Study: The distribution of employment growth rates in Canada: The role of high-growth and rapidly shrinking firms, 2000 to 2009
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Studies on job growth typically seek answers to questions such as: What is the source of the growth of jobs? Does job growth lie predominantly in small, large, young or old firms? Where is job growth strongest? Where is it most volatile?
An earlier Statistics Canada study, published in The Daily on July 5, 2012, showed that the average annual rate of job growth does not differ significantly for firms of different sizes once the age of the firm is taken into account.
A new study looks at whether large positive or negative growth rates can be found among growing and declining firms. The study moves beyond examining average job growth rates to examining the variability in the distributions of the growth rates of firms of different sizes and ages. In doing so, it looks at the extent to which job growth, either positive or negative, is concentrated in what are referred to as high-growth or rapidly shrinking firms.
Making use of data from Statistics Canada's Longitudinal Employment Analysis Program, the study estimates annual rates of employment growth for continuing firms in the business sector over the 2000-to-2009 period. Although many incumbent firms did not change their employment substantially year over year, the study finds that the distribution of annual job growth rates had a high variance—specifically, that there are a significant number of incumbent firms with either very positive or very negative growth rates.
As a result, both the growth of jobs and the decline in jobs, at any point in time, are concentrated in a relatively small part of the incumbent firm population. Over the 2000-to-2009 period, the top 10% of growing firms accounted for 38% of the overall employment creation and the top 10% of shrinking firms were responsible for 35% of the overall employment destruction.
Some types of firms have especially large variances in their growth rates. In particular, the study finds that the small firms sector has a relatively large concentration of rapidly shrinking firms, while young firms have a particularly large concentration of high-growth firms.
Together, these two phenomena suggest that small and young firms are more volatile than their larger and older counterparts.
Note to readers
Using data from Statistics Canada's Longitudinal Employment Analysis Program, this study analysed the distribution of year-over-year employment growth rates of firms in the Canadian business sector between 2000 and 2009. The study was produced jointly by Statistics Canada and Industry Canada.
The research paper "The Distribution of Employment Growth Rates in Canada: The Role of High-Growth and Rapidly Shrinking Firms," part of the Economic Analysis Research Paper Series (Catalogue number11F0027M), is now available from the Browse by key resource module of our website under Publications.
Similar studies are available in the Update on Economic Analysis module of our website.
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