COMPETITIVE ADVANTAGE ANALYSIS

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					     What Makes Saskatchewan Tick?

COMPETITIVE ADVANTAGE ANALYSIS
        Detailed Statistical Report


             September 2005
WHAT MAKES SASKATCHEWAN TICK?

COMPETITIVE ADVANTAGE ANALYSIS
            September 2005




           Sask Trends Monitor
             444 19th Avenue
          Regina, Saskatchewan
                 S4N 1H1
            Tel: 306-522-5515
      Email: sasktrends@sasktel.net
       Internet: www.sasktrends.ca
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                                               Table of Contents


SECTION 1   INTRODUCTION AND BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 2   LOCATION QUOTIENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
      2.1   Using Employment as an Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
      2.2   Using GDP as an Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
      2.3   Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

SECTION 3   SHIFT SHARE ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          21
      3.1   Using Employment as an Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  23
      3.2   Using GDP as an Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             29
      3.3   Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   35

SECTION 4   LEADING/LAGGING ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              39
      4.1   Using Employment as an Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  41
      4.2   Using GDP as an Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             48
      4.3   Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   54

SECTION 5   INDUSTRY TARGETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          59
      5.1   Using Employment as an Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  60
      5.2   Using GDP as an Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             66
      5.3   Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   72

SECTION 6   SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77




                                                           iii
iv
                                                                     List of Tables

Table 1.1    Competitive Advantage Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Table 2.1    Interpretation of Location Quotients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 2.2    Employment Based Location Quotients for Saskatchewan Relative to Western Provinces . . . . . . . . . . . 10
Table 2.3    Employment Based Location Quotients for Saskatchewan Relative to Midwestern States and Prairie
             Provinces, Paid Workers Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 2.4    GDP Based Location Quotients for Saskatchewan Relative to Western Provinces . . . . . . . . . . . . . . . . . 14
Table 2.5    GDP Based Location Quotients for Saskatchewan Relative to Midwestern States and Prairie Provinces,
             2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 2.6    Location Quotients for Saskatchewan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Table 3.1    Shift Share Components for Employment Growth from 1992 to 2004, Comparison with Western
             Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table 3.2    Shift Share Components for Paid Employment Growth from 2001 to 2003, Comparison with Midwest
             States and Prairie Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table 3.3    Shift Share Components for Real GDP from 1997 to 2004, Comparison with Four Western Provinces . 30
Table 3.4    Shift Share Components for Real GDP from 1998 to 2002, Comparison with Midwest States and
             Prairie Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Table 3.5    Provincial Effect in the Shift/Share Analysis for Saskatchewan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Table 4.1    Carvalho Classification System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Table 4.2    Leading/Lagging Classification Relative to Four Western Provinces, Employment Measure,
             1992 to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Table 4.3    Leading/Lagging Classification Relative to Midwest States and Prairie Provinces, Paid Employment
             Measure, 2001 to 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Table 4.4    Leading/Lagging Classification Relative to Four Western Provinces, Real GDP Measure,
             1997 to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Table 4.5    Leading/Lagging Classification Relative to Midwest States and Prairie Provinces, Real GDP Measure,
             1998 to 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Table 4.6    Leading/Lagging Classification for Saskatchewan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Table 5.1    Industry Targeting Classification System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Table 5.2    Industry Targeting Classification, Employment in Saskatchewan Relative to Four Western Provinces,
             1992 to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Table 5.3    Industry Targeting Classification, Paid Employment in Saskatchewan Relative to Midwest States and
             Prairie Provinces, 2001 to 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Table 5.4    Industry Targeting Classification, GDP in Saskatchewan Relative to Four Western Provinces,
             1997 to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Table 5.5    Industry Targeting Classification, GDP in Saskatchewan Relative to Midwest States and Prairie
             Provinces, 1998 to 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Table 5.6    Industry Targeting Classification for Saskatchewan Relative to the Four Western Provinces . . . . . . . . . 73
Table 5.7    Industry Targeting Classification for Saskatchewan Relative to the Midwest States and Prairie
             Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Table 6.1    Comparative Advantage Summary for Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Table 6.2    Comparative Advantage Summary for Mining and Oil/Gas Extraction . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Table 6.3    Comparative Advantage Summary for Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Table 6.4    Comparative Advantage Summary for Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Table 6.5    Comparative Advantage Summary for Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Table 6.6    Comparative Advantage Summary for Accommodation and Food Services . . . . . . . . . . . . . . . . . . . . . . 83
Table 6.7    Comparative Advantage Summary for Professional, Scientific, and Technical Services . . . . . . . . . . . . . 84

                                                                     List of Figures

Figure 1.1   Region Chosen for Midwest Provinces and States, (showing relative sizes of state and provincial
             economies) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Figure 1.2   Real Gross Domestic Product (chained 1997 dollars), Western Provinces, 1991=100 . . . . . . . . . . . . . . . 4
Figure 1.3   Employment in the Western Provinces, 1991=100 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 2.1   Employment Based Location Quotients, Saskatchewan Compared with the Four Western Provinces,
             1992 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Figure 2.2   Location Quotients for Paid Employment, Saskatchewan Compared with the Midwest States and
             Prairie Provinces, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13



                                                                                 v
Figure 2.3   GDP Based Location Quotients, Saskatchewan Compared with the Four Western Provinces,
             1997 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        15
Figure 2.4   GDP Based Location Quotients, Saskatchewan Relative to the Midwest States and Prairie Provinces,
             2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   17
Figure 3.1   Provincial Effect Using Employment, Saskatchewan Compared with the Four Western Provinces,
             1992 to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       25
Figure 3.2   The Provincial Effect Using Paid Employment, Saskatchewan Compared with the Midwest States and
             Prairie Provinces, 2001 to 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                28
Figure 3.3   The Provincial Effect Using Real GDP, Saskatchewan Compared with the Four Western Provinces,
             1997 to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       31
Figure 3.4   The Provincial Effect Using Real GDP, Saskatchewan Compared with the Midwest States and Prairie
             Provinces, 1998 to 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              34
Figure 4.1   Leading/Lagging Classification using Employment, Saskatchewan Relative to the Four Western
             Provinces, 1992 to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              44
Figure 4.2   Leading/Lagging Classification using Paid Employment, Saskatchewan Relative to the Midwest States
             and Prairie Provinces, 2001 to 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    47
Figure 4.3   Leading/Lagging Classification Relative to Four Western Provinces, GDP Measure, 1997 to 2004 . . . . .                                                         50
Figure 4.4   Leading/Lagging Classification, Saskatchewan Relative to the Midwest States and Prairie Provinces,
             GDP Measure, 1998 to 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  53
Figure 5.1   Industry Targeting using Employment, Saskatchewan Compared with the Four Western Provinces,
             1992 to 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       62
Figure 5.2   Industry Classification Using Paid Employment Growth, 2001 to 2003, Relative to the Midwest States
             and Prairie Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          65
Figure 5.3   Industry Classification Using Growth in Real GDP, 1997 to 2004, Saskatchewan Compared with the
             Four Western Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               68
Figure 5.4   Industry Classification Using Growth in Real GDP, 1998 to 2002, Saskatchewan Compared with the
             Midwest States and Prairie Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     71




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SECTION 1 INTRODUCTION AND BACKGROUND


Governments, businesses, individuals, and organizations involved in community and economic
development are always searching for a way to forecast patterns of economic growth. They do
this for all the right reasons, of course, wanting to encourage economic growth in areas that have
the most potential to be successful and avoid devoting scarce resources to economic areas and
opportunities that are more likely to fail.

Unfortunately, forecasting economic trends is extremely difficult. The market has a tendency to
move in unpredictable ways because of new technology (think of the Internet), changes in politics
or world events (think of September 11, 2001), or other factors (think of BSE).

This document is not a forecast of future opportunities. It is, instead, an examination of past
trends with a view to identifying industry sectors that have under-performed or over-performed
relative to other industries and other regions. Perhaps this will enable an informed debate about
where the province’s economy is headed and about “what makes Saskatchewan tick”.

This report summarizes the results of a competitive advantage analysis1 for the Saskatchewan
economy. A competitive advantage analysis looks at recent industry trends in comparison with
trends in other economies and other industries. The research was conducted by Doug Elliott, the
principal of QED Information Systems Inc. and publisher of Sask Trends Monitor. The opinions
expressed in this document do not necessarily represent those of the Chamber of Commerce,
the Government of Canada, or the members of the research committee which was charged with
overseeing the research. Responsibility for the accuracy of the data and the validity of the
conclusions reached remains with the author.

Choosing the Economic Measures

In theory a competitive advantage analysis can be done for any kind of economic measure. In
practise, there are only two kinds of economic statistics – employment and the gross domestic
product – that are comprehensive, consistently available over time for different regions and
industry groups.

There are advantages and disadvantages to using each of these measures. Using employment
as a measure of economic activity has the advantage of being easy to understand. A job is a
readily identifiable measure of economic success for an individual if not an economy. The data
from Statistics Canada’s Labour Force Survey (LFS) are both up-to-date and reliable and
historically comparable information by industry is available back to the mid 1980s.

But there are difficulties with employment as a measure of activity at the industry level. The first
is that changes in productivity can affect changes in employment; a firm or industry may be more
successful by every other measure except employment. If an individual firm or an industry group
has revenue growth, higher salaries, and profit increases with the same number of employees, a
measure of employment will not indicate “success”.


1
       The model for Competitive Advantage Analysis used in this report is based on research done for the Ontario
       Ministry of Municipal Affairs by economist Dr. Emanuel Carvalho from the University of Waterloo.



Competitive Advantage Analysis                     September 2005                                          Page 1
A second difficulty is related to a uniquely Saskatchewan phenomenon, namely the presence of
multiple job holders, people who simultaneously hold two or more jobs. In 2004, for example, 8%
of persons employed in the province were multiple job holders, the highest rate in Canada. The
LFS measures the characteristics, including the industry, of only the “main” job – the one at
which the respondent works the most hours. We undoubtedly misrepresent agricultural
employment in the province, for example, when we measure only employment for the main job.

A third difficulty is with part-time employment specifically and hours of work generally. Replacing
two part-time employees with a single full-time employee working the same aggregate hours will
look, in the statistics, like an increase in employment. Increased hours for either part-time or full-
time employees will not register. A more appropriate measure might be hours worked rather
than employment but in practise this would make little difference because changes in hours of
work are relatively slow to occur and tend to happen in Saskatchewan at the same rate as in
other provinces.

The Gross Domestic Product (GDP) is a more comprehensive measure of economic activity.
The GDP is a measure of the value of goods and services produced by an economy and is the
statistic used most often by economists. Adjusted for changes in price levels, “real” GDP is a
measure of the value added by an economy. Besides being harder for a non-economist to
understand, the difficulty with GDP measures – either real or nominal – is accuracy and
availability. At the provincial level, calculation of GDP requires a good deal of detailed raw data
about international and interprovincial trade, corporate profits, wage rates, and the volume and
value of goods and services produced. Much of this hard data is not available so provincial GDP
figures are based on econometric models to a large extent and prone to error and periodic
retroactive revisions that can be significant.

To compound the difficulty with gross domestic product, Statistics Canada has recently begun a
process to “re-base” provincial GDP values to a new industry classification scheme - the North
American Industry Classification System (NAICS). Data for real GDP by province is only
available since 1997.

Choosing the Comparison and the Time Frame

A competitive advantage analysis requires:
      i) another economy against which the Saskatchewan economy can be compared; and
      ii) a time frame over which the comparison is made.
The choices made for these parameters are important. Saskatchewan’s resource-based
economy has experienced a number of booms and busts over the years and the choice of the
starting and ending points will have an impact on how well or how poorly the economy performs
over a period of time. The economy chosen for the comparison should reflect the same kinds of
economic opportunities as those available in Saskatchewan.

The obvious choice for a comparison economy is Canada as a whole. This has some risks,
however, because the national economy is not at all like the Saskatchewan economy.
Dominated by the manufacturing sectors in populous Ontario and Quebec, any comparison with
the national economy would certainly make Saskatchewan’s resource-based economy look
different.

A focus on the prairie provinces, on the other hand, may be too narrow. Saskatchewan accounts
for one sixth of employment or GDP in the prairie provinces and one would normally like to find a
comparable region in which we play a smaller role. An analysis that expanded the prairies to


Competitive Advantage Analysis                September 2005                                  Page 2
include the northern states would also be interesting because this kind of comparison would
include economies under a different political régime but with similar climates and natural
resources. Another alternative is to include British Columbia which also has a significant but
different kind of resource base.

In the end, the research committee decided that two comparisons would be made;
      i) one between Saskatchewan and the four western provinces, and
      ii) one between Saskatchewan and the midwest states combined with the prairie provinces.
Figure 1.1 shows the states and provinces chosen for the latter comparison.

Choosing a time frame is also important. We are measuring changes over time so both the
starting point and the end point is important. The end point would be the most recent year
available – ideally 2004 – but the starting point could be any time after 1986 when comparable
data were produced. Obviously an earlier start date means that changes will be measured over
a longer period and less subject to annual fluctuations.

             Figure 1.1     Region Chosen for Midwest Provinces and States, (showing
                            relative sizes of state and provincial economies)




                                  2002 GDP measured in 1997$



                       Alberta         Saskatchewan          Manitoba
                       C$120 B            C$28 B             C$32 B




                                 Montana               North Dakota
                                                        US$19 B          Minnesota
                                 US$23 B
                                                                         US$193 B


                                                       South Dakota
                                                         US$24 B
                                      Wyoming
                                      US$20 B                               Iowa
                                                                           US$94 B
                                                        Nebraska
                                                        US$58 B

                          2002 GDP measured in 2000$
                                                               Kansas
                                                                              Missouri
                                                               US$86 B
                                                                             US$179 B




Competitive Advantage Analysis                 September 2005                              Page 3
The last national recession (defined as a decline in real GDP) occurred in 1991. The Manitoba
economy was also in recession that year whereas the B.C. and Alberta economies slowed but
did not decline. Saskatchewan’s economy went into recession one year later, in 1992 (see
Figure 1.2). As well, 1992 marks a point where employment in both the national economy and in
three of the four western provinces reached a low (see Figure 1.3) so seems a good starting
point for the analysis. In effect, we will be measuring, for the comparison with the four western
provinces, changes over the past twelve years from 1992 to 2004 in the analysis of employment
that follows.

The comparison with the midwest states and prairie provinces requires the use of a much shorter
time frame and a slightly different measure of employment. Data on employment in the USA is
published by the Bureau of Labour Statistics (BLS) and is derived from payroll records rather
than a telephone survey. The information therefore excludes the self-employed because there
are no payroll records to measure employment.

