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Services play a key role in economies around the world and Canada is no exception. Gradually, the proportion of our economy stemming from services has been increasing, from 65% in 1984 to 69% in 2004. The gross domestic product (GDP) of service industries in 2004 totalled $714 billion—almost double the amount in 1984.
The economy is divided into two sectors: the goods-producing sector, which makes tangible products, and the services-producing sector, which is essentially everything else. Services comprises a diverse range of activities, including high-tech and knowledge-intensive jobs, as well as low-skill, labour-intensive jobs—everything from software developer to fast food server.
In 2004, three out of every four working Canadians—12 million people—worked in services. From 1984 to 2004, the proportion of the labour force employed in service industries increased from 70% to 75%.
Many service industries deliver personalized and specialized services, and are very labour intensive as a result. On average, about one-third of operating expenses in the service industry goes toward paying salaries and wages. The share is even higher in industries reliant on highly-trained employees: wages account for 54% in the accounting and bookkeeping industries, and 47% in engineering services.
Women are more likely than men to hold service jobs. In 2004, 55% of employees in service industries were women. The health care and social assistance industries employ an especially large number, with 1.4 million women occupying 82% of jobs in the field.
Firms with fewer than 50 employees made up 95% of Canada’s services-producing businesses in 2003. The public administration sector is the exception, with only 79% of firms having 50 or fewer employees, due to the fact that it is composed of mostly larger government-run businesses.
In almost all provinces, the proportion of GDP accounted for by service industries has been steadily increasing over the past 20 years. The provinces with the largest service concentrations in 2004 were Nova Scotia at 76%, Prince Edward Island at 75%, and British Columbia and Manitoba at 74% each.
The only exception was Newfoundland and Labrador, where the proportion of GDP coming from services has fluctuated over the past 20 years, from 66% in 1984, to a high of 75% in 1992, and then down to a low of 59% in 2003. The recent drop is likely due to the discovery of natural resources, which sparked the goods-producing side of the economy. In any case, the total amount of GDP from services increased due to the overall boom in the economy.
The largest growth in service concentration over the past 20 years occurred in Alberta and Saskatchewan. Due to their natural resource wealth, the economies of these two provinces have traditionally been skewed toward goods production. Lately, however, services have begun to catch up. From 1984 to 2004, the proportion of GDP from services rose from 43% to 61% in Alberta and from 55% to 64% in Saskatchewan. Despite this growth, both provinces remain below the national average of 69%. From 2000 to 2004, Alberta’s GDP from services increased by nearly $15 billion, while GDP from goods-producing industries inched up by less than $1 billion.
Census metropolitan areas (CMAs) have a large concentration of service jobs, at 78% of total employment in 2003, compared with 68% elsewhere. Throughout the 1990s, almost all CMAs became more service-oriented.
The largest concentrations of service employment in 2003 were in St. John’s, Ottawa−Gatineau, Halifax, Victoria, Regina and Québec—all of which had over 85% of their work forces employed in service-related jobs.
Much of the growth in services employment can be attributed to job creation in professional, scientific and technical services (mainly business services). This was especially the case in Canada’s five most populous CMAs (Toronto, Montréal, Vancouver, Ottawa−Gatineau and Calgary), where 280,000 such jobs were created from 1989 to 2003. This job growth accounted for 11% of the total increase in all service jobs in Canada over this period.
Professional, scientific and technical services are becoming an increasingly important industry in the Canadian economy. From 1994 to 2003, their share of total GDP increased from 3.0% to 4.5%. Most of this growth took place from 1996 to 2000, primarily in a few key industries. Notably, computer systems design and related services turned in the fastest growth, increasing its share of GDP from 0.6% in 1997 to 1.1% by 2003.
Firms in the ‘other professional, scientific and technical services’ industry—specialized design services, management and other technical consulting, research and development services and other scientific and technical services—grew their share of GDP from 0.7% in 1997 to 1.0% in 2003. By contrast, architectural and engineering services remained fairly constant at 1.1% of GDP in 1997and 1.0% of GDP in 2003.
The rest of the professional, scientific and technical services industry—legal services, accounting, tax and bookkeeping services and advertising services—accounted for 1.3% to 1.4% of GDP during the same period.
The profit margins of service industries range from the very lucrative to the razor-thin. Short- and long-term trends affected profit margins in certain service industries in 2003. For example, the housing boom lifted 2003 profit margins for real estate agents and brokers to 35% and for the real estate rental and leasing industry to 22%—rates much higher than those for other service industries.
At the other end, food and beverage services had a profit margin of 3.3% in 2003. Small profit margins are a long-term trend in this industry, due to high food and labour expenses. Travel arrangement services posted even lower profit margins of 0.2% in 2003, partly due to the Severe Acute Respiratory Syndrome (SARS) outbreak and the war in Iraq. From 1998 to 2002, the industry had posted an average profit margin of 4.1% annually.