 2006 Census, machine operators and assemblers saw big job losses over the 2001 to 2006 period (Statistics Canada 2008). This occupational group includes sewing machine operators, pulp and paper machine operators and motor vehicle assemblers, inspectors and testers. According to the Labour Force Survey, many of the workers who lost their jobs between 2002 and 2007 were in the middle range to lower end of the pay scale, while higher-paid machine operators and assemblers—those averaging over $23 per hour—saw an increase in their numbers over the period. The proportion of machine operators and assemblers in manufacturing who earned over $23 per hour increased from 14% in 2002 to 22% by 2007. Those earning less than $10 per hour dropped from 17% in 2002 to 8%. The share of those in the middle range held relatively steady at around 70%. Machine operators and assemblers earned an average of $18.37 per hour in 2007, up 3% from $17.81 (in 2007 dollars) in 2002.

While a lot of attention has focused on auto workers losing their jobs, sewing machine operators also experienced layoffs and employment declines. According to the 2006 Census, sewing machine operators experienced the fifth largest drop in numbers of all occupations between 2001 and 2006. Nearly 52,000 jobs disappeared from textile mills and clothing manufacturing between 2002 and 2007, according to the Survey of Employment, Payrolls and Hours.

In fact, many of the job losses in manufacturing over the 2002 to 2007 period occurred in textiles and clothing, which on average pay much less than transportation equipment firms. Textile and clothing businesses cut the number of employees on their payrolls by almost half. These workers were paid, on average, between $13.60 and $15.65 in 2007. Most of the job losses in transportation equipment from 2002 to 2007 were in motor vehicle parts manufacturing, where employees averaged a much higher $25.13 per hour in 2007. Overall, much of the employment loss in manufacturing happened at the lower end of the wage scale over the 2002 to 2007 period. Even as recently as 2006 and 2007, clothing manufacturing suffered greater employment losses than motor vehicle parts.

The situation in Ontario and Quebec

Central Canada has been at the forefront of discussions about losses in high-paying factory jobs and gains in service sector employment, especially since Ontario and Quebec account for the vast majority of the declines. Ontario experienced heavier factory losses in the mid range of the pay scale. In the highest pay category, employment of machine operators and assemblers in manufacturing increased. In Ontario, the average hourly wage for machine operators and assemblers in manufacturing was $18.89 in 2007, a 2.0% increase from $18.53 in 2002 (in 2007 dollars). For all workers in Ontario, constant-dollar earnings grew 3.5% over the same period.

By contrast, employment for machine operators and assemblers in Quebec declined in both the mid-wage and the low-wage groups. Quebec has a high concentration of clothing manufacturing and textile workers, and this group earns less per hour than auto workers in Ontario. In Quebec, the average hourly pay for machine operators and assemblers in manufacturing was $17.08 in 2007, an increase of 5.3% from $16.22 in 2002 (in 2007 dollars). For Quebec workers overall, real earnings increased 3.3% from 2002 to 2007.

While increases in other high-paying industries have offset manufacturing losses in Ontario, this does not mean that ex-manufacturing workers were getting these high-paying jobs. An earlier Statistics Canada study found that high-seniority men who lost their jobs between 1987 and 1997 earned 18% to 35% less five years later; their female counterparts earned 24% to 35% less (Morissette et al. 2007).

A closer look at Ontario reveals that while employment in the retail trade industry experienced a big increase from 2002 to 2007, similar gains were made in educational services. In addition, health care and social assistance, as well as finance, insurance and real estate and construction all added workers (Figure 4).

By occupation, the largest increase was for other management positions, which gained 72,000 workers from 2002 to 2007, followed by clerical workers (60,000) and social science, government service and religion (55,000). Other management jobs cover a diverse range, including managers in construction, public administration and banking and telecommunications. With the exception of retail trade and clerical positions, these were jobs with above-average hourly pay. Over the same period, Ontario lost 94,000 machine operators and assemblers in manufacturing, including supervisors. Workers making between $10 and $23 per hour were hit the hardest by layoffs and plant closures, more so than those making less than $10. Workers in this occupation averaged $18.89 per hour in 2007, compared with the province’s overall average of $21.27.

Figure 4

In Quebec, the professional, scientific and technical services industry as well as health care and social assistance and construction recruited the most workers over the 2002 to 2007 period, each outnumbering the additions to retail trade. Occupationally, machine operators suffered a loss of 65,000 in their ranks over the six years. During this time, the province saw an increase in clerical workers and wholesale, technical insurance and real estate specialists as well as sales and service occupations related to travel, accommodation, sport and recreation. As in Ontario, more workers found jobs in management and social sciences, government services and religion. In addition, about the same number of teachers and professors were added as retail salespersons and clerks. Teachers in Quebec earned an average of $28.16 per hour in 2007 compared with $11.02 for retail salespersons and clerks. The average pay for machine operators and assemblers in manufacturing was $17.08, compared with $19.35 for all workers.

Summary

In recent years, industry employment trends have been interpreted by some as evidence that high-paying manufacturing jobs were being replaced by lower-paying service jobs. In fact, the jobs lost in manufacturing were not all high paying. Nor were all the gains in poor paying positions. Between 2002 and 2007, employment increased more strongly in higher-paying industries and occupations. Earnings increased rapidly for workers in the mining, oil and gas industries, and managers in primary production (excluding agriculture). Meanwhile, most of the job losses among machine operators and assemblers in manufacturing occurred in the mid and lower pay ranges. In Ontario, losses were heavy in the mid range; in Quebec, the losses were split more evenly between the low and mid ranges.

The employment declines in manufacturing from 2004 to 2007 totalled nearly 250,000. While this was not as large as the losses of the early 1990s, most of the jobs were full time. An earlier study found that high-seniority men laid off in the late 1980s to late 1990s earned less five years after being let go (Morissette et al. 2007). However, although employment increased in high-paying industries and occupations, more research is needed to determine whether ex-factory workers were able to share in these job gains.

While retail trade has added many workers, construction and health care and social assistance saw larger additions to their workforces between 2002 and 2007. The increases among other high-paying jobs may partly explain the discrepancy between increasing real earnings and disappearing manufacturing jobs. Occupations at the high end of the pay scale, such as other management positions in business, finance or government and natural and applied sciences, saw big increases. In construction and health care, workers at both the higher and lower ends of the pay scale saw increases.

References

Bowlby, Geoff. 2006. Toward an International Quality of Work Framework: A report to the Task Force on the Measurement of Quality of Work. Statistics Canada. Ottawa. 14 p.

Frenette Marc, Feng Hou, René Morissette, Ted Wannell and Maryanne Webber. 2008. Earnings and Incomes of Canadians Over the Past Quarter Century, 2006 Census. Statistics Canada Catalogue no. 97-563-X. Ottawa. 51 p.

Mollins, Julie. 2008. Perks needed to keep older workers: poll. April 15. Reuters UK. Thomson Reuters.

Morissette, René, Xuelin Zhang and Marc Frenette. 2007. Earnings Losses of Displaced Workers: Canadian Evidence from a Large Administrative Database on Firm Closures and Mass Layoffs. Statistics Canada Catalogue no. 11F0019MIE – No. 291. Analytical Studies Branch Research Paper Series. Ottawa. 38p.

Statistics Canada. 2008. Canada’s Changing Labour Force, 2006 Census. Statistics Canada Catalogue no. 97-559-X. Ottawa. 34 p.

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