Accordingly, the comparison with the midwest states and prairie provinces is made for only paid
workers, effectively minimizing agriculture as an industry because, for example, only one in six
persons employed in Saskatchewan agriculture is a paid worker. Other industries with a large
proportion of the self-employed such as real estate, professional and technical services, retail
trade, and accommodation and food services are also affected. Other problems arise with the
comparison because the BLS has only been publishing data using the same industry groups as
Statistics Canada since 2001 so there is a lack of historical data from the USA.

For real GDP, the time frame is limited by the availability of the data – the seven years from 1997
to 2004 were chosen for the comparison with the four western provinces. For the midwest states
and prairie provinces, real GDP is available only from 1998 to 2002.


 Figure 1.2      Real Gross Domestic Product (chained 1997 dollars), Western Provinces, 1991=100

  170
        1991=100
  160

  150
                Alberta
                B.C.
  140
                Manitoba
  130           Saskatchewan

  120

  110

  100

   90

   80
        1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004




Competitive Advantage Analysis                September 2005                                 Page 4
Choosing the Industry Sectors

The choice of industry sectors to be used in the analysis was determined by availability. The
Labour Force Survey conducted monthly by Statistics Canada is the only source of current
employment information so, by necessity, it was used as the main data source for the analysis of
employment. Statistics Canada uses the NAICS (North American Industry Classification System)
to classify industries in the LFS. In practical terms, the analysis is limited to the detail available in
the NAICS classification scheme and published in the LFS. The only change was to combine
two smaller industry groups to ensure reliability of the data (forestry and logging was combined
with fishing, hunting, and trapping). This results in nineteen different industry groups for the
comparison of employment in western Canada.

For GDP, the industry groups are published with slightly different groupings resulting in eighteen
industry groups.

The employment data from the LFS is based on annual averages for the years in question, that
is, the average of twelve monthly “snapshots” of employment2. To be employed, a person must
have done work for pay or profit. Employed persons can be paid workers, self-employed, or the
so-called “unpaid family workers”, namely those who work without pay in a family farm, business
or professional practice. Those who are absent from their job or business because of a vacation,
illness, labour dispute, or other reason are still considered as employed. Persons with two or
more simultaneous jobs are counted only once, classified in their “main” job.


    Figure 1.3       Employment in the Western Provinces, 1991=100

     140
           1991=100


     130

                     Alberta
                     B.C.
     120
                     Manitoba
                     Saskatchewan
     110



     100



      90



      80
           1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004




2
           The LFS does not survey residents on Reserve so the employment figures for Saskatchewan will be
           somewhat understated, particularly in the public sector, compared with those in other provinces.



Competitive Advantage Analysis                         September 2005                                         Page 5
The Bureau of Economic Analysis (BEA) in the US is responsible for publishing the GDP and the
BEA uses a different approach to the public sector in the economic accounts. In effect all
government related activities, what we call the “public sector”, is classified as “government”. So
for example, the public sector part of education services is classified as part of government
whereas in Canada, it is considered part of the education sector. This affects the comparison
between Saskatchewan and the midwest states and prairie provinces group in any sector where
there is a significant government presence in either the USA or Canada. Besides public
administration, these include transportation (the postal service), health care, education services,
and utilities.

A more complete description of the industry categories used in this analysis follows.

Agriculture          This category includes grain and cattle farming, market gardens, intensive livestock operations, and
                     services related to agriculture such as crop spraying, custom harvesters, seed cleaning, and animal
                     breeding services.

Forestry, fishing,   Logging and forestry, commercial and sustenance fishing and trapping are included in this
hunting              category. Note that the logging industry only measures activity in the forest (including silviculture),
                     and doesn’t include processing activities.

Mining, oil and      This category includes oil and gas exploration and production, above and below ground mining, and
gas extraction       contract drilling for oil and natural gas. Oil refineries are classified as manufacturing
                     establishments.

Utilities            Establishments engaged in the production and distribution of electricity or the distribution of natural
                     gas and water are classified as utilities. (Telephone companies are considered as part of the
                     information sector.) In Saskatchewan, this category will be dominated by SaskEnergy and
                     SaskPower.

Construction         This sector comprises establishments primarily engaged in constructing, repairing and renovating
                     buildings and engineering works, and in subdividing and developing land. These establishments
                     may operate on their own account or under contract to other establishments. They may produce
                     complete projects or subcontract work to other establishments.

Manufacturing        Manufacturing establishments take raw materials and transform them into finished products, in the
                     sense that they are ready to be used or consumed, or semi-finished products, in the sense of
                     becoming a raw material for an establishment to use in further manufacturing. Manufacturing
                     establishments may own the materials which they transform or they may transform materials
                     owned by other establishments.

                     In Saskatchewan, this category includes traditional manufacturing activities as well as food
                     processing (meat processing plants and grain milling). Oil refineries are also considered as
                     manufacturing establishments.

                     Non-durable goods include food, beverages, clothing, textiles, chemicals, paper products, plastics
                     and rubber products. Durable goods include machinery and equipment, steel and metal products,
                     transportation equipment, wood products, furniture and electrical/electronic equipment.

Wholesale trade      The wholesaling process is generally an intermediate step in the distribution of merchandise; many
                     wholesalers are therefore organized to sell merchandise in large quantities to retailers, businesses,
                     and institutional customers. Some wholesalers, in particular those that supply non-consumer
                     capital goods, sell merchandise in single units to final users. Farm machinery dealers and lumber
                     yards are considered as wholesale establishments.

Retail trade         The retail category includes establishments that sell merchandise (not services) to the general
                     public. Non-store retailers such as vending machine operators are included as well.

Transportation       Establishments in this category transport people or goods by rail, air, or road. Included are trucking
and warehousing      companies, the post office, courier services, pipelines, grain terminals, airlines, taxis, and
                     scheduled, charter, or school bus services.




Competitive Advantage Analysis                            September 2005                                              Page 6
Finance and         This category includes both deposit-taking financial institutions such as banks and credit unions as
insurance           well as financial management firms. Insurance companies and insurance agencies are also
                    included.

Real estate and     This category is dominated by self-employed real estate agents although it also includes
leasing             establishments that rent or lease equipment or vehicles.

Professional,       These kinds of establishments provide services primarily to other businesses. The category
scientific, and     includes, for example, management and computer consulting firms, law offices, advertising
technical           agencies, accounting services, architectural, and engineering services.
services

Business            This category includes head offices and companies that provide waste management or cleaning
building and        services to buildings. It also includes other services to business such as temporary employment
other support       agencies, investigation and security services, and office administration services.
services

Education           Education services include elementary and secondary education, post-secondary institutions and
service             private vocational schools.

Health and          Health and social services includes establishments that are involved in the delivery of health
social assistance   services such as hospitals, ambulance services, physicians or dentists offices or social services
                    such as special care homes, child care services, or services for those with a disability.

Information,        This category includes the media, telecommunications, performing arts companies, amusement
culture, and        parks, museums, casinos, sports and cultural venues as well as agents for artists and athletes.
recreation

Accommodation       These are establishments primarily engaged in providing accommodation services such as hotels,
and food            motels, vacation farms, and campgrounds or food and beverage services such as lounges,
services            restaurants, and catering services.

Personal and        This category is dominated by companies that generally provide personal or household services to
household           individuals. It includes hair salons, funeral homes, and laundry services as well as lawn care
services            companies, and auto repair shops. Membership organizations such as employee organizations,
                    churches, trade unions, and social advocacy organizations are also included.

Public              Public administration includes all levels of government – federal, provincial, town, municipal, and
administration      First Nation – and the agencies which operate at arm’s length from government such as Workers
                    Compensation and the Human Rights Commission. It does not include government enterprises
                    such as crown corporations.


Note that the public sector industry groups – public administration, health care and education, for
example – are included in the analysis for completeness. There is no suggestion that these are
economic “drivers” for the provincial or regional economies.




Competitive Advantage Analysis                          September 2005                                            Page 7
 Table 1.1        Competitive Advantage Analysis

                                                                  Economic indicator
  Comparison group
                                                     Employment             Real Gross Domestic Product

                                                   19 industry groups            18 industry groups
  Four western provinces
                                                     1992 to 2004                   1997 to 2004

                                                   16 industry groups            17 industry groups
  Midwest states and prairie provinces
                                                     2001 to 2003                  1998 to 2002




Table 1.1 summarizes the time frames and industry groups used in this competitive advantage
analysis.




Competitive Advantage Analysis                September 2005                                          Page 8
SECTION 2 LOCATION QUOTIENTS


A location quotient identifies the level of specialization in a geographic region. In simple terms it
measures the concentration of certain industry sectors in the region relative to a reference
economy – either the four western provinces or the midwest states and prairie provinces.

In mathematical terms, the location quotient for each individual sector (using employment data
comparison to the four western provinces, for example) is




where:
     LQSECT = the location quotient for an industry sector
     SASKEMPLSECT = employment in the industry sector in Saskatchewan
     SASKEMPL = total employment in Saskatchewan
     WCEMPLSECT = employment in the industry sector in western Canada
     WCEMPL = total employment in western Canada
The analysis for the midwestern states and provinces substitutes the aggregate of the provinces
and states for the four western provinces. The analysis for GDP uses real GDP figures in the
equation instead of employment figures.

Table 2.1 shows the range of possible location quotients arising from the formula and their
suggested interpretation. The interpretation of location quotients is not particularly complex; we
are simply measuring employment or economic concentration in the province. Industry groups
that dominate in the province will have higher location quotients and ones that are relatively
scarce will have lower location quotients. Not that a low (or high) location quotient doesn’t
necessarily mean the industry group is unimportant (or important) in Saskatchewan, just that it is
less so (or more so) than in the comparison economy.




 Table 2.1           Interpretation of Location Quotients

 Location Quotient          Label              Interpretation

 less than 0.75             Low                Provincial needs are not being met by the sector. The province is
                                               probably importing goods and services in this sector.

 0.75 to 1.24               Medium             Most local needs are being met by the sector. The province will
                                               probably be both importing and exporting goods and services in this
                                               sector.

 1.25 to 4.99               High               The sector is serving needs beyond the border, exporting goods and
                                               services in this sector to other provinces.

 More than 5.00             Very High          This is indicative of a very high level of local dependence on the
                                               sector, typically in a “single-industry” community.




Competitive Advantage Analysis                       September 2005                                            Page 9
2.1   Using Employment as an Indicator

Relative to the four western provinces, all but three of the nineteen industry groups have a
location quotient for employment that is classified as either low or medium in 2004 (see Table 2.2
and Figure 2.1). The three industry groups with a “high” location quotient are agriculture, the
resource sector, and utilities. Note that an increase in the location quotient can arise if
employment in Saskatchewan increases as a proportion of total employment or if it declines as a
proportion of employment in the comparison group.

In two of these three cases, the location quotient has increased from a “medium” category in
1992 to a “high” category in 2004. Although there are changes in the location quotient for the
other seventeen industry groups, all are classified in 2004 in the same category as in 1992. The
educational services group is almost an exception – the location quotient has increased from
1992 to 2004 to the extent that education services is almost in the “high” category.

The other observation that can be made about the comparison with the four western provinces is
that Saskatchewan’s location quotients tend to be increasing. In thirteen of the nineteen industry
groups, the location quotient is
higher in 2004 than in 1992. This is   Table 2.2          Employment Based Location Quotients for
an indication that the province’s                         Saskatchewan Relative to Western Provinces
economy is becoming more
                                                                                             Category
diversified – employment in                                                    1992    2004
                                                                                              in 2004
agriculture declined by 42% over the
twelve years and there was an         Agriculture                                2.8     2.7    High
increase of 18% in non-agricultural   Forestry, fishing, hunting                 0.5     0.4    Low
employment.
                                        Mining and oil and gas extraction        0.9    1.3    High

Several of the location quotients are   Utilities                                1.0    1.3    High
low enough to suggest that the          Construction                             0.7    0.7    Low
province is importing a large
                                        Manufacturing                            0.6    0.6    Low
proportion of goods/services in
these industry groups. These            Wholesale trade                          1.0    1.1   Medium
include the forestry/fishing/hunting    Retail trade                             1.0    1.0   Medium
group, the manufacturing sector,
and the professional, scientific, and   Transportation and warehousing           0.8    0.9   Medium
technical services group.               Finance and insurance                    0.9    1.1   Medium
                                        Real estate and leasing                  0.7    0.7    Low
                                        Professional, scientific and technical
                                                                                 0.6    0.6    Low
                                        services
                                        Business, building and other support
                                                                                 0.8    0.7    Low
                                        services
                                        Educational services                     1.0    1.2   Medium
                                        Health care and social assistance        1.1    1.1   Medium
                                        Information, culture and recreation      0.9    0.9   Medium
                                        Accommodation and food services          0.8    0.9   Medium
                                        Personal and household services          1.0    1.0   Medium
                                        Public administration                    1.0    1.1   Medium




Competitive Advantage Analysis                 September 2005                                 Page 10
 Figure 2.1         Employment Based Location Quotients, Saskatchewan Compared with the Four Western
                    Provinces, 1992 and 2004

                                                                                                    2.8
                   Agriculture
                                                                                                  2.7


                       Utilities

       Mining and oil and gas
             extraction

         Educational services

       Health care and social
            assistance

         Public administration
                                                                                              1992
                                                                                              2004
       Finance and insurance


              Wholesale trade


                  Retail trade

     Personal and household
            services

      Information, culture and
            recreation

    Accommodation and food
          services

           Transportation and
              warehousing

      Real estate and leasing

  Business, building and other
       support services

                 Construction


               Manufacturing

   Professional, scientific and
       technical services

     Forestry, fishing, hunting


                               0.00   0.25   0.50         0.75    1.00    1.25      1.50   1.75      2.00
                                                    low          medium          high




Competitive Advantage Analysis                      September 2005                                Page 11
Midwestern States and Prairie Provinces

As noted in Section 1, the data on employment in the USA is restricted to paid employment and
available only since 2001. Table 2.3 shows the location quotient, based on paid workers, for
Saskatchewan relative to the midwest states and prairie provinces.

In the categories using paid employment, retail and wholesale trade joins agriculture, the
resource sector, and utilities as having a “high” location quotient in Saskatchewan in 2003. The
location quotient for the resource sector is much higher in this comparison than with the
comparison to four western provinces. Two of the industries dominated by the public sector,
namely education and government proper, remain high in this comparison but less so than in the
comparison with Western Canada. The other public sector industry – health care – has a lower
location quotient relative to the midwest states and prairie provinces than in does in the
comparison with the four western provinces.

