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Chrysler employees assemble minivan engines at the Windsor, Ont., assembly plant Jan. 18, 2011. A rising loonie, climbing energy costs and lacklustre productivity growth have sent manufacturing jobs south to the U.S. and even Mexico.REBECCA COOK/Reuters

Fading factories

Why has employment in Canada's manufacturing sector sagged over the past decade? Blame it on a rising loonie, climbing energy costs – and lacklustre productivity growth.

"Unfortunately, growing productivity has been a challenge for Canadian manufacturers in recent years," writes Dina Cover of TD Economics in a recent report. While this country's manufacturing sector grew productivity by 5 per cent between 2000 and 2007, factories in other G-7 nations grew theirs by 30 per cent.

Slower productivity growth has boosted unit labour costs in the manufacturing sector. A decade ago, Canadian labour was cheaper than its U.S. counterpart. Not so any more.





Average all-in labour costs in the sector (including wages, benefits and taxes) are now $35.76 per hour in Canada compared to $34.74 in the United States. This provides manufacturers with strong incentive to locate production in the U.S. or even lower-cost Mexico.

"The bottom line is that the Canadian manufacturing sector is now under a great deal of competitive pressure and must invest in innovative practices and technologies that will help boost productivity and lower unit labour costs," writes Ms. Cover.

Freedom 75

In 1970, just a few years after the Canada Pension Plan was introduced, close to seven people were at work for every person collecting a pension. Today, with people living longer, that ratio has dwindled to just over four.

As baby boomers start to retire, the trend grows even more alarming. In less than 20 years, there will be a scant 2.4 workers per pensioner, according to National Bank Financial economist Stéfane Marion. At that point, if projections hold true, Canada's supply of workers to pensioners will be less than the OECD average.

The dwindling supply of workers could deliver a blow to the economy. A recent study by Christopher Ragan of McGill University estimates that Canada's net-debt-to-GDP ratio may be back to that of the bloated deficit days of the mid-1990s within about 25 years.





How to ease the burden? Raise the retirement age, Mr. Marion suggests.

"Retention of older workers in the work force should be seen as an economic growth strategy to limit the pressure of aging on all government social programs (notably health care), not just public pensions," he said. "Further structural measures will obviously be needed to ensure a fairer deal among generations, but raising the retirement age is the first step."

Meat's retreat

Investors have heard of peak oil, but here's a new one: peak meat.

The volume of meat consumed in the United States hit a high point in 2007, and has been falling each year since, according to the Earth Policy Institute, an environmental think tank in Washington. This year, the total is forecast to be about 6 per cent below the 2007 peak, a noteworthy drop that should worry commodity bulls.

The institute speculates that the trend "could signal the end of meat's mealtime dominance" and points out that the decline of meat has been even more dramatic when expressed in terms of per capita consumption. If trends continue, the amount of meat eaten per American in 2012 will be about 10 per cent less than in 2004. Beef consumption per person peaked in 1976 and per capita pork consumption way back in 1944.





A fondness for poultry has been the reason overall meat eating continued to rise in recent decades, but even it peaked in 2006.

The institute says the weak economy has contributed to lower meat consumption, but so have higher corn prices, because they increased the cost of livestock feed. Higher feed input costs lead to more expensive meat, crimping demand. Other factors leading to less meat being eaten include concerns over health, the environment and the ethics of factory farms, it says.

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