Mark Thoma of Economist’s View is unconvinced by the optimistic tone of The Economist’s article on the shift from manufacturing in rich countries. As he notes in his comments page, he’s aware of the gains from trade, but he’s also concerned with the welfare of those who lose. That’s a sentiment I share.

Mark’s quote from article contains the part that jumped out at me as well:

…[T]he line between manufacturing and services is blurred. McDonald’s counts as a service company, but a visit to any of its restaurants puts one in mind of an industrial assembly line, turning out cooked meat products. Similarly, an increasing slice of value-added in manufacturing consists of service activities, such as design, marketing, finance and after-sales support. Last but not least, Britain’s number-crunchers stick The Economist, along with the whole publishing and printing industry, in manufacturing, even though almost all our staff are engaged in service-like activities.

The division between manufacturing and services has become redundant. A more sensible split now is between low-skilled and high-skilled jobs.

Statistics Canada has data on employment and wages by occupation – what can they tell us?

Here’s a summary table of how employment has evolved in Canada between 1987 and 2004, organised by 2004 average hourly wages.

It seems pretty clear from this table that in Canada, employment shifts have generally been out of low-wage occupations toward those paying higher wages. In 1987, 33% of Canadians worked in jobs that now pay $19.99 an hour or more; in 2004, that proportion was 36%. At the other end of the pay scale, 28% worked in low-wage jobs (those paying less than $15.50 in 2004), but by 2004, that had declined to 26%.

Another way of looking at the gains is to consider the following thought experiment: what would we have seen in 2004 if we held wages constant, with the only difference being that the composition of job types was the same as what we saw in 1987? A bit of arithmetic suggests that the shift in employment patterns by itself has generated an increase in average hourly wages of about 2%. That’s not an overwhelmingly impressive increase, but it’s better than a kick in the head with a frozen boot.