The comparison with four western provinces showed manufacturing, construction, the
professional, scientific and technical services group, and the business, building, and other
support group as having a low location quotient in Saskatchewan. The location quotients relative
to the midwest states and prairie provinces are still low for these industries but construction and
the professional services group have
moved up to a “medium” classification.           Table 2.3       Employment Based Location Quotients
                                                                  for Saskatchewan Relative to
                                                                  Midwestern States and Prairie
                                                                  Provinces, Paid Workers Only

                                                                                            2003 Category
                                               Agriculture, forestry, fishing and hunting    2.3    High
                                               Mining, oil and gas                           3.1    High
                                               Utilities                                     1.3    High
                                               Construction                                  0.8   Medium
                                               Manufacturing                                 0.5    Low
                                               Retail and wholesale trade                    1.3    High
                                               Transportation and warehousing                1.1   Medium
                                               Finance, insurance, real estate and
                                                                                             1.0   Medium
                                               leasing
                                               Professional and technical services           0.8   Medium
                                               Business, building and other support
                                                                                             0.4    Low
                                               services
                                               Educational services                          1.1   Medium
                                               Health care and social assistance             1.0   Medium
                                               Information, arts, entertainment, and
                                                                                             1.1   Medium
                                               recreation
                                               Accommodation and food services               0.9   Medium
                                               Personal and household services               1.2   Medium
                                               Public Administration                         1.2   Medium




Competitive Advantage Analysis               September 2005                                        Page 12
 Figure 2.2         Location Quotients for Paid Employment, Saskatchewan Compared with the Midwest
                    States and Prairie Provinces, 2002



                               Mining, oil and gas                                                                    3.1


         Agriculture, forestry, fishing and hunting                                                                   2.3


                      Retail and wholesale trade



                                           Utilities



                            Public Administration



                Personal and household services



                             Educational services



  Information, arts, entertainment, and recreation



                 Transportation and warehousing



      Finance, insurance, real estate and leasing



               Health care and social assistance



              Accommodation and food services



                                     Construction



              Professional and technical services



                                   Manufacturing



   Business, building and other support services


                                                   0.00   0.25   0.50         0.75    1.00    1.25     1.50   1.75   2.00
                                                                        low          medium          high




Competitive Advantage Analysis                            September 2005                                             Page 13
2.2   Using GDP as an Indicator

Relative to the four western provinces, all but five of the eighteen industry groups have a location
quotient for real GDP that is classified as medium in 2004 (see Table 2.4 and Figure 2.3). The
two industry groups with a “high” location quotient are agriculture and the resource sector.
Those that are considered as low are the “professional, scientific, and technical services” group,
the “administrative and support, waste management” group, and accommodation and food
services. The location quotients for all three have increased since 1997.

These classifications are similar to the ones derived using employment rather than GDP. A
comparison with the employment data, which is hampered by slightly different industry groupings,
shows that utilities is ranked medium in terms of GDP but high in terms of employment. This
would indicate that the utility sector in Saskatchewan has a “typical” level of output but relatively
high levels of employment. Manufacturing and construction were both ranked low in terms of
employment but medium in terms of GDP. This would indicate the opposite, namely a relatively
low level of employment but relatively high output for manufacturing and construction.

The largest declines over the seven
years have been in construction,         Table 2.4         GDP Based Location Quotients for
                                                           Saskatchewan Relative to Western Provinces
accommodation and food services,
and the professional, scientific, and                                                              Category
technical services group. The                                                        1997   2004
                                                                                                    in 2004
largest increases have been in
                                        Agriculture, forestry, fishing and hunting   2.05   1.94    High
transportation/warehousing and
manufacturing.                          Mining and oil and gas extraction            1.42   1.47    High
                                        Utilities                                    1.10   1.15   Medium
                                        Construction                                 0.92   0.79   Medium
                                        Manufacturing                                0.67   0.76   Medium
                                        Wholesale trade                              1.07   1.11   Medium
                                        Retail trade                                 0.90   0.94   Medium
                                        Transportation and warehousing               0.96   1.09   Medium
                                        Information and cultural industries          0.93   0.97   Medium
                                        Finance and insurance, real estate,
                                        renting/leasing, management of               0.84   0.85   Medium
                                        companies and enterprises
                                        Professional, scientific and technical
                                                                                     0.59   0.46     Low
                                        services
                                        Administrative and support, waste
                                                                                     0.64   0.56     Low
                                        management and remediation services
                                        Educational services                         1.12   1.12   Medium
                                        Health care and social assistance            1.01   1.12   Medium
                                        Arts, entertainment and recreation           0.76   0.81   Medium
                                        Accommodation and food services              0.83   0.75     Low
                                        Other services                               1.02   0.98   Medium
                                        Public administration                        1.05   1.13   Medium




Competitive Advantage Analysis                 September 2005                                      Page 14
 Figure 2.3         GDP Based Location Quotients, Saskatchewan Compared with the Four Western
                    Provinces, 1997 and 2004


               Agriculture, forestry, fishing and hunting


                      Mining and oil and gas extraction


                                                 Utilities


                                  Public administration


                     Health care and social assistance


                                   Educational services
                                                                                                               1997
                                       Wholesale trade
                                                                                                               2004


                      Transportation and warehousing


                     Personal and household services


                     Information and cultural industries


                                            Retail trade


  Finance, insurance, real estate, leasing, head offices


                     Arts, entertainment and recreation


                                           Construction


                                         Manufacturing


                    Accommodation and food services


  Administrative and support, waste management and
                  remediation services


         Professional, scientific and technical services


                                                         0.00   0.25   0.50   0.75   1.00     1.25   1.50     1.75   2.00
                                                                        low          medium            high




Competitive Advantage Analysis                               September 2005                                           Page 15
Midwestern States and Prairie Provinces

The location quotients for Saskatchewan relative the midwest states and prairie provinces using
real GDP are shown in Table 2.5 and graphically in Figure 2.4 As noted in Section 1, there are
comparison difficulties in the industry sectors dominated by the public sector in these data.

Once again, however, agriculture and the resource sector are classified as “high” in terms of their
location quotient. These two sectors are joined by three others that are affected by comparability
issues – utilities, transportation and warehousing, and educational services.

Two industry groups that had a relatively low location quotient in other comparisons are higher
here – construction and accommodation and food services.

The same two industry groups that were classified as “low” in terms of their location quotient in
the other comparison, namely manufacturing and the professional, scientific, and technical
services group, remain low in this comparison. Government services is also in this category but
only because it is more broadly defined in
the US data.                                   Table 2.5      GDP Based Location Quotients for
                                                                      Saskatchewan Relative to Midwestern
                                                                      States and Prairie Provinces, 2002

                                                                                              2002    Category
                                                  Agriculture, forestry, fishing, and
                                                                                                2.4     High
                                                  hunting
                                                  Mining, oil and gas extraction                3.7     High
                                                  Utilities*                                    1.3     High
                                                  Construction                                  1.1   Medium
                                                  Manufacturing                                 0.6     Low
                                                  Wholesale trade                               1.0   Medium
                                                  Retail trade                                  0.8   Medium
                                                  Transportation and warehousing*               1.6     High
                                                  Information and culture                       0.8   Medium
                                                  Professional and technical services           0.4     Low
                                                  Educational services*                         3.6     High
                                                  Health care and social assistance*            1.0   Medium
                                                  Arts, entertainment, and recreation           0.8   Medium
                                                  Accommodation and food services               0.9   Medium
                                                  Personal and household services               1.1   Medium
                                                  Other services**                              0.8   Medium
                                                  Government*                                   0.6     Low

                                              *            comparability in these categories is compromised
                                                           because the US midwestern states include all public
                                                           sector activities in the “government” category
                                              **           finance, insurance, real estate, rental and leasing,
                                                           head offices, waste management and remediation



Competitive Advantage Analysis               September 2005                                           Page 16
 Figure 2.4            GDP Based Location Quotients, Saskatchewan Relative to the Midwest States and Prairie
                       Provinces, 2002


            Mining, oil and gas                                                                                         3.7


         Educational services*                                                                                          3.6

  Agriculture, forestry, fishing,
                                                                                                                        2.4
           and hunting

            Transportation and
              warehousing*


                       Utilities*


                   Construction


      Personal and household
             services

        Health care and social
             assistance*


              Wholesale trade


    Accommodation and food
          services

      Arts, entertainment, and
             recreation


              Other services**


       Information and culture


                    Retail trade


                 Manufacturing


                  Government*


   Professional and technical
            services

                                0.00   0.25         0.50     0.75       1.00        1.25       1.50       1.75          2.00

                                              low                    medium                high


  * "Government" in the USA includes all public sector activities including health, education, and the postal service

  ** Finance, insurance, real estate, rental and leasing, head offices, waste management and remedial services




Competitive Advantage Analysis                             September 2005                                           Page 17
2.3   Summary

Table 2.6 summarizes the location quotients for Saskatchewan from this section. A high location
quotient (1.25 or more) is indicative of a concentration in that particular sector whereas a low
location quotient (less than 0.75) means that the province will be importing the majority of goods
or services produced by this sector.

Several industries have a high location quotient for Saskatchewan relative to both the four
western provinces and the midwest states and prairie provinces.
•    Agriculture and the resource sector both have consistently high location quotients
     regardless of the measure and the comparison. The resource sector is particular strong
     relative to the midwest states and prairie provinces.
•    The utilities sector is classified as having a high location quotient in three of the four
     comparisons. The only exception is the GDP measure relative to western Canada.
•    The public sector groups – public administration, health care and social assistance,
     and education services – have a relatively high location quotient but they are generally
     classified as “medium” in the methodology.

Several industries have a low location quotient for Saskatchewan relative to both the four
western Canadian provinces and the midwest states and prairie provinces.
•    Manufacturing and the Professional, Scientific, and Technical Services group has a
     low location quotient in all four comparisons.
•    Construction typically has a low location quotient although the paid employment
     comparison with the midwest states and prairie provinces shows a high location quotient.
     This would suggest that Saskatchewan has a relatively low proportion of self-employed
     construction workers compared with the midwest states and prairie provinces.
•    Although ranked as having a “medium” concentration by the methodology, the
     accommodation and food services sector has a location quotient that is consistently well
     below 1.0.

Several other industries are average in the sense that their location quotient is near 1.0 in the
four comparisons.
•     Retail and wholesale trade combined have a medium location quotient although
      wholesale trade is often a little higher than retail trade. This is undoubtedly because of the
      number of farm machinery dealers in the province. One exception is the paid employment
      measure for the midwest states and prairie provinces which would suggest that the
      province has relatively few self-employed individuals in this sector.
•     Depending on the measure, the transportation and warehousing sector is near the
      reference point of 1.0 – somewhat below for employment and somewhat above for the GDP
      measure.
•     Personal and household services are near the reference point of 1.0 in all four
      comparisons.




Competitive Advantage Analysis               September 2005                                Page 18
 Table 2.6           Location Quotients for Saskatchewan

                 Relative to Western Canada                       Relative to Midwest States and Prairie Provinces
     Employment (2004)                    GDP (2004)             Employment (2003)                    GDP (2002)

Agriculture              2.65 Agriculture,                  Agriculture,                  Agriculture,
Forestry, fishing,            forestry, fishing        1.94 forestry, fishing        2.33 forestry, fishing,         2.38
                         0.45 and hunting                   and hunting                   and hunting
hunting
                                                                                            Mining, oil and
Mining, oil and gas      1.28 Mining, oil and gas      1.47 Mining, oil and gas     3.13                             3.38
                                                                                            gas
Utilities                1.31 Utilities                1.15 Utilities                1.32 Utilities                  1.28
Construction             0.70 Construction             0.79 Construction             0.78 Construction               1.10
Manufacturing            0.65 Manufacturing            0.76 Manufacturing            0.55 Manufacturing              0.59
Wholesale trade          1.07 Wholesale trade          1.11 Retail and                      Wholesale trade          0.95
                                                                                     1.32
Retail trade             1.03 Retail trade             0.94 wholesale trade                 Retail trade             0.76
Transportation and              Transportation and            Transportation and            Transportation
                         0.86                          1.09                          1.05                            1.56
warehousing                     warehousing                   warehousing                   and warehousing
Accommodation                   Accommodation                 Accommodation                 Accommodation
                         0.91                          0.75                          0.92                            0.92
and food services               and food services             and food services             and food services
                                                                                          Personal and
Personal and                    Personal and                  Personal and
                         1.03                          0.98                          1.19 household                  0.82
household services              household services            household services
                                                                                          services
Professional,                 Professional,                 Professional,                 Professional,
scientific and           0.57 scientific and           0.46 scientific and           0.75 scientific and             0.44
technical services            technical services            technical services            technical services
                              Finance and
Finance and
                         1.10 insurance, real
insurance                     estate and renting            Finance,
                              and leasing and          0.85 insurance, real          1.01
Real estate and               management of                 estate and leasing
                         0.75 companies and                                                 Other services           0.82
leasing
                              enterprises
                              Administrative and
Business, building                                          Business, building
                              support, waste
and other support        0.74                          0.56 and other support        0.40
                              management
services                                                    services
                              services
                                Arts, entertainment                                         Information and
                                                       0.81                                                          0.81
                                and recreation              Information, arts,              culture
Information, culture
                         0.91                               entertainment, and       1.06 Arts,
and recreation                  Information and
                                                       0.97 recreation                    entertainment,             0.84
                                cultural industries
                                                                                          and recreation
Educational                     Educational                   Educational                   Educational
                         1.24                          1.12                          1.13                            3.56
services                        services                      services                      services
Health care and                 Health care and               Health care and               Health care and
                         1.15                          1.12                          1.00                            0.99
social assistance               social assistance             social assistance             social assistance
Public                          Public                        Public
                         1.12                          1.13                          1.19 Government                 0.57
administration                  administration                Administration




Competitive Advantage Analysis                         September 2005                                           Page 19
Data comparability issues limit what can be said about the large finance, insurance, real estate,
and business management group. Saskatchewan seems to have a relatively low level of
business, building, and support services, a category that includes head offices but an
average or slightly above average level in the finance and insurance group. The same
comparability issues are evident in the information, culture, recreation group with
Saskatchewan seeming to have a below-average level compared with others although the paid
employment comparison with the midwest states and prairie provinces suggests this is only true
for paid workers and not the self-employed.

