The boom in Canada’s tech sector
Nearly 6 per cent of all workers now in high-tech, report finds
Canada’s high-tech sector is much bigger than thought, extending beyond just information and communications technology to play a greater role in the overall economy, a new report says.
“Professions that10 or 20 years ago may not have been considered high-tech are now moving into areas where they are essentially becoming high-tech workers,” said Sean Mullin, executive director of the Brookfield Institute for innovation and entrepreneurship at Ryerson University.
“That phenomenon has not been captured in the traditional way that economists and others measure the sector,” he said.
The institute released the State of Canadian Tech Sector on Monday, which analyzes data, looking at jobs across different sectors to determine which should be categorized as high-tech.
Using methodologies developed by U.S. Bureau of Labor Statistics and Nesta, a U.K.-based innovation charity, the institute developed a custom definition for Canada — mapping and identifying tech occupations and industries.
If the number of tech jobs exceeded 15 per cent in an industry, more than three times the national average, it was considered a member of the tech sector.
It found 864,000 employees across Canada are high-tech workers, or 5.6 per cent of total employment in 2015.
The tech sector, which includes 71,000 firms, generated $117 billion of Canada’s total $1.65 trillion GDP last year.
More than two-thirds of those firms are small operations with fewer than four employees.
In terms of private-sector investment in research and development, the tech sector was the largest at $9.1 billion.
That translates into 7.1 per cent of real economic output — with the next closest sector in terms of output being finance and insurance — but was exceeded by construction, mining, manufacturing and real estate sectors.
Mullin noted that the federal government is focused on developing an innovation agenda and expects the tech sector will play a key part of that strategy.
“Understanding its impact, its size and it stretching out into other areas of the economy that you wouldn’t necessarily think” are points to consider, he said.
The use of technology is growing in many fields and that means some should be counted as high-tech work.
That could be an engineer building flight simulators, or an architect at a design firm, or a researcher at a chemical company — who would not be captured under traditional measures.
“Using our more encompassing definition, we found that Canada’s tech sector is exceptionally diverse, ranging from digital technologies to aerospace and pharmaceuticals,” the report says.
“The sector is also much broader in size and scope and geography than ever before. It is truly a pan-Canadian sector with pan-Canadian impacts.”
Tech professionals are more likely to have university degrees, earn higher annual wages and are younger than Canada’s workforce as a whole.
Urban centres had higher concentrations of tech professionals, as expected. But surprisingly, Toronto and Vancouver came in above the Kitchener-Waterloo-Cambridge area in terms of tech sector concentration.
With the national average at 1, the Kitchener-Waterloo-Cambridge area came in at 1.3, compared with 1.7 for Montreal and Toronto at 1.4, and Vancouver and Calgary, both at 1.3.
Cities with lower tech sector employment were Hamilton, Winnipeg and Saskatoon at 0.7, and London at 0.6.
Cities that were on par with the country included Victoria, Saint John, N.B., and St. John’s, N.L., at 1, and Quebec City at 1.1.
“It doesn’t contradict the idea that Kitchener-Waterloo is a high-tech hub,” Mullin said, noting that Toronto and Montreal had higher proportions, due to larger populations, that could include big employers such as an IBM in Toronto or aerospace or pharmaceutical companies in Montreal.
“Even if you are home to a lot of promising startups, they are not going to show up in a lot of numbers,” he said.
It also analyzed financial perfor- mance — data applying to firms with annual revenues between $30,000 and $5 million — and found 84.2 per cent were profitable, compared with 82.3 per cent for other companies in the broader economy.
Mullin noted that when compared to other countries, using data only for information and communications technology sector, Canada lags behind.
In 2013, the Organization of Economic Co-operation and Development ranked Canada 20th out of 29 international peers, in terms of the amount of value added by the sector to Canada’s national income, behind leaders such as Korea, Japan, United States and United Kingdom.
“If we want to build an economy that is relevant to 21st-century market forces and technological trends, we need to continue to grow and support the tech sector and ensure it becomes an integral part of our economic strategy for our country,” Mullin said.
That means creating the right conditions for businesses to thrive, as well as a pipeline for entrepreneurs and startups to grow, and attract international companies to set up shop here, he said.
As well, there needs to be an emphasis on exposing students and young people to science, technology and engineering, including coding skills, he added.
Researchers plan to produce updates to determine how the tech sector is doing in Canada, hoping to do year-over-year comparisons.
“The future of Canada is probably going to be much more linked to the prosperity of the tech sector in the long run, than some of our more traditional industries that are resource based,” Mullin said.
“(Those industries) are subject to things like commodity prices we don’t control or finite resources that will run out some day.”