Enterprises with Employees in Many Provinces or Territories
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by Anne-Marie Rollin, Economic Analysis Division
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This Economic Insights article looks closely at Canadian enterprises that employ individuals in more than one province or territory. It studies the share of business sector enterprises, and the employment accounted for by these multi-jurisdiction enterprises, both over time and across industries. It also examines the regional mix of these enterprises, and asks if most of them are Canadian controlled.
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How an enterprise decides to spread geographically is an important choice for the enterprise, since it influences the firm’s growth and survival. These firm-level decisions are also important because they affect the extent to which Canadian regions are interconnected. These decisions play a role as well in defining the type of employment opportunities found in each Canadian province and territory.
This short paper answers the following questions. What is the share of Canadian enterprises with employees in multiple provinces or territories? What share of total business sector employment is accounted for by those multi-jurisdiction enterprises? Are there variations in these shares across industries, and were there any trends observed from 2001 to 2011? In which regions do these multi-jurisdiction enterprises most frequently have employees? Finally, are most of these enterprises foreign controlled or Canadian controlled?
The data come from Statistics Canada’s Longitudinal Employment Analysis Program (LEAP). This database contains employment information for all enterprises that issue at least one statement of remuneration paid—a T4 slip. LEAP measures the enterprise’s employment level in each province and territory. Only enterprises classified in the business sector are included in this analysis.Note 1 The unit of analysis is the statistical enterprise as defined by Statistics Canada’s Business Register.Note 2
Enterprise and employment shares
In 2011, the 23,810 multi-jurisdiction enterprises enumerated in LEAP accounted for 2.3% of business sector employer enterprises. However, these enterprises accounted for 43.4% of total business sector employment. Mainly, this reflects large enterprises that spread their employment across jurisdictions: in 2011, 80.0% of business sector enterprises with 500 or more employees were present in multiple provinces or territories, compared with 8.5% of enterprises with at least 10 but fewer than 100 employees (Chart 1).
Trends from 2001 to 2011
From 2001 to 2011, the enterprise share accounted for by multi-jurisdiction enterprises remained broadly stable. However, their share of business-sector employment increased 1.3 percentage points over this period. The increase was the result of a 2.5-percentage-point rise in the employment share of enterprises with employees in at least six provinces or territories, which was partly offset by a 1.2-percentage-point decline for enterprises present in two to five jurisdictions (Table 1). During this period, the business sector employment share of large enterprises with at least 500 employees increased 1.1 percentage points, from 35.8% in 2001 to 36.9% in 2011. Therefore, not all the rise observed for enterprises active in at least six jurisdictions is explained by the rise in the importance of large enterprises.
In 2011, the share of enterprises with employees in multiple jurisdictions varied slightly across the 2-digit NAICS industries that were part of the business sector (the minimum share was 1.0%; the maximum share, 7.8%). There were wider industry variations in the employment share accounted for by multi-jurisdiction enterprises (Table 2). Both construction and real estate and rental and leasing, which are subject to numerous provincial regulations, had more than two-thirds of their employment in single-jurisdiction enterprises. At the other end of the spectrum were finance and insurance as well as information and cultural industries (which includes telecommunications), two sectors regulated in large part by federal laws. About 60% of employment in these two industries was in enterprises active in at least six provinces or territories in 2011.
From 2001 to 2011, all the industries presented witnessed increases in the employment share accounted for by enterprises with payroll in a minimum of six provinces or territories, except manufacturing (-0.3 percentage points).Note 3 Large increases occurred in information and cultural industries, 10.1 percentage points, and in mining, quarrying, and oil and gas extraction, 8.2 percentage points. However, these two industries also saw drops in the employment share for enterprises active in two to five provinces or territories. Some enterprises already active in many provinces or territories expanded activities to even more jurisdictions.
Retail trade saw a 6.3-percentage-point increase in employment share found in multi-jurisdiction enterprises, and most of the rise was among enterprises counting at least six provinces or territories of employment. This increase coincided with a 4.7-percentage-point increase in the proportion of chain stores found in the retail sector, up from 21.0% in 2001 to 25.7% in 2011.Note 4
Which provinces and territories are the most frequent among multi-jurisdiction enterprises? To answer this question, a geographical region was assigned to each province and territory using the Standard Geographical Classification 2011: Atlantic, Quebec, Ontario, Prairies, British Columbia, and Territories.Note 5 Not surprisingly, the most frequent combinations involve neighbouring regions (Table 3). Firms with employees in two provinces or territories, which made up two-thirds of multi-jurisdiction enterprises in 2011, were most often found in the following areas: Prairies and British Columbia; and Quebec and Ontario. For firms active in three to five jurisdictions, this was most common in Ontario, the Prairies and British Columbia. Enterprises with payroll in at least six provinces or territories were most often present in all regions except the Territories.
From 2001 to 2011, the location of multi-jurisdiction enterprises in Canada shifted from east to west (Table 4). Quebec was affected most, losing 5.0 percentage points of multi-jurisdiction enterprises over the period (from 35.7% in 2001 to 30.7% in 2011). Although Ontario saw a 2.5-percentage-point decline, it was still the region with the greatest share of multi-jurisdiction enterprises, 61.2% in 2011. Both the Prairies and British Columbia gained 3 percentage points of multi-jurisdiction enterprises; the Territories added 1.2 percentage points.
Foreign or Canadian controlled enterprises?
In 2011, 86.3% of enterprises with employees in multiple jurisdictions were Canadian controlled (Table 5).Note 6 Furthermore, two-thirds of the employment found in multi-jurisdiction enterprises was accounted for by Canadian controlled businesses.
However, foreign controlled enterprises have a greater tendency to have employees in multiple jurisdictions compared to Canadian controlled enterprises. Geographical diversification within Canada is a natural extension for those enterprises that have links abroad, whether they be Canadian founded enterprises purchased by foreigners or Canadian subsidiaries of foreign enterprises or multinationals.
In the 2001-to-2011 period, about 4 in 10 business sector employees worked for an enterprise that had payroll in multiple provinces or territories. By the end of the period, more than one-quarter of business sector employment was found in enterprises active in at least six provinces or territories, owing to a 2.5-percentage-point increase in the employment share of those firms. This reflects the fact that some Canadian enterprises have managed to grow by means of wide geographic expansion. The industries in which this type of expansion took place include retail trade, mining, quarrying, and oil and gas extraction as well as information and cultural industries. Among the regions, the Prairies and British Columbia gained the most multi-jurisdiction enterprises over the period, while Quebec lost the most. Even if the vast majority of enterprises with employees in many provinces or territories are Canadian controlled, foreign controlled enterprises tend to spread geographically more within Canada than their Canadian controlled counterparts.