Generally speaking, there are relatively few differences in the two comparison measures and, in
spite of the measurement difficulties, in the comparison with the two different regions.

Saskatchewan’s economy is dominated by agriculture and the resource sector, regardless of the
measure and regardless of the comparison. It has a large, but not unduly large, public sector
broadly defined to include health, education, and the crowns.

The province is very weak in manufacturing and the “professional, scientific, and technical
services” and below average in construction and accommodation/food services.




Competitive Advantage Analysis              September 2005                                Page 20
SECTION 3 SHIFT SHARE ANALYSIS

If a particular industry is growing or declining, an automatic question that arises is whether or not
the decline is “natural” in the sense that it is growing or declining everywhere as well. Shift share
analysis attempts to answer this question by breaking down the change into three components

Using either GDP or employment as the measure, the shift share analysis ascribes changes in
the measure over a period and within a particular region to three components. The equations
below use employment as the measure and four western provinces as the comparison. For
GDP, the real value of GDP is substituted for employment; for the comparison with midwestern
states and provinces, the four western provinces is replaced by the values for the midwest states
and prairie provinces.

1.   The first component is growth or decline arising from general employment growth. If
     employment is generally increasing in western Canada, one would expect it to be
     increasing in Saskatchewan as well. This is referred to as the regional effect and is
     calculated for a particular sector as follows.



     where 92EMPSECT is the 1992 employment level in the sector in the Saskatchewan and
     ªWCEMP is the percentage change in overall employment between 1992 and 2004 in
     Western Canada.

2.   The second component is growth or decline arising from the nature of the industry. If a
     particular industry group is expanding or declining generally in the comparison group, one
     would expect it to be expanding or declining in the Saskatchewan. This is referred to as the
     industry effect and is calculated for a particular sector as follows.



     where 92EMPSECT is the 1992 employment level in the sector in Saskatchewan,
     ªWCEMPSECT is the change in employment in the sector between 1992 and 2004 in
     western Canada, and ªWCEMP is the percentage change in overall employment between
     1992 and 2004 in four western provinces.

3.   The third component is the residual and is the growth or decline arising from the specifics of
     the industry within the region. This is referred to as the provincial effect and is the most
     interesting for analysis purposes. It is calculated as follows.



     where 92EMPSECT is the 1992 employment level in the sector in Saskatchewan, ªEMPSECT is
     the percentage change in that sector’s employment between 1992 and 2004 in
     Saskatchewan and ªWCEMPSECT is the percentage change in that sector’s employment
     between 1992 and 2004 in the four western provinces.




Competitive Advantage Analysis                September 2005                                Page 21
The sum of these three effects yields overall employment growth in the sector from 1992 to
2004. The equations simply attribute the change to the three effects.

Interpretation of shift share components is complex so an example may help. From 1992 to
2004, employment in the retail trade sector increased by 4,900 persons in Saskatchewan.
      •     Given overall employment growth in the four western provinces, employment in the
            sector would reasonably be expected to increase by 14,500 persons in
            Saskatchewan.
      •     If Saskatchewan had experienced the same pattern in the retail trade sector as
            occurred in the four western provinces, employment would have declined by 3,200
            persons. That is, employment would have grown by 14,500-3,200 = 11,300.
      •     The difference between these figures is the provincial effect. That is, a decline of
            6,400 persons (11,300 - 4,900) is necessary to explain the actual change in
            employment.

In other words, the growth in retail trade employment was less than would be expected because
of changes in the industry which were occurring throughout western Canada. The provincial
effect is the unique effect for Saskatchewan. (One of those factors unique to Saskatchewan
would undoubtedly be the lack of population growth which would directly affect retail sales.)




Competitive Advantage Analysis               September 2005                               Page 22
3.1     Using Employment as an Indicator

The total regional effect in Saskatchewan is large and positive, reflecting the fact that within the
four western provinces employment grew by 27% compared with 7% in Saskatchewan and the
regional effect assumes that employment should have grown by 27% in Saskatchewan as well.
The methodology effectively assumes that employment in each of the industry groups should
also have grown by 27%.

So the interesting part of the shift-share analysis is the degree to which the industry effects and
provincial effects offset this expected increase. The large negative provincial effect is therefore
simply measuring the fact that Saskatchewan’s employment is growing much more slowly than
employment in the four western provinces. For industries that are affected by population, such

 Table 3.1           Shift Share Components for Employment Growth from 1992 to 2004, Comparison with
                     Western Canada

                                                              Shares of employment change
                                          Employ-                                                          Employ-
                                          ment in     Regional      Industry    Provincial                  ment in
 Industry Category                         1992         effect        effect        effect       Total*      2004
 Agriculture                                  80.3        +21.5        -43.2        -11.9        -33.6         46.7
 Forestry, fishing, hunting                    2.1         +0.6         -1.0         -0.3          -0.7          1.4
 Mining and oil and gas extraction            10.7         +2.9         +0.9         +3.1          6.9         17.6
 Utilities                                     4.1         +1.1         -1.2         +0.4          0.3           4.4
 Construction                                 19.9         +5.3         +4.1          -4.9         4.6         24.5
 Manufacturing                                24.6         +6.6         +1.9          -4.3         4.2         28.8
 Wholesale trade                              14.6         +3.9         +0.3          -1.4         2.8         17.4
 Retail trade                                 54.1       +14.5          -3.2          -6.4         4.9         59.0
 Transportation and warehousing               19.3         +5.2         +0.6          -1.9         3.9         23.2
 Finance and insurance                        16.7         +4.5         -1.1          -0.2         3.1         19.8
 Real estate and leasing                       7.1         +1.9         -1.1         -0.8          0.0           7.1
 Professional, scientific and technical
                                              11.4         +3.1         +5.5          -2.6         5.9         17.3
 services
 Business, building and other support
                                               8.4         +2.3         +5.3          -2.8         4.8         13.2
 services
 Educational services                         31.4         +8.4         -0.9         +0.9          8.4         39.8
 Health care and social assistance            50.0       +13.4          +3.0         -7.9          8.6         58.6
 Information, culture and recreation          15.5         +4.2         +3.6          -3.0         4.8         20.3
 Accommodation and food services              25.9         +6.9         +2.4          -2.6         6.8         32.7
 Personal and household services              21.3         +5.7         -1.9         -2.3          1.5         22.8
 Public administration                        29.5         +7.9        -10.2          -1.9         -4.1        25.4
                                             446.9      +119.9         -36.3        -50.5         33.1        480.0

* This is both the total change in employment between 1992 and 2004 and the sum of the effects in the previous three
columns.



Competitive Advantage Analysis                       September 2005                                       Page 23
as construction, health, retail sales, and education, one would expect a large negative provincial
effect.

The overall industry effect is negative which simply means that a good deal of Saskatchewan’s
employment is in industries that are declining regionally. Excluding agriculture, which is the
penultimate example of this, the industry effect is positive. In other words, agriculture is the main
reason why the province’s mix of industries is yielding an overall negative effect.

Figure 3.1 shows the provincial effect expressed in percentage terms.

In three sectors, the province was able to counteract the regional and industry effects to yield a
positive provincial effect – education, utilities, and the resource sector. The finance and
insurance sector was also able to effectively counteract those trends with a small negative
provincial effect.

The largest negative provincial effects, indicative of a particular weakness in Saskatchewan,
were in the business, building and other support services group, construction, and the
professional, scientific, and technical services group.




Competitive Advantage Analysis                September 2005                                Page 24
 Figure 3.1         Provincial Effect Using Employment, Saskatchewan Compared with the Four Western
                    Provinces, 1992 to 2004

  Business, building and other
       support services

                 Construction

   Professional, scientific and
       technical services

      Information, culture and
            recreation

               Manufacturing

       Health care and social
            assistance

                   Agriculture


     Forestry, fishing, hunting


                  Retail trade


      Real estate and leasing

     Personal and household
            services

    Accommodation and food
          services

           Transportation and
              warehousing

              Wholesale trade


         Public administration


       Finance and insurance


         Educational services


                       Utilities

       Mining and oil and gas
             extraction

                              -40%   -30%      -20%       -10%       0%         10%       20%        30%      40%
                                     % change in employment because of the provincial effect, 1992 to 2004




Competitive Advantage Analysis                        September 2005                                         Page 25
Midwest States and Prairie Provinces

Because of data availability issues, the comparison with midwest states and prairie provinces is
over a much shorter time period (2001 to 2003) and restricted to paid employment (see Table
3.2).

Over this short term, the regional effect is small and negative because there was a general
decline in employment in the midwest states and prairie provinces over the two years. The
industry effect was large and negative for manufacturing and large and positive for health care;
these were the sectors that were, respectively, declining and growing in the midwest states and
prairie provinces.

Saskatchewan’s economy moved in different directions, as measured by the provincial effect. In
percentage terms, the business, building, and other support services group was the fastest
growing over the period. The same strong growth that was unique to the province was evident in
utilities, the information, arts, entertainment, and recreation group and education. In absolute
terms, increases in retail/wholesale trade helped offset large declines in public administration and
the transportation/warehousing group.




Competitive Advantage Analysis               September 2005                                Page 26
Table 3.2          Shift Share Components for Paid Employment Growth from 2001 to 2003, Comparison with
                   Midwest States and Prairie Provinces

                                                              Shares of employment change
                                         Employ-                                                           Employ-
                                         ment in      Regional      Industry    Provincial                  ment in
 Industry Category                        2001          effect        effect        effect       Total*      2003
 Agriculture, forestry, fishing and
                                            8,300          (21)          100        (779)        (700)        7,600
 hunting
 Mining, oil and gas                       14,400          (37)        (313)        1,550        1,200       15,600
 Utilities                                  3,400           (9)          157          552          700        4,100
 Construction                              15,900          (41)          353          488          800       16,700
 Manufacturing                             26,600          (68)      (1,941)          909      (1,100)       25,500
 Retail and wholesale trade                63,300         (162)        (346)        4,908        4,400       67,700
 Transportation and warehousing            20,400          (52)        (469)      (2,179)      (2,700)       17,700
 Finance, insurance, real estate and
                                           22,400          (57)          668        1,290        1,900       24,300
 leasing
 Professional and technical services       11,500          (30)        (324)          953          600       12,100
 Business, building and other support
                                            7,200          (18)        (137)        1,856        1,700        8,900
 services
 Educational services                      33,100          (85)          608        3,777        4,300       37,400
 Health care and social assistance         47,500         (122)        2,575          947        3,400       50,900
 Information, arts, entertainment, and
                                           16,500          (42)        (474)        2,316        1,800       18,300
 recreation
 Accommodation and food services           28,800          (74)         851         (477)          300       29,100
 Personal and household services           15,100          (39)         737           102          800       15,900
 Public Administration                     26,900          (69)          799      (2,030)      (1,300)       25,600
 Total                                    361,300         (927)        2,844       14,183       16,100      377,500

* This is both the total change in employment between 2001 and 2003 and the sum of the effects in the previous three
columns.




Competitive Advantage Analysis                       September 2005                                       Page 27
 Figure 3.2          The Provincial Effect Using Paid Employment, Saskatchewan Compared with the Midwest
                     States and Prairie Provinces, 2001 to 2003


             Transportation and
                warehousing

    Agriculture, forestry, fishing
            and hunting


          Public Administration


     Accommodation and food
           services

       Personal and household
              services

         Health care and social
              assistance


                    Construction



                  Manufacturing


       Finance, insurance, real
          estate and leasing


    Retail and wholesale trade


    Professional and technical
             services


             Mining, oil and gas



           Educational services


        Information, arts,
  entertainment, and recreation


                          Utilities


   Business, building and other
        support services

                                 -15%   -10%    -5%       0%        5%       10%      15%      20%       25%     30%
                                        % change in employment because of the provincial effect, 2001 to 2003




Competitive Advantage Analysis                         September 2005                                           Page 28
3.2   Using GDP as an Indicator

Saskatchewan’s economic growth, as measured by GDP, was relatively weak in the 1997 to
2004 when compared with the economies of the four western provinces so the provincial effects
for GDP tend to be negative as they were for employment. If the economy had grown by the
same rate as the four western provinces, GDP would have increased by $6 billion from 1997 to
2004 whereas it actually grew by only one half that amount.

The industry effects tend to be negative as well with large negative effects in both agriculture and
the resource sector so the province’s economy during the seven years was concentrated in
sectors that were not doing well regionally.

The provincial effect was positive in three sectors – manufacturing, transportation/warehousing,
and health care/social assistance. In these sectors, a growth that was unique to Saskatchewan
was occurring over the period. As with the provincial effect based on employment, the
professional, scientific, and technical services group, construction, and the administrative and
support, waste management and remediation services group showed large negative provincial
effects.




Competitive Advantage Analysis               September 2005                                Page 29
    Table 3.3             Shift Share Components for Real GDP from 1997 to 2004, Comparison with Four Western
                          Provinces

                                                                          Shares of GDP change ($M)
                                                GDP in         Regional       Industry   Provincial                   GDP in
    Industry Category                          1997 ($M)         effect         effect       effect        Total*   2004 ($M)
    Agriculture, forestry, fishing and
                                                    $2,436         $549        ($514)       ($338)        ($303)       $2,133
    hunting
    Mining and oil and gas extraction              $4,084          $920        ($922)       ($214)        ($216)       $3,868
    Utilities                                        $801          $181        ($233)         ($33)        ($86)         $716
    Construction                                    $1,558         $351           $57       ($426)         ($19)       $1,539
    Manufacturing                                   $1,911         $431           $85         $105          $621       $2,532
    Wholesale trade                                 $1,429         $322          $260         ($99)         $483       $1,912
    Retail trade                                    $1,201         $271          $254         ($69)         $455       $1,657
    Transportation and warehousing                  $1,571         $354           $59          $77          $490       $2,061
    Information and cultural industries              $757          $171          $167         ($44)         $294       $1,050
    Finance and insurance, real estate
    and renting and leasing and
                                                    $4,309         $971          $288       ($433)          $826       $5,135
    management of companies and
    enterprises
    Professional, scientific and technical
                                                     $569          $128          $128       ($237)           $19         $588
    services
    Administrative and support, waste
    management and remediation                       $284           $64           $18         ($73)           $9         $293
    services
    Educational services                           $1,413          $319          ($46)      ($149)          $124       $1,537
    Health care and social assistance              $1,588          $358           $31          $29          $418       $2,006
    Arts, entertainment and recreation               $178           $40           ($2)         ($4)          $34         $212
    Accommodation and food services                  $641          $144          ($39)      ($130)         ($25)         $616
    Personal and household services                  $682          $154           $24       ($109)           $68         $750
    Public administration                          $1,497          $337          ($91)        ($32)         $214       $1,711
    Total**                                       $26,907        $6,064        ($474)      ($2,181)       $3,261      $30,168

*               This is both the total change in employment between 1992 and 2004 and the sum of the effects in the
                previous three columns.
**              The total industry effect is not zero because there is a minor statistical discrepancy between the sum the
                industry GDP values and the total provincial GDP.




