Thank you very much, Mr. Chairman.
Given that the decision to study the services sector is a recent one, we did not have much time to prepare the data. However, we have distributed a deck—I am sorry that it was not available earlier—which we will use to try and give you a general overview.
We'll try to share with the committee today a little bit of a 30,000-foot look at the services sector, and particularly at key trends. Perhaps this will point your deliberations towards some of the challenges.
My plan is to go through this deck and then turn to my colleague Colleen Barnes, from the Department of Finance, who will be able to speak in a little more detail about the finance and insurance sector within that global umbrella of the services sector.
I'll turn to page one of the deck I've distributed to members. The first point to make in looking at the services sector is that it is hugely diverse. We're not talking about a sector that is homogeneous in very many respects. It is important, and unambiguously. Two-thirds of GDP and employment get affected through this sector.
It encompasses both public and private sectors, and so what you're going to be seeing is government and non-market services as well as producer services. That will become important as you pursue your investigations, because this is a segment of the economy that is inextricably linked with manufacturing. Their role vis-à-vis the balance of the economy is something that is important to understand.
This is particularly the case if you start taking a look at marketing, procurement, logistics, and that sort of thing. In fact, there are studies out of the OECD that would suggest to you that services account for upwards of 25% of the value-added activity. So it's a very important sector, but understand that wide element of diversity.
I mentioned to you that it accounts for over two-thirds; in fact, it's close to 70% of the economy. It's important to recognize as well--if you look at the chart on the bottom right-hand side--that the share of services in total economic activity has been increasing over time. So this isn't a stagnant portion of our economy; there has, in fact, been shift there. You'll see that as a portion of the economy it's been relatively stable over time, at some 70%. There's been a dimension of growth, and we'll see that in some of the subsequent slides.
On slide three, you see some of the detail. I made the point at the outset that this is not a homogeneous sector. You can't look at it as being all the same jobs, all the same kind of activity. Here you get a snapshot of some of that variation. This particular snapshot tries to outline the relative contributions to GDP. You'll see that the largest components are real estate, wholesale, retail, finance, and insurance, and yet down at the other end you have a series of things such as tourism, which are far smaller contributors to the overall GDP of the economy.
In the centre, you'll see that there are large segments that are industries performed with the assistance of public funding, and by that I'm referring to health care, government, education. Those are major contributors as well.
Slide four starts to point out that, while this has been a relatively stable component, growing somewhat at 70% of the economy, there have been elements of growth, and in a sense they have grown faster than other elements of the economy. You'll see there that the total economy has grown by some 2.8%—I'm talking about the last five years here—whereas the services sector has grown at an average of some 3.2%.
The fastest elements of growth are wholesale and retail, associated with a healthy economy. Also among the areas, you're seeing growth in arts and entertainment, albeit at the bottom end. I would note that none of them are demonstrating negative growth; there has been growth in all segments of services.
Turning to slide five, clearly the contribution of service industries to employment has increased over time, and here you will see that there was a bit of a change around 1958, when services started to exceed the goods-producing sector in terms of employment. Back in 1946, 40% of Canadian workers were in the service sector, and today you'll see that it is a far higher proportion. The service sector accounted for some 90% of the increase in employment in Canada between 2005 and 2006, so you'll see that there is clearly activity going on in this sector.
Slide six starts to take a look at retail trade accounts, and that is the largest share of employment. The retail trades account for a huge amount, fully 16%, but if you take a look at total employment in the economy, we're talking in the order of 10.9 million people as of 2006. Retail and health care are the largest ones. That's not particularly surprising, I don't suspect. In the overall composition--you see that we have bars indicating 2002 and 2006--there is relative stability. You see the variation through the sub-sectors, but there is relative stability across time.
As you would expect, given all of those facts so far, retail has created the most jobs within the services sector since 2002. Over the past five years, you'll see, the increases are in retail, health care, and administrative support, and again, it hasn't fallen in any of them. It's an important dimension to recognize. This is a segment of the economy that is, in fact, growing.
It's important to understand what the distribution of wages looks like in this sector. The hourly wage in the services sector, on average, was $20.59 in 2006. It's below manufacturing, which over that period of time clocked in at $23. However, there are significant differences. At the outset I suggested to you that the services sector is not homogenous, and again, you see that lack of homogeneity reflected here in terms of wages. Perhaps not surprisingly, we have a number of sub-sectors in services that are above the national average, and it comes as no surprise, obviously, that there is a group that is below the national average.
As show on slide nine, productivity growth has in fact been quite high in the services sector relative to other portions of the economy. It has been gaining ground, and it's outperformed the other sectors. It's an important dimension to recognize that this labour productivity growth rate is greater in the services sector.
In terms of exports, services account for a relatively small share of total Canadian exports, but it's been somewhat consistent over time. Exports totalled about $64 billion and about 13%. Imports constitute about 16%, and the bulk of this is in what economists would term commercial services. Commercial services comprises a broad basket of activities that covers communications, construction, insurance, and the financial sector.
There is a whole host of sub-elements there. I think if you were to talk to economists about some of this, they might get into some of the challenges of data in this sector. It's important that data be consistent. With the evolution in the economy, global value chains, and inter-firm commerce, keeping accurate records of some of this data becomes a bit of a challenge on some fronts.
There has been absolute growth in exports, and I think that's an important dimension.
On slide 11 I've tried to capture a bit of a summary of some of these slides. Services is a large portion of the economy. It does provide an essential support to the other segments of the economy. It has accounted for most of the job gains of late. There's always an assumption that it has low-paying wages, but a number of components of this sector offer very good and above-average wages. It's a diverse sector. It has been experiencing increased investment that has led to its increased productivity. And the exports are there. They're significant. They're growing somewhat. There is opportunity for the future.
I will stop there.
I do not know if I used the ten minutes allotted to me, Mr. Chairman, but with your permission, I will give the floor to my colleague from the Department of Finance, Colleen Barnes, who will talk a bit more about the services sector elements that affect the financial industries.