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Canada Should Trade Some White Collars for Blue

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While the decline of the Canadian manufacturing sector has accelerated in the past decade, the drop in employment has been a much longer trend.

Since the mid-1980s, manufacturing's share of the job market has sloped progressively downward, due to a combination of various domestic and international factors, such as outpaced productivity, the growth of low-cost manufacturing countries with large domestic markets, the rapid appreciation of the Loonie and a general business taxation regime that was by-and-large uncompetitive until the early- to mid-2000s. As a result, manufacturing was labeled by many as an "old industry" that should be abandoned for more promising areas of the Canadian economy.

Those pundits were dead wrong. Rewind to December 13, 2004: That was the date Canadian import tariffs on textile products were dropped to zero per cent. "We are free-traders," said the politicians of the day. "We are an exporting country -- we have to open our borders." The very same day, seven textile manufacturing plants in Huntingdon, Quebec, shut down, directly costing roughly 800 workers their jobs in a community of only 2,600 people.

At the scale of a province or country, this would have been a national catastrophe. At the scale of Huntingdon, it was merely the reflection of the new economy -- at least according to the media. But they, too, were wrong. The Huntingdon case was just another example of our own collective choice to let manufacturing down in this country.

Today, many of the talking heads argue that while manufacturing is still an important part of Canada's economy, it does not deserve any particular attention or support from government. In other words, what happened in Huntingdon could simply repeat itself in any other manufacturing sub-sector, and we should not intervene. Again, wrong.

Parallel to the decline in employment in manufacturing over the last quarter century, we have witnessed a number of other disturbing trends. For example, income inequality -- the gap between the wealthiest and the poorest -- has sharply increased. The key year here is 1982, when the growth of personal revenues came to a screeching halt. In sociology, income inequality gaps are seen as precursors of major revolutions, because they propel individuals with lower incomes to define their interests in opposition to those in upper economic classes.

In Canada, however, the gap in income inequality has not had the impact like in other countries for one reason, and one reason only: Today, compared to 25 years ago, women are fully participating in the labour market. When I was younger (I am now 34), one manufacturing job allowed any family of four to live well, access a middle-class quality of life, to buy middle-class bungalows in middle-class neighbourhoods and to send their kids to public schools full of thousands of middle-class kids.

The overall slowdown in manufacturing has shifted jobs into the services sector, which, on average, pay 20 per cent less than jobs in manufacturing. In the lives of everyday Canadians, this means that both parents must now work to maintain the same quality of life.

Another factor complicating the income inequality gap is the high dropout rate amongst high school students. A recent investigative report by a Montreal-based newspaper discovered that in some poor neighbourhoods of Montreal, one out of every two male students don't graduate. According to Statistics Canada meanwhile, nearly one in four dropouts in the labour market could not find a job during the 2008-09 economic downturn.

In the past, this major problem was offset by a strong manufacturing sector which employed thousands of people with not much education, while offering wages that allowed them to access middle-class amenities. Today, they end up in the services sector, where wages are lower.

While it is true the dropout rate has declined in the past few decades, there are still close to 200,000 Canadians aged between 20 and 24 who have not completed their high school education. In the early 90s, there were almost 400,000. Today, those 400,000 are still relatively young (in their early- to mid-40s) and are available to work. Unfortunately, with little education, many of those individuals are competing for jobs in the services sector that pay low, sometimes minimum wage.

We've all heard the message time and time again: We need to send more people to colleges and universities, and ensure our country is well-educated. This is great in theory; after all, no one is against apple pie. The reality is that we can't flip a switch and guarantee everyone has a university degree in 10 years -- but that's not necessarily a bad thing, either. China has not grown a middle-class larger than the entire population of the United Sates by sending them to university. They were smarter -- they developed their manufacturing sector.

It's no secret: The income inequality gap, the shrinking middle class -- all of this strongly relates to our education gap. It always has. And sectors such as manufacturing no longer offset the adverse effects. Sure, part of the blame can be placed on circumstances beyond our control -- the rise of the BRIC economies, globalization, open borders -- but the dismal truth is that we ourselves are at fault. When we had the chance, we systemically refused to support manufacturing.

Always remember December 13, 2004.

This blog originally appeared in 20/20 Magazine.