" (Rowthorn and Ramaswamy, 1999)
The largest portion of the workforce in these advanced economies is employed either in the manufacturing or services sector and the result is "...the evolution of employment shares depends mainly on output and productivity trends in these two sectors." (Rowthorn and Ramaswamy, 1999) in the majority of advanced economies, there has been a generally faster growth of labor productivity than the growth in services with the output growth about the same in these two sectors. Therefore, due to the output trends being so similar in the two sectors, the productivity lagging in the services sectors has a result, which is the absorption of a rising share of total employment "while rapid productivity in growth in manufacturing leads to a shrinking employment share for this sector." (Rowthorn and Ramaswamy, 1999)
The work of Sachs and Schatz (1994) as well as Wood (1994, 1995) and Saeger (1996) all agrees that importance should be "assigned to 'internal' factors in accounting for deindustrialization." (Rowthorn and Ramaswamy, 1999) it is however recognized in the work of all these individuals that "external factors such as the growth of north-south trade will, under these conditions reduce manufacturing employment in the north because of the number of low-skill jobs lost in the import-competing industries will greatly exceed the new jobs created in the skill-intensive export sector." (Rowthorn and Ramaswamy, 1999)
Rowthorn and Ramaswamy (1999) state that among richer countries "gross imports from the south have eliminated manufacturing jobs equivalent in a number to 1.5-4% of total employment. Indications are "for the new manufacturing jobs created by exports to the south are 0.3% for the United States and 0.3% for the average country. Given that total employment in the countries of our sample is about 350 million, this suggests that about 7 million manufacturing jobs have been lost because of southern competition and about 1 million created by additional exports to the south. The net loss of 6 million jobs is less than one-fifth of manufacturing jobs lost because of deindustrialization since, 1970, but the impact on unskilled workers and those with nontransferable skills is greater than this figure suggests." (1999)
While deindustrialization is not only due to north-south trade, this...
Rowthorn and Ramaswamy state that there are two primary channels that competition from low-wage producers can utilize and that affects employment in manufacturing in northern countries:
1) Via its impact on total manufacturing output in the north;
2) Through its impact on labor productivity. (1999)
Labor has responded in northern countries "not by abandoning manufacturing as Brown and Julius (1994) have claimed but by increasing labor productivity within the manufacturing sector." (Rowthorn and Ramaswamy, 1999) This is stated to have involved:
1) Increasing efficiency to produce more of the same kind of output per unit of labor; or 2) Switching to other types of manufactured goods where value-added per worker is higher. (Rowthorn and Ramaswamy, 1999)
Rowthorn and Ramaswamy state that the primary conclusions drawn in their work are those as follows:
Deindustrialization is explained mainly by factors that are internal to the advanced economies...as a result of the interactions among changing preference patterns between manufacturers and services, the faster growth of productivity in manufacturing as compared to services, and the associated relative decline in the price of manufactures." (1999)
The north-south trade is stated to have contributed "on the average...less than 20% to the relative decline in manufacturing employment in the advanced economies;
Moreover, the impact of north-south trade on deindustrialization has been mainly through its effect in stimulating labor productivity in the manufacturing sector of the advanced economies; it has had little effect on manufacturing output in the advanced economies; and the decline in the ratio of investment to GDP in the advanced economies has also skewed demand away from manufacturing output. The decline in the investment ratio has caused almost one-sixth of total deindustrialization -- which is roughly similar to the effect of north-south trade on deindustrialization. (Rowthorn and Ramaswamy, 1999)
SUMMARY and CONCLUSION
Three categories of workers affected by industrialization include: (1) Those who are long-term unemployed; (2) Those who are employed after downsizing but re-employed in the long-term; and (3) the survivors who remain employed in industries that are undergoing restructuring at different intensities. (Ostrey, et al. 2001) the response of the workforce in Canada as well as in other advanced economies has been to become more productive and to produce goods at a lower or equal price to those produced in developing economies.
Findings in this study include the fact that deindustrialization is due to factors that are internal to advanced economies (Rowthorn and Ramaswamy, 1999) and are due to a combination of the interactions among shifts in the demand patters of services and manufacturers. North-south trade has contributed to deindustrialization through the stimulation of labor productivity in the advanced economies manufacturing sectors as the advanced economies in the north have responded to the competition of developing economies and their cheaper imports by using labor in a more efficient manner and by changing production and increasing higher valued items. (Rowthorn and Ramaswamy, 1999)
Cairncross, a (1982) 'What is deindustrialization?' Pp. 5-17 in: Blackaby, F (Ed.) Deindustrialization, London: Pergamon
Goshen, Erica (2005) Commentary FRBNY Economic Policy Review August 2005.
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