Competitive Advantage Analysis                               September 2005                                          Page 30
 Figure 3.3        The Provincial Effect Using Real GDP, Saskatchewan Compared with the Four Western
                   Provinces, 1997 to 2004


               Professional, scientific and technical services


                                                Construction

        Administrative and support, waste management and
                        remediation services

                          Accommodation and food services


                           Personal and household services


                    Agriculture, forestry, fishing and hunting


                                        Educational services

  Finance and insurance, real estate and renting and leasing
       and management of companies and enterprises

                                            Wholesale trade


                          Information and cultural industries


                                                  Retail trade


                           Mining and oil and gas extraction


                                                      Utilities


                          Arts, entertainment and recreation


                                        Public administration


                           Health care and social assistance


                            Transportation and warehousing


                                               Manufacturing


                                                             -50%    -40%      -30%      -20%     -10%       0%       10%
                                                          % change in real GDP because of the provincial effect, 1997 to 2004




Competitive Advantage Analysis                            September 2005                                           Page 31
Midwest States and Prairie Provinces

The shift/share analysis for Saskatchewan relative the midwest states and prairie provinces using
real GDP are shown in Table 3.4. As noted in Section 1, there are comparison difficulties in the
industry sectors dominated by the public sector in these data.

Over this relatively short period, Saskatchewan’s GDP was virtually constant so the regional
effect is large – with the same growth as this large group of economies, Saskatchewan’s GDP
would have grown by $2.5 billion. As with the comparison to the four western provinces, the
industry effect is negative for some of the province’s largest sectors – agriculture and the
resource sector.

The provincial effect shows a different picture when compared to the midwest states and prairie
provinces than it did when compared with the four western provinces. Retail trade and the
information, arts, entertainment, and recreation group have a large positive provincial effect.
Ignoring the possibility that the time frame is the cause, this suggests that these sectors were not
doing well in the USA during this period whereas they were in Saskatchewan.

The same is true for the professional, scientific, and technical services group which shows a
positive provincial effect. This is one of the few indicators where this sector is showing any
strength at all.

Negative provincial effects are evident in the large agriculture and resource sectors as well as
manufacturing and construction.




Competitive Advantage Analysis               September 2005                                Page 32
     Table 3.4          Shift Share Components for Real GDP from 1998 to 2002, Comparison with Midwest
                        States and Prairie Provinces

                                                                     Shares of GDP change ($M)
                                             GDP in       Regional       Industry   Provincial                 GDP in
    Industry Category                       1998 ($M)       effect         effect       effect      Total*   2002 ($M)
    Agriculture, forestry, fishing, and
                                               $2,747         $247        ($391)     ($1,012)     ($1,155)       $1,592
    hunting
    Mining and oil and gas extraction          $4,258         $383        ($599)       ($415)       ($631)       $3,627
    Utilities**                                  $833          $75          ($37)      ($148)       ($109)        $724
    Construction                               $1,513         $136          ($91)       ($60)        ($14)       $1,499
    Manufacturing                              $1,985         $179        ($135)        $240         $283        $2,268
    Wholesale trade                            $1,563         $141           $75         ($9)        $206        $1,769
    Retail trade                               $1,273         $115          $214        ($42)        $286        $1,559
    Transportation and warehousing**           $1,594         $143            $2        $166         $312        $1,905
    Other services***                          $4,695         $423           $71       ($180)        $313        $5,008
    Professional and technical services          $603          $54           $36       ($111)        ($21)        $582
    Educational services**                     $1,397         $126          ($20)       ($30)         $75        $1,472
    Health care and social assistance**        $1,680         $151           $82        ($58)        $176       $1,855
    Information, arts, entertainment, and
                                                 $963          $87          $187        ($50)        $224        $1,187
    recreation
    Accommodation and food services              $630          $57           $17        ($72)           $2        $632
    Personal and household services              $671          $60          ($68)         $65         $57         $728
    Government**                               $1,537         $138          ($78)         $56        $117        $1,654
    Total GDP                                 $27,941       $2,515            $0     ($2,396)        $119      $28,060

*            this is both the total change in employment between 1998 and 2002 and the sum of the effects in the
             previous three columns.
**           comparability in these industry groups is compromised because the US midwest states include all public
             sector activities in the “government” category
***          finance, insurance, real estate, rental and leasing, head offices, waste management and remediation




Competitive Advantage Analysis                           September 2005                                       Page 33
 Figure 3.4         The Provincial Effect Using Real GDP, Saskatchewan Compared with the Midwest States
                    and Prairie Provinces, 1998 to 2002


        Agriculture, forestry, fishing, and hunting


                Mining and oil and gas extraction


                Personal and household services


                                   Manufacturing


                                     Construction


                                    Government*


                                          Utilities*


                            Educational services*


                Transportation and warehousing*


                                 Other services**


              Accommodation and food services


                                 Wholesale trade


              Health care and social assistance*


              Professional and technical services


                                      Retail trade


  Information, arts, entertainment, and recreation


                                                  -20% -15%        -10%    -5%     0%     5%     10%    15%    20%     25%
                                                       % change in real GDP because of the provincial effect, 1998 to 2002

  * comparability in these industry groups is compromised because of the different approach to public sector in the USA
  ** finance, insurance, real estate, rental and leasing, head offices, waste management and remediation




Competitive Advantage Analysis                              September 2005                                           Page 34
3.3   Summary

Table 3.5 summarizes the provincial effects for Saskatchewan from this section. A positive
provincial effect is indicative of a sector that is “going against the grain” of the comparison
economy in the sense that it is growing more than would be expected compared with the overall
economy in the region and that particular industry in the comparison economy. Similarly a
negative provincial effect means that the sector is performing poorly relative to that sector in the
comparison economy.

Many of Saskatchewan’s industry sectors have a negative provincial effect in the comparison
with the four western provinces but a positive effect in the short-term comparison with the
midwest states and prairie provinces.
      •     The retail and wholesale trade sectors and the professional, scientific and
            technical services group are not performing as well as these sectors in the other
            western provinces but are doing relatively well compared with the midwest states and
            prairie provinces. This seems to be particularly the case for retail trade.
      •     The information, culture, arts, entertainment, and recreation group is in a similar
            situation.
      •     The large group of services related to finance and real estate shows a similar pattern.
      •     The accommodation and food services and personal and household services
            sectors are similar although there is a small negative provincial effect for paid
            employment during the 2001-03 period in the former and a negative GDP effect for
            the latter.

There are two sectors that have a negative provincial effect in both the comparison with the four
western provinces and the short-term comparison with the midwest states and prairie provinces
using either economic indicator:
      •     agriculture, and
      •     public administration.
The construction sector is close to showing the same pattern except that it has a positive
provincial effect using paid employment compared with the midwest states and prairie provinces.
Apparently the negative effects are only evident among the self-employed in Saskatchewan.

The resource sector is showing a positive effect in terms of employment for both comparison
groups but a negative provincial effect for GDP growth. This suggests that employment was
growing in Saskatchewan and output was not whereas both employment and output were
declining in the comparison groups. The same phenomenon is evident in the utilities sector and
the education services sector although there are comparison issues with both of these sectors.

The opposite is true for the transportation and warehousing sector – positive provincial effects
for GDP growth and negative ones for employment. This would be the case if labour productivity
was growing more quickly in Saskatchewan than in the same sector in the comparison
economies.

The health care and social services sector is showing a positive provincial effect in three of the
four measures with the exception being employment growth from 1992 to 2004 compared with
the four western provinces.




Competitive Advantage Analysis                September 2005                                Page 35
 Table 3.5           Provincial Effect in the Shift/Share Analysis for Saskatchewan

                 Relative to Western Canada                      Relative to Midwest States and Prairie Provinces
 Employment (1982-2004)             GDP (1997-2004)          Paid Employment (2001-03)           GDP (1997-2002)

Agriculture             -15%                                                              Agriculture,
                             Agriculture, forestry,          Agriculture, forestry,
Forestry, fishing,                                    -14%                            -9% forestry, fishing,      -14%
                        -15% fishing and hunting             fishing and hunting
                                                                                          and hunting
hunting
Mining, oil and gas     29% Mining, oil and gas        -5% Mining, oil and gas        11% Mining, oil and gas     -14%
Utilities                9% Utilities                  -4% Utilities                  16% Utilities                 -4%
Construction            -25% Construction             -27% Construction                3% Construction              -6%
Manufacturing           -17% Manufacturing             6% Manufacturing                3% Manufacturing             -7%
Wholesale trade         -10% Wholesale trade           -7% Retail and wholesale              Wholesale trade        5%
                                                                                       8%
Retail trade            -12% Retail trade              -6% trade                             Retail trade           17%
Transportation and             Transportation and            Transportation and              Transportation and
                        -10%                           5%                             -11%                          0%
warehousing                    warehousing                   warehousing                     warehousing
Accommodation                  Accommodation                 Accommodation and               Accommodation
                        -10%                          -20%                            -2%                           3%
and food services              and food services             food services                   and food services
                                                                                          Personal and
Personal and                   Personal and                  Personal and
                        -11%                          -16%                             1% household               -10%
household services             household services            household services
                                                                                          services
Professional,                Professional,                 Professional,                  Professional,
scientific and          -23% scientific and           -42% scientific and              8% scientific and            6%
technical services           technical services            technical services             technical services
                             Finance and
Finance and
                         -1% insurance, real
insurance                    estate and renting            Finance, insurance,
                             and leasing and          -10% real estate and             6%
Real estate and              management of                 leasing
                        -12% companies and
leasing                                                                                      Other services         2%
                             enterprises
                             Administrative and
Business, building           support, waste                Business, building
and other support       -33% management and           -26% and other support          26%
services                     remediation                   services
                             services
                               Arts, entertainment
                                                       -2% Information, arts,             Information, arts,
Information, culture           and recreation
                        -19%                               entertainment, and         14% entertainment, and        19%
and recreation                 Information and
                                                       -6% recreation                     recreation
                               cultural industries
Educational                    Educational                                                   Educational
                         3%                           -11% Educational services       11%                           -1%
services                       services                                                      services
Health care and                Health care and               Health care and                 Health care and
                        -16%                           2%                              2%                           5%
social assistance              social assistance             social assistance               social assistance
Public                         Public
                         -6%                           -2% Public Administration      -8% Government                -5%
administration                 administration




Competitive Advantage Analysis                         September 2005                                          Page 36
The manufacturing sector has a large negative provincial effect for employment relative to the
four western provinces but a positive one for GDP growth. This would indicate improved labour
productivity. The opposite is true over the shorter time frame and comparison with the midwest
states and prairie provinces.

In summary there is a great deal more variability and inconsistency in these measures than there
was for the location quotients. This is undoubtedly because the shift/share analysis is an
examination over a time period whereas the location quotient is a snapshot at a single point in
time. Data comparability problems were evident in the location quotient analysis but were
compounded in the shift/share because similar time periods were not available for the
comparison.

The most reliable of these data will be the comparison with the four western provinces which
generally show that Saskatchewan’s provincial effect was negative with some exceptions.
     •     The provincial effect for employment was positive for education, utilities, and
           mining/oil and gas extraction.
     •     The provincial effect for GDP was positive for manufacturing, transportation and
           warehousing, and health care and social assistance.




Competitive Advantage Analysis             September 2005                               Page 37
Competitive Advantage Analysis   September 2005   Page 38
SECTION 4 LEADING/LAGGING ANALYSIS


Another way to look at the different industry sectors is to examine their employment or economic
growth relative to growth in the overall economy at either the provincial or regional level.
Industries which are “leading” have a growth rate in excess of the rate of growth in the overall
economy and those that are “lagging” are growing more slowly. Using employment as an
example, the regional sector relative growth (RSRG) is:



where ªEMPLSECT is change in employment in the industry group at the regional level and
ªREGEMP is the overall growth in employment in the region. Positive numbers indicate that the
sector is growing more quickly than average. This is done for both the four western provinces
and the midwest states and prairie provinces.

In Saskatchewan, the provincial sector relative growth (PSRG) is the difference between the
growth in the sector at the provincial level and the regional level:



where ªSASKEMPLSECT is change in employment in the industry group in Saskatchewan and
ªREGEMPSECT is the growth in
employment in the sector regionally. Table 4.1     Carvalho Classification System
Positive numbers indicate that the
sector is growing more quickly in    RSRG      PSRG       Location Quotient       Classification
Saskatchewan than it is in the
                                     Leading   Leading    High (> 1.25)           Driving
comparison region.
                                                                         Medium (0.75 to 1.25)     Accelerating
A comparison between the regional
                                                                         Low (<.0.75)              Rising
indicator and the provincial indicator
is combined with the location                Lagging       Leading       High (> 1.25)             Evolving
quotient (see Section 2) to yield an
                                                                         Medium (0.75 to 1.25)     Transitional
overall assessment of the sector.
The classification system3 is shown                                      Low (<.0.75)              Moderate
in Table 4.1.
                                             Leading       Lagging       High (> 1.25)             Promising

The categories are meant to be                                           Medium (0.75 to 1.25)     Yielding
descriptive. For example, consider
                                                                         Low (<.0.75)              Modest
an industry which is dominant at the
provincial level, that is, has a high        Lagging       Lagging       High (> 1.25)             Challenging
location quotient. If the industry is
                                                                         Medium (0.75 to 1.25)     Vulnerable
lagging in the four western
provinces but leading in                                                 Low (<.0.75)              Marginal
Saskatchewan it is considered as

3
       This is called the Carvalho Classification because it was developed by economist Dr. Emanuel Carvalho
       from the University of Waterloo.



Competitive Advantage Analysis                     September 2005                                        Page 39
“evolving”. If the industry is leading in both Saskatchewan and the four western provinces level
it is “driving”. If the industry is leading in the four western provinces but lagging in
Saskatchewan, it is classified as “promising”. And finally, if growth is lagging at both the region
and provincial level, it is considered as “challenging”.




Competitive Advantage Analysis               September 2005                                 Page 40
4.1   Using Employment as an Indicator

Table 4.2 has the classification for the nineteen industry groups relative to the four western
provinces. They can be examined in five categories.

Five industry groups accounting for 32% of employment in 2004 were classified as “yielding”
because they were leading growth in the four western provinces but lagging in Saskatchewan.
All are classified as medium-sized in terms of their location quotients:
      •     wholesale trade;
      •     health care and social services;
      •     transportation and warehousing;
      •     information, culture, and recreation; and
      •     accommodation and food services.
Three of the sectors have at least some relationship with tourism so the message, at least for
employment, is that these industry sectors are yielding to growth in other provinces.

Four industry groups accounting for 26% of employment were classified as vulnerable because
employment was lagging both in western Canada and Saskatchewan. All are classified as
medium-sized in terms of their location quotients:
     •     retail trade;
     •     finance and insurance;
     •     personal and household services; and
     •     public administration.
Three of these sectors have experienced a downsizing in the 1990s because of industry
consolidation or different service delivery methods. The “personal and household services”
category is a disparate group of industries which is in a constant state of evolution.

Seven industry groups accounting for 19% of employment were classified as “modest” or
“marginal” because they are relatively small in Saskatchewan. In the first four, employment was
leading in western Canada but lagging in Saskatchewan:
      •    manufacturing;
      •    construction;
      •    business, building, and other support services (which is close to a medium location
           quotient and therefore could be classified as “yielding”); and
      •    professional, scientific, or technical services.
In essence, the methodology is saying that these industry groups are not doing well relative to
the four western provinces but are relatively small and therefore not a major concern. In the
remaining two groups, employment is lagging in both the four western provinces and
Saskatchewan but instead of being classified as vulnerable, they are considered as marginal
because they are relatively small in Saskatchewan:
      •    forestry, fishing, hunting; and
      •    real estate and leasing.
The real estate group is almost in the medium category of location quotient so it could be
considered as “vulnerable”.

The final four industry groups are special cases.

Agriculture is classified as “challenging” because the location quotient is high and it is lagging
growth both in western Canada and Saskatchewan.




Competitive Advantage Analysis                September 2005                                 Page 41
Table 4.2          Leading/Lagging Classification Relative to Four Western Provinces, Employment Measure,
                   1992 to 2004

                              Regional Sector      Provincial Sector
                                                                        Location Quotient
                              Relative Growth      Relative Growth                          Classification
                                Value    Class       Value    Class       Value    Class
Agriculture                     -54%    Lagging      -15%    Lagging       2.65     High    Challenging
Forestry, fishing, hunting      -46%    Lagging      -15%    Lagging       0.45     Low       Marginal
Mining and oil and gas
                                  8%    Leading       29%    Leading       1.28     High       Driving
extraction
Utilities                       -29%    Lagging        9%    Leading       1.31     High      Evolving
Construction                     21%    Leading      -25%    Lagging       0.70     Low        Modest
Manufacturing                     8%    Leading      -17%    Lagging       0.65     Low        Modest
Wholesale trade                   2%    Leading      -10%    Lagging       1.07   Medium      Yielding
Retail trade                     -6%    Lagging      -12%    Lagging       1.03   Medium     Vulnerable
Transportation and
                                  3%    Leading      -10%    Lagging       0.86   Medium      Yielding
warehousing
Finance and insurance            -7%    Lagging       -1%    Lagging       1.10   Medium     Vulnerable
                                                                                  Low to      Marginal/
Real estate and leasing         -15%    Lagging      -12%    Lagging       0.75
                                                                                  medium     Vulnerable
Professional, scientific
                                 48%    Leading      -23%    Lagging       0.57     Low        Modest
and technical services
Business, building and                                                            Low to      Modest/
                                 64%    Leading      -33%    Lagging       0.74
other support services                                                            medium      Yielding
                                                                                  Medium    Transitional/
Educational services             -3%    Lagging        3%    Leading       1.24
                                                                                  to high     Evolving
Health care and social
                                  6%    Leading      -16%    Lagging       1.15   Medium      Yielding
assistance
Information, culture and
                                 23%    Leading      -19%    Lagging       0.91   Medium      Yielding
recreation
Accommodation and food
                                  9%    Leading      -10%    Lagging       0.91   Medium      Yielding
services
Personal and household
                                 -9%    Lagging      -11%    Lagging       1.03   Medium     Vulnerable
services
Public administration           -34%    Lagging       -6%    Lagging       1.12   Medium     Vulnerable




Competitive Advantage Analysis                    September 2005                                 Page 42
The “mining, oil and gas” industry group is considered as “driving” because the location quotient
is high and it is leading growth in both the four western provinces and Saskatchewan.

The educational services and utilities group are both leading growth in Saskatchewan but lagging
growth in western Canada. This implies that they are classified as “evolving” and “transitional”
because they are relatively important sectors in Saskatchewan.

The nineteen industry groups can be placed in a sector graph (see Figure 4.1) indicating their
relative classifications. Sectors in the upper right quadrant (of which mining, oil/gas is the only
example) are classified using positive terms. Those in the lower left quadrant are all classified in
negative terms and almost one half of Saskatchewan’s industries are in this quadrant. Industry
groups in the lower right quadrant are generally classified as in a state of evolution and those in
the upper left quadrant have mixed classifications, depending on their size.

If the Saskatchewan economy was following the economy of the four western provinces, all of
the sectors would be in either the upper right quadrant or the lower left quadrant. In other words
those in the upper left and lower right quadrants are “out of step” with what is happening
regionally.

Those in the upper left quadrant are ones that are leading growth in the region but lagging
growth in Saskatchewan. Those in the lower right quadrant are leading growth in Saskatchewan
but lagging growth regionally.




Competitive Advantage Analysis               September 2005                                 Page 43
 Figure 4.1        Leading/Lagging Classification using Employment, Saskatchewan Relative to the Four
                   Western Provinces, 1992 to 2004

  80%
         relative growth in
         the four western
         provinces


                   Business, building and
                     support services
  60%



                                Professional, scientific
                                and technical services


  40%    leading




               Construction             Information, culture,
                                             recreation
  20%

                                                  Accomodation and food
                                                        services
                          Manufacturing
                                                                Transportation and                            Mining,
                                                                   warehousing                              oil and gas
                Health care and
               social assistance                                Wholesale trade
   0%
                                                                        Educational services
                     Retail trade
                                                                   Finance and insurance
                        Personal and
                      household services
                                                  Real estate and leasing

  -20%



                                                                                    Utilities
         lagging

                                                            Public administration

  -40%
                                              Forestry, fishing,
                                                  hunting


                                              Agriculture

  -60%
      -40%         -30%         -20%            -10%             0%           10%               20%       30%         40%
                                                provincial sector relative growth
                                    laggng                                                      leading




Competitive Advantage Analysis                           September 2005                                            Page 44
Midwest States and Prairie Provinces

The same leading/lagging analysis can be applied to the midwest states and prairie provinces
using the relatively short time period from 2001 to 2003 and measuring paid employment rather
than total employment (see Table 4.3).

In this comparison, several industry groups are classified as accelerating or driving:
       •   Utilities;
       •   Construction;
       •   Finance, insurance, real estate and leasing;
       •   Educational services;
       •   Health care and social assistance;
       •   Personal and household services.
Two are classified as evolving:
       •   Mining, oil and gas extraction, and
       •   retail/wholesale trade.
Three are classified as in transition:
       •   Transportation and warehousing;
       •   Professional, scientific and technical services;
       •   Information, arts, entertainment, and recreation.

Agriculture is classified as “promising” which is rather an odd description until one remembers
that we are measuring only paid employment so the methodology may be suggesting that paid
employment in agriculture such as that which occurs in intensive livestock operations offers an
opportunity.

Two sectors – accommodation and food services and public administration – are classified as
“yielding” because their growth is lagging in Saskatchewan but leading in the midwest states and
prairie provinces.

Manufacturing is considered as “marginal” because it is small in Saskatchewan relative to the
midwest states and prairie provinces and because paid employment was lagging both in the
province and regionally during the 2001 to 2003 period.

The remaining sector – business, building and other support services – is classified as
“moderate” because it is small in Saskatchewan but leading in the province.




Competitive Advantage Analysis               September 2005                               Page 45
 Table 4.3         Leading/Lagging Classification Relative to Midwest States and Prairie Provinces, Paid
                   Employment Measure, 2001 to 2003

                                     Regional Sector    Provincial Sector
                                                                            Location Quotient
                                     Relative Growth    Relative Growth                         Classification
                                      Value    Class     Value     Class      Value    Class
Agriculture, forestry, fishing and
                                        1%    Leading     -13%    Lagging       2.3    High      Promising
hunting
Mining, oil and gas                    -2%    Lagging       4%    Leading       3.1    High       Evolving
Utilities                               5%    Leading      16%    Leading       1.3    High        Driving
Construction                            2%    Leading       1%    Leading       0.8   Medium    Accelerating
Manufacturing                          -7%    Lagging      -9%    Lagging       0.5     Low       Marginal
Retail and wholesale trade             -1%    Lagging       2%    Leading       1.3    High       Evolving
Transportation and warehousing         -2%    Lagging     -18%    Lagging       1.1   Medium    Transitional
Finance, insurance, real estate
                                        3%    Leading       4%    Leading       1.0   Medium    Accelerating
and leasing
Professional, scientific, and                                                         Medium/   Transitional/
                                       -3%    Lagging       1%    Leading       0.8
technical services                                                                      low      Moderate
Business, building and other
                                       -2%    Lagging      19%    Leading       0.4     Low       Moderate
support services
Educational services                    2%    Leading       9%    Leading       1.1   Medium    Accelerating
Health care and social
                                        5%    Leading       3%    Leading       1.0   Medium    Accelerating
assistance
Information, arts, entertainment,
                                       -3%    Lagging       6%    Leading       1.1   Medium    Transitional
and recreation
Accommodation and food
                                        3%    Leading      -3%    Lagging       0.9   Medium      Yielding
services
Personal and household
                                        5%    Leading       1%    Leading       1.2   Medium    Accelerating
services
Public Administration                   3%    Leading      -9%    Lagging       1.2   Medium      Yielding




Competitive Advantage Analysis                     September 2005                                   Page 46
 Figure 4.2        Leading/Lagging Classification using Paid Employment, Saskatchewan Relative to the
                   Midwest States and Prairie Provinces, 2001 to 2003

  8%
        relative growth in
        the midwest states
        and prairie
        provinces


  6%
                                                                          Health care and social
                                                                               assistance
                                                                    Personal and household
                                                                           services                                Utilities

  4%
                                      Accommodation and food
        leading                             services
                                                                                Finance, insurance, real
                       Public
                                                                                   estate and leasing
                    Administration

                                                                   Construction
  2%
                                                                                            Education services

                          Agriculture




  0%

                                                                         Retail and wholesale trade

                                                                                                                 Business, building and
                                                                                                                 other support services

  -2%
              Transporation and                                                 Mining, oil and gas
                 warehousing
                                                                                           Information, arts,
                                                                                       entertainment, recreation
                                                    Professional, scientific,
                                                    and technical services

  -4%

        lagging




  -6%




                                        Manufacturing


  -8%
     -20%         -15%       -10%             -5%            0%             5%              10%            15%            20%         25%
                                                    provincial sector relative growth
                                     laggng                                                           leading




Competitive Advantage Analysis                                September 2005                                                       Page 47
4.2   Using GDP as an Indicator

The same leading/lagging analysis is done for GDP over the time frame of 1998 to 2004 in Table
4.4 and shown graphically in Figure 4.3.

There is more consistency in these classifications because of the longer time period than is
available with the comparison of the midwest states and prairie provinces. Many of the sectors
are in the upper right or lower left quadrants which suggests that they are tracking the
performance of the same sectors regionally.

The five sectors in the lower left quadrant are lagging both in Saskatchewan and the four western
provinces.
      •    Agriculture, utilities, and the resource sector are classified as “challenging”.
      •    Accommodation and food services and, to a lesser extent, education services are
           “vulnerable” because they are smaller sectors.

The seven sectors in the upper right quadrant are classified as “accelerating” because GDP
growth is above average both in Saskatchewan and in the four western provinces:
     •     Manufacturing;
     •     Wholesale trade;
     •     Retail trade;
     •     Transportation and warehousing;
     •     Information and culture;
     •     Finance and insurance, real estate and renting and leasing and management of
           companies and enterprises; and
     •     Health care and social assistance.

The arts, entertainment, and recreation group and public administration are classified as
“transitional” because growth in Saskatchewan is leading whereas it is lagging in the four western
provinces.

The remaining four sectors are classified as either “yielding” if they are significant in the province
– construction and personal and household services – or modest if they are small – professional,
scientific and technical services, and administrative and support, waste management and
remediation services.




Competitive Advantage Analysis                September 2005                                 Page 48
 Table 4.4         Leading/Lagging Classification Relative to Four Western Provinces, Real GDP Measure,
                   1997 to 2004

                                     Regional Sector    Provincial Sector
                                                                            Location Quotient
                                     Relative Growth    Relative Growth                         Classification
                                      Value    Class     Value     Class      Value    Class
Agriculture, forestry, fishing and
                                      -21%    Lagging     -25%    Lagging      1.94    High     Challenging
hunting
Mining and oil and gas
                                      -23%    Lagging     -17%    Lagging      1.47    High     Challenging
extraction
Utilities                             -29%    Lagging     -23%    Lagging      1.15   Medium    Challenging
Construction                            4%    Leading     -13%    Lagging      0.79   Medium      Yielding
                                                                                      Medium/   Accelerating/
Manufacturing                           4%    Leading      20%    Leading      0.76
                                                                                       Low         Rising
Wholesale trade                        18%    Leading      22%    Leading      1.11   Medium    Accelerating
Retail trade                           21%    Leading      26%    Leading      0.94   Medium    Accelerating
Transportation and warehousing          4%    Leading      19%    Leading      1.09   Medium    Accelerating
Information and cultural
                                       22%    Leading      27%    Leading      0.97   Medium    Accelerating
industries
Finance and insurance, real
estate and renting and leasing
                                        7%    Leading       7%    Leading      0.85   Medium    Accelerating
and management of companies
and enterprises
Professional, scientific and
                                       23%    Leading      -9%    Lagging      0.46     Low        Modest
technical services
Administrative and support,
waste management and                    6%    Leading      -9%    Lagging      0.56     Low        Modest
remediation services
Educational services                   -3%    Lagging      -3%    Lagging      1.12   Medium     Vulnerable
Health care and social
                                        2%    Leading      14%    Leading      1.12   Medium    Accelerating
assistance
Arts, entertainment and
                                       -1%    Lagging       7%    Leading      0.81   Medium    Transitional
recreation
Accommodation and food                                                                 Low/      Vulnerable/
                                       -6%    Lagging     -16%    Lagging      0.75
services                                                                              Medium      Marginal
Personal and household
                                        3%    Leading      -2%    Lagging      0.98   Medium      Yielding
services
Public administration                  -6%    Lagging       2%    Leading      1.13   Medium    Transitional




Competitive Advantage Analysis                     September 2005                                   Page 49
Figure 4.3         Leading/Lagging Classification Relative to Four Western Provinces, GDP Measure, 1997 to
                   2004

  30%
         relative growth in
         the four western
         provinces


                                                                                                               Information, culture,
                                                     Professional, scientific,
                                                                                                                    recreation
                                                       technical services

  20%                                                                                                                        Retail
                                                                                                                             trade

                                                                                                               Wholesale
                                                                                                                trade


         leading


  10%


                                                       Admin support                   Finance and
                                                                                                                  Manufacturing
                                                     waste management                    insurance


                                            Construction             Personal and                                   Transportation
                                                                   household service                               and warehousing

                                                                                                          Health care and social
   0%                                                                                                          assistance

                                                                                       Arts, entertainment
                                                                 Education                  recreation

                                      Accommodation and food
                                                                             Public administration
                                            services



  -10%




         lagging


  -20%
                     Agriculture
                                    Mining, oil and gas




                        Utilities
  -30%
      -30%               -20%                 -10%                  0%                  10%                    20%                     30%
                                                   provincial sector relative growth
                                     laggng                                                          leading




Competitive Advantage Analysis                              September 2005                                                        Page 50
Midwest States and Prairie Provinces

In the shorter time frame available for the midwest states and prairie provinces, there is still a
preponderance of sectors in the upper right and lower left parts of the quadrants. Ignoring those
sectors what have comparability problems between the sector definitions in the USA and
Canada, we see that three sectors are considered as challenging or vulnerable and two of them
were also classified in this category for the comparison with the four western provinces:
      •     agriculture;
      •     mining, oil and gas; and
      •     construction.

The professional, scientific, and technical services group is considered as modest and
accommodation and food services is on the border between “yielding” and “accelerating”.

Manufacturing and personal and household services are considered as moderate in the former
case because it is a small sector in Saskatchewan and transitional in the latter.

Two sectors are classified strongly as “accelerating” – information, arts, entertainment, and
recreation, and retail trade.




Competitive Advantage Analysis               September 2005                               Page 51
Table 4.5              Leading/Lagging Classification Relative to Midwest States and Prairie Provinces, Real GDP
                       Measure, 1998 to 2002

                                          Regional Sector      Provincial Sector
                                                                                     Location Quotient
                                          Relative Growth      Relative Growth                            Classification
                                           Value    Class        Value    Class        Value     Class
    Agriculture, forestry, fishing, and
                                           -14%    Lagging       -42%    Lagging         2.38    High      Challenging
    hunting
    Mining and oil and gas
                                           -14%    Lagging       -15%    Lagging         3.68    High      Challenging
    extraction
    Utilities*                              -4%    Lagging       -14%    Lagging         1.28    High      Challenging
    Construction                            -6%    Lagging         -1%   Lagging         1.10   Medium     Vulnerable
    Manufacturing                           -7%    Lagging        14%    Leading         0.58    Low        Moderate
    Wholesale trade                          5%    Leading        13%    Leading         0.95   Medium     Accelerating
                                                                                                Medium/   Accelerating/
    Retail trade                            17%    Leading        22%    Leading         0.76
                                                                                                 Low         Rising
    Transportation and
                                             0%    Leading        19%    Leading         1.56    High        Driving
    warehousing*
    Other services**                         2%    Leading         6%    Leading         0.82   Medium     Accelerating
    Professional and technical
                                             6%    Leading         -4%   Lagging         0.44     Low        Modest
    services
    Educational services*                   -1%    Lagging         5%    Leading         3.56    High       Evolving
    Health care and social
                                             5%    Leading        10%    Leading         0.99   Medium     Accelerating
    assistance*
    Information, arts, entertainment,
                                            19%    Leading        23%    Leading         0.82   Medium     Accelerating
    and recreation
    Accommodation and food
                                             3%    Leading         -0%   Lagging         0.92   Medium       Yielding
    services
    Personal and household
                                           -10%    Lagging         8%    Leading         1.09   Medium     Transitional
    services
    Government*                             -5%    Lagging         7%    Leading         0.57    Low        Moderate

*            comparability in these industry groups is compromised because the US midwest states include all public
             sector activities in the “government” category
**           finance, insurance, real estate, rental and leasing, head offices, waste management and remediation




Competitive Advantage Analysis                           September 2005                                       Page 52
 Figure 4.4          Leading/Lagging Classification, Saskatchewan Relative to the Midwest States and Prairie
                     Provinces, GDP Measure, 1998 to 2002

   25%
           relative growth in
           the midwest states
           and prairie                                                                                       Information, arts,
           provinces                                                                                        entertainment, and
                                                                                                                 recreation
   20%



                                                                                                                       Retail trade

   15%



           leading

   10%


                                                                                       Health care and social
                                                Professional, scientific,                   assistance*
                                                and technical services
    5%                                                                                                   Wholesale trade

                                                        Accomodation and food
                                                              services
                                                                                              Other services**
                                                                                                                 Transporation and
    0%                                                                                                             warehousing*
                                                                                            Education services*



                                                               Utilities*
   -5%                                                                                            Government*
                                                                                   Construction
                                                                                                          Manufacturing



  -10%                                                                                             Personal and household
                                                                                                          services

           lagging


                      Agriculture                           Mining, oil and gas
  -15%




  -20%
      -50%           -40%           -30%       -20%            -10%               0%              10%            20%          30%
                                    lagging           provincial sector relative growth       leading

 * comparability in these industry groups is compromised because of the different approach to public sector in the USA
 ** finance, insurance, real estate, rental and leasing, head offices, waste management and remediation




Competitive Advantage Analysis                           September 2005                                                     Page 53
4.3   Summary

Table 4.6 summarizes the leading/lagging classifications for the industry sectors.

There is little consistency across the different comparisons although that should not be surprising
because we are measuring different economic indicators across different time frames and
against different regional economies. This is compounded by some of the data comparison
issues.

Relative the Four Western Provinces

There is agreement on only three industry groups when Saskatchewan is compared with the four
western provinces using the two different economic indicators. Whether measured by
employment or GDP, the business, building, and other support services group and the
professional, scientific, and technical services group are seen as modest because they are
small and growth is lagging relative to the other western provinces. Both of these sectors are
primarily business service industries. The other consistency is for agriculture which is classified
as challenging.

Seven industry groups were classified as accelerating in terms of GDP growth over the period
but they have a variety of indicators for employment growth.
      •    Health care and social assistance, transportation and warehousing, and
           wholesale trade are classified as yielding. All are medium in terms of their location
           quotient and all three are leading growth regionally in both GDP and employment but
           lagging growth in Saskatchewan in terms of employment. This is not necessarily a
           negative assessment because they are leading growth in Saskatchewan in terms of
           GDP so employee productivity is increasing.
      •    The information, culture, and recreation group is also classified as yielding in terms
           of employment growth although the information and culture component is accelerating
           in terms of GDP.
      •    Manufacturing is leading GDP growth both in Saskatchewan and regionally but is
           lagging in employment growth in the province. Its small size means that it is classified
           as modest whereas it would be considered as yielding if it was larger.
      •    Two other sectors are classified as vulnerable in terms of employment growth – retail
           trade and finance/insurance/real estate. This classification arises because these
           sectors although leading GDP growth both in Saskatchewan and regionally are
           lagging in employment growth both in Saskatchewan and regionally. Once again, this
           is not necessarily a negative assessment.

Two public sector services – public administration and education services are classified as
vulnerable for one economic indicator and transitional for the other. In both cases growth is
lagging regionally for both indicators so the difference arises according to whether or not they are
leading or lagging growth in Saskatchewan. Public administration is leading GDP growth but
lagging employment growth and the opposite is true for education services.




Competitive Advantage Analysis               September 2005                                Page 54
 Table 4.6             Leading/Lagging Classification for Saskatchewan

                     Relative to Western Canada                               Relative to Midwest States and Prairie Provinces
 Employment (1992 to 2004)                GDP (1997 to 2004)          Employment (2001 to 2003)              GDP (1998 to 2002)

Agriculture          Challenging Agriculture,                     Agriculture,                       Agriculture,
Forestry, fishing,               forestry, fishing    Challenging forestry, fishing        Promising forestry, fishing,   Challenging
                       Marginal and hunting                       and hunting                        and hunting
hunting
Mining, oil and                     Mining, oil and                  Mining, oil and                    Mining, oil and
                          Driving                     Challenging                           Evolving                      Challenging
gas                                 gas                              gas                                gas
Utilities               Evolving Utilities            Challenging Utilities                   Driving Utilities           Challenging
Construction              Modest Construction             Yielding Construction          Accelerating Construction         Vulnerable
Manufacturing             Modest Manufacturing        Accelerating Manufacturing            Marginal Manufacturing          Moderate
Wholesale trade          Yielding Wholesale trade     Accelerating                                      Wholesale trade   Accelerating
                                                                   Retail and
                                                                                            Evolving                      Accelerating
Retail trade          Vulnerable Retail trade         Accelerating wholesale trade                      Retail trade
                                                                                                                              / Rising
                                                                 Transportation                       Transportation
Transportation                      Transportation
                         Yielding                   Accelerating and                     Transitional and                         Driving
and warehousing                     and warehousing
                                                                 warehousing                          warehousing
Accommodation                     Accommodation                   Accommodation                       Accommodation
and food                 Yielding and food             Vulnerable and food                   Yielding and food                   Yielding
services                          services                        services                            services
Personal and                     Personal and                      Personal and                       Personal and
household             Vulnerable household                Yielding household             Accelerating household           Transitional
services                         services                          services                           services
Professional,                       Professional,                    Professional,                      Professional,
scientific and                      scientific and                   scientific and                     scientific and
                          Modest                          Modest                         Transitional                            Modest
technical                           technical                        technical                          technical
services                            services                         services                           services
                                 Finance and
Finance and
                      Vulnerable insurance, real
insurance                        estate and                        Finance,
                                 renting and                       insurance, real
                                                      Accelerating                       Accelerating
                                 leasing and                       estate and
Real estate and        Marginal/ management of                     leasing
leasing               Vulnerable companies and
                                 enterprises                                                            Other services    Accelerating

                                  Administrative
Business,                         and support,                   Business,
building and             Modest/ waste                           building and
                                                          Modest                           Moderate
other support            Yielding management                     other support
services                          and remediation                services
                                  services
                                  Arts,
Information,                      entertainment        Transitional Information,                      Information,
                                                                    arts,                             arts,
culture and              Yielding and recreation                                         Transitional                     Accelerating
                                                                    entertainment,                    entertainment,
recreation                          Information and
                                                      Accelerating and recreation                     and recreation
                                    culture
Educational           Transitional Educational                       Educational                        Educational
                                                       Vulnerable                        Accelerating                        Evolving
services                /Evolving services                           services                           services
                                                                   Health care and                    Health care and
Health care and                     Health care and
                         Yielding                     Accelerating social                Accelerating social              Accelerating
social assistance                   social assistance
                                                                   assistance                         assistance
Public                              Public                           Public
                      Vulnerable                      Transitional                           Yielding Government            Moderate
administration                      administration                   Administration




Competitive Advantage Analysis                                 September 2005                                              Page 55
Two sectors are classified as yielding in terms of GDP because growth is lagging in
Saskatchewan but leading regionally. For personal and household services, employment
growth is lagging both regionally and in Saskatchewan so it is classified as vulnerable. For
construction, the location quotient is low and employment growth is lagging in Saskatchewan
and leading regionally so it is considered as only moderate. If employment was higher, it would
be classified as yielding.

Accommodation and food services is classified as yielding in terms of employment growth and
vulnerable in terms of GDP growth. This is a medium sized sector in Saskatchewan that is
lagging growth in both employment and GDP terms. Employment is leading growth regionally
although GDP growth is lagging regionally.

The final two sectors are sometimes combined as the resource sector – mining, oil and gas,
and utilities. They are both classified as challenging in GDP terms because they have a high
location quotient and GDP growth is lagging both regionally and in Saskatchewan. Employment
in the mining/oil and gas group, however, is growing both regionally and in the province so it is
classified as an economic driver in terms of employment. For the utility sector, employment is
leading growth in Saskatchewan but lagging growth regionally so it is classified as evolving.

Relative to the Midwest States and Prairie Provinces

While ignoring the sectors that have data comparability problems, there is even less agreement
in the comparison between the two economic measures with the midwest states and prairie
provinces. The GDP data are the most reliable because they cover a longer period so the
analysis that follows is limited to that indicator. Two sector are classified as challenging –
agriculture and the mining/oil and gas group – as they were in the comparison with the four
western provinces. Both have a high location quotient and GDP is lagging growth regionally and
in Saskatchewan.

Four groups are doing well in the region and are classified as accelerating if they are medium-
sized or rising if they are smaller because growth is leading in both Saskatchewan and the
region:
      •     Retail trade;
      •     Wholesale trade;
      •     The large group of finance, insurance, real estate, business and building support
            services; and
      •     Information, arts, entertainment, and recreation.
Retail and wholesale trade and the finance/insurance sector were also given relatively positive
ratings in the comparison with the four western provinces.

Accommodation and food services is considered as yielding which agrees with the GDP
comparison with the four western provinces. The construction sector is lagging growth both in
Saskatchewan and in the US so it is classified as vulnerable in this comparison whereas it was
classified as yielding in the comparison with the four western provinces because construction is
leading growth in this region. Manufacturing is small relative to the midwest states and prairie
provinces so even though it is leading growth in Saskatchewan but lagging growth regionally, it is
classified as “moderate”. In the comparison with the four western provinces, it was classified as
accelerating because manufacturing is leading growth in the four western provinces whereas it is
lagging growth in the midwest states and prairie provinces.




Competitive Advantage Analysis              September 2005                               Page 56
The same small size for the professional, scientific, and technical services group results in a
modest classification as it did in the comparison with the four western provinces. Relative to the
midwest states and prairie provinces, personal and household services is doing well, leading
GDP growth in Saskatchewan whereas it is lagging growth regionally. This results in a
transitional classification where it was generally given negative ratings in the comparison with the
four western provinces.




Competitive Advantage Analysis               September 2005                                Page 57
Competitive Advantage Analysis   September 2005   Page 58
SECTION 5 INDUSTRY TARGETING


There are a number of ways to summarize the indicators for the individual industry groups. One
such way is the industry targeting classification. This system is based on three indicators – the
location quotient, overall growth at the regional level, and the PSRG from the leading/lagging
analysis. The classification scheme is shown in Table 5.1. The wording of the categories
suggests the kinds of prospects for growth that one might expect in the future so the
classification scheme is somewhat forward-looking.

The targeting classification scheme makes at least two implicit assumptions that are open to
question.

1.   The categories implicitly assume that regional growth is a measure of success. If the
     industry group is leading growth regionally and not doing so in Saskatchewan, for example,
     then it is assumed that the sector has limited prospects.

2.   There is a bias towards large sectors; relatively small industry groups can be classified as
     an emerging strength but most are dismissed as having a “weak base”. This is partly an
     artifact of the industry classifications used. One can have, for example, a small
     manufacturing sector which will be dismissed as having a weak base whereas some sub-
     sector such as food processing may be large in the province and be classified as a high
     priority retention target.




 Table 5.1        Industry Targeting Classification System

 PSRG        Regional growth   Location Quotient             Classification

                               Medium to High (> 0.75)       Current strength
             Positive
                               Low (<.0.75)                  Emerging strength
 Leading                       Medium to High (> 0.75)       Prospects limited by external trends
             Negative                                        Prospects limited by external trends and weak
                               Low (<.0.75)
                                                             base

                               Medium to High (> 0.75)       High priority retention target
             Positive                                        Prospects limited by weak base and declining
                               Low (<.0.75)
                                                             competitiveness
 Lagging
                                                             Prospects limited by external trends and declining
                               Medium to High (> 0.75)
             Negative                                        competitiveness

                               Low (<.0.75)                  Prospects limited overall




Competitive Advantage Analysis                     September 2005                                      Page 59
5.1   Using Employment as an Indicator

The application of this classification scheme to the comparison between Saskatchewan and the
four western provinces yields the values in Table 5.2 and shown graphically in Figure 5.1.

Four industry groups are classified as current strengths or nearly so. The resource sector is the
only one that is clearly in this category. Employment has grown by 64% from 1992 to 2004
compared with 35% for the four western provinces as a whole.

The other three are near the cutoff points – education services, finance and insurance, and
utilities. External trends in the utility sector suggest stable employment whereas it is growing at
the average provincial rate in Saskatchewan. Depending on the reason for this growth, the
sector could be considered as either a current strength or with limited prospects in a competitive
market. Both education and the finance/insurance group are growing at near the average rate in
the four western provinces and nearly the same rate in Saskatchewan.

Three sectors are declining regionally and even more quickly in Saskatchewan. Foremost
among these is agriculture although public administration and the forestry sector are also
included. The classification of these industries is negative because external factors and trends
are limiting the prospects for growth.

All of the other industry groups fall well within the lower right quadrant which is indicative of a
growth rate in the western provinces that exceeds the growth rate in Saskatchewan. The larger
ones should, according to the classification scheme, be targeted for retention whereas the
smaller ones face the additional challenge of operating from a small base.




Competitive Advantage Analysis               September 2005                                 Page 60
 Table 5.2           Industry Targeting Classification, Employment in Saskatchewan Relative to Four Western
                     Provinces, 1992 to 2004

                                              Provincial sector
                         Location quotient     relative growth
                                                                    Regional
                         Value       Class     Value        Class    Growth Classification
                                                                            Prospects limited by external
Agriculture                2.65       High      -15%      Lagging      -27% trends and declining
                                                                            competitiveness
Forestry, fishing,
                           0.45        Low      -15%      Lagging      -19% Prospects limited overall
hunting
Mining and oil and
                           1.28       High      29%       Leading       35% Current strength
gas extraction
                                                                              Prospects limited by external
Utilities                  1.31       High        9%      Leading       -2%
                                                                              trends
                                                                              Prospects limited by weak base
Construction               0.70        Low      -25%      Lagging       48%
                                                                              and declining competitiveness
                                                                              Prospects limited by weak base
Manufacturing              0.65        Low      -17%      Lagging       34%
                                                                              and declining competitiveness
Wholesale trade            1.07    Medium       -10%      Lagging       29% High priority retention area
Retail trade               1.03    Medium       -12%      Lagging       21% High priority retention area
Transportation and
                           0.86    Medium       -10%      Lagging       30% High priority retention area
warehousing
Finance and                                                                   High priority retention area
                           1.10    Medium        -1%      Lagging       20%
insurance                                                                     because near current strength
Real estate and                                                               Prospects limited by weak base
                           0.75        Low      -12%      Lagging       12%
leasing                                                                       and declining competitiveness
Professional,
                                                                              Prospects limited by weak base
scientific and             0.57        Low      -23%      Lagging       75%
                                                                              and declining competitiveness
technical services
Business, building
                                                                              Prospects limited by weak base
and other support          0.74        Low      -33%      Lagging       90%
                                                                              and declining competitiveness
services
Educational services       1.24    Medium         3%      Leading      24% Current strength
Health care and
                           1.15    Medium       -16%      Lagging       33% High priority retention area
social assistance
Information, culture
                           0.91    Medium       -19%      Lagging       50% High priority retention area
and recreation
Accommodation and
                           0.91    Medium       -10%      Lagging       36% High priority retention area
food services
Personal and
                           1.03    Medium       -11%      Lagging       18% High priority retention area
household services
                                                                            Prospects limited by external
Public administration      1.12    Medium        -6%      Lagging       -8% trends and declining
                                                                            competitiveness




Competitive Advantage Analysis                     September 2005                                     Page 61
 Figure 5.1          Industry Targeting using Employment, Saskatchewan Compared with the Four Western
                     Provinces, 1992 to 2004

  40%

          provincial sector
          relative growth




  30%
                                                                                               Mining, oil and gas




  20%


                prospects limited                                                       current strengths
                by external trends



  10%
                                                            Utilities




                                   Finance and insurance           Education

   0%
                                                                                                         manufacturing, wholesale trade,
                                                                                                         retail trade, transportation and
                                                                                                         warehousing, health and social
                                         Public                                                          services, real estate and leasing
         Forestry, fishing,
                                         Admin                                                           acccomodation and food, personal
             hunting
                                                                                                         and household services
  -10%




                                                                                                            Information, culture,
                     Agriculture                                                                                 recreation
  -20%
                                                                                                                              Professional,
                                                                                                                               scientific,
                                                                                                                                technical
                                                                                                                                services


                                                                                        Construction
  -30%
                prospects limited


                                                                        retention targets for larger circles or
                                                                        prospects limited for smaller circles
                                                                                                                        Business, building
                                                                                                                         support services
  -40%
      -50%                -25%                    0%                    25%                    50%                   75%                 100%
                                                       regional growth from 1992 to 2004




Competitive Advantage Analysis                                  September 2005                                                         Page 62
Midwest States and Prairie Provinces

In the short time period available to measure paid employment, the classification system puts six
sectors as current strengths relative to the midwest states and prairie provinces. These include
utilities, the two public sector industry groups of health and education, and the finance/insurance
group. Personal and household services and the construction sector are in this quadrant as well
but are near the boundary with the groups that are targeted for retention.

Two sectors are solidly in the “limited prospects” classification – transportation/warehousing and
manufacturing – because paid employment declined both regionally and in Saskatchewan.

Using paid employment rather than total employment moves agriculture from having limited
prospects to a high priority retention industry. Public administration and accommodation and
food services are classified in the same category.

Because the resource sector is growing in Saskatchewan but not regionally, the scheme
classifies this industry group as having limited prospects because of external trends. This may
have been true in the 2001-03 period in the midwest (which is more mining than oil and gas) but
it has probably not been the case since then.

The other industry groups classified with limited prospects for a variety of reasons are retail and
wholesale trade, the information/recreation/arts group and the two business support groups. All
are limited by either a weak base, external trends, or both.




Competitive Advantage Analysis               September 2005                                 Page 63
 Table 5.3           Industry Targeting Classification, Paid Employment in Saskatchewan Relative to Midwest
                     States and Prairie Provinces, 2001 to 2003

                                              Provincial sector
                         Location quotient     relative growth
                                                                    Regional
                         Value        Class     Value       Class    Growth Classification
Agriculture, forestry,
                           2.33        High     -13%      Lagging        1% High priority retention area
fishing and hunting
                                                                              Prospects limited by external
Mining, oil and gas        3.13        High       4%      Leading       -2%
                                                                              trends
Utilities                  1.32        High      16%      Leading        4% Current strength
Construction               0.78     Medium        1%      Leading        2% Current strength
Manufacturing              0.55        Low       -9%      Lagging       -8% Prospects limited overall
Retail and wholesale                                                          Prospects limited by external
                           1.32        High       2%      Leading       -1%
trade                                                                         trends
Transportation and                                                            Prospects limited by weak base
                           1.05     Medium      -18%      Lagging       -3%
warehousing                                                                   and declining competitiveness
Finance, insurance,
real estate and            1.01     Medium        4%      Leading        3% Current strength
leasing
Professional,
                                  Medium to                                   Prospects limited by external
scientific and             0.75                   1%      Leading       -3%
                                        low                                   trends and weak base
technical services
Business, building
                                                                              Prospects limited by external
and other support          0.40        Low       19%      Leading       -2%
                                                                              trends and weak base
services
Educational services       1.13     Medium        9%      Leading        2% Current strength
Health care and
                           1.00     Medium        3%      Leading        5% Current strength
social assistance
Information, arts,
                                                                              Prospects limited by external
entertainment, and         1.06     Medium        6%      Leading       -3%
                                                                              trends
recreation
Accommodation and
                           0.92     Medium       -3%      Lagging        3% High priority retention area
food services
Personal and
                           1.19     Medium        1%      Leading        5% Current strength
household services
Public
                           1.19     Medium       -9%      Lagging        3% High priority retention area
Administration




Competitive Advantage Analysis                     September 2005                                     Page 64
 Figure 5.2         Industry Classification Using Paid Employment Growth, 2001 to 2003, Relative to the
                    Midwest States and Prairie Provinces

  25%
                                     prospects limited
          provincial sector                                                                     current strengths
                                     by external trends
          relative growth


  20%
                              Business, building, and
                                 support services


                                                                                                                              Utilities
  15%




                                                                                                     Education
  10%                Information, arts,
                                                          Retail and wholesale trade
                 entertainment, recreation


                                                                                                           Finance, insurance, real
                                                                                                                   estate
   5%                                                                                                                             Health care
                    Mining, oil and gas




   0%
                                                                                                                           Personal and
                      Professional, scientific,                            Construction                                  household services
                      and technical services
                                                                                                              Accommodation
   -5%                                                                                                       and food services




                               Manufacturing
                                                                                                              Public administration
  -10%


                                                                                                     Agriculture, forestry,
                                                                                                     fishing and trapping

  -15%


                              transportation and
                                 warehousing

  -20%



                                                                                                retention targets for larger circles or
          prospects limited                                                                     prospects limited for smaller circles
  -25%
     -10.0%       -8.0%         -6.0%             -4.0%          -2.0%         0.0%           2.0%         4.0%           6.0%             8.0%
                                                          regional growth from 2001 to 2003




Competitive Advantage Analysis                                     September 2005                                                         Page 65
5.2   Using GDP as an Indicator

The comparison with the four western provinces using GDP results in a more intuitively satisfying
set of classifications.

Sectors that are current strengths according to this measure make up eight of the eighteen
industry sectors:
     •     Manufacturing;
     •     Wholesale and retail trade;
     •     Transportation and warehousing;
     •     Information and cultural industries;
     •     Finance and insurance, real estate and renting and leasing and management of
           companies and enterprises;
     •     Health care and social assistance;
     •     Arts, entertainment and recreation; and
     •     Public administration
Public administration is the only group that is not solidly in the upper right quadrant being on the
border with the industries classified as retention targets. Two other sectors – personal and
household services and education services – are classified as retention targets but near the
border with the group classified as current strengths.

Those solidly in the “high priority retention target” are:
     •      Construction; and
     •      Accommodation and food services.
Two others in the lower right quadrant are deemed too small to be a priority and are classified as
having limited prospects because of declining competitiveness and a weak base. These are the
two business service groups:
     •      Professional, scientific and technical services; and
     •      Administrative and support, waste management and remediation services.

The remaining three industry groups are also on the edge of the boundaries so their classification
could easily change with another year of data or a slightly different time frame. Agriculture and
the resource sector are near the border between high priority retention areas and having
prospects limited by external trends and declining competitiveness. The utilities sector, on the
other hand, is solidly in the latter category.




Competitive Advantage Analysis                September 2005                                Page 66
 Table 5.4          Industry Targeting Classification, GDP in Saskatchewan Relative to Four Western
                    Provinces, 1997 to 2004

                                                 Provincial sector
                             Location quotient    relative growth
                                                                      Regional
                               Value     Class    Value       Class    Growth Classification
Agriculture, forestry,
                                1.94      High     -25%    Lagging         1% High priority retention area
fishing and hunting
                                                                              Prospects limited by external
Mining and oil and gas
                                1.47      High     -17%    Lagging         0% trends and declining
extraction
                                                                              competitiveness
                                                                              Prospects limited by external
Utilities                       1.15   Medium      -23%    Lagging        -7% trends and declining
                                                                              competitiveness
Construction                    0.79   Medium      -13%    Lagging        26% High priority retention area
Manufacturing                   0.76   Medium      20%     Leading        27% Current strength
Wholesale trade                 1.11   Medium      22%     Leading        41% Current strength
Retail trade                    0.94   Medium      26%     Leading        44% Current strength
Transportation and
                                1.09   Medium      19%     Leading        26% Current strength
warehousing
Information and cultural
                                0.97   Medium      27%     Leading        45% Current strength
industries
Finance and insurance,
real estate and renting
and leasing and
                                0.85   Medium        7%    Leading        29% Current strength
management of
companies and
enterprises
                                                                              Prospects limited by weak
Professional, scientific
                                0.46       Low      -9%    Lagging        45% base and declining
and technical services
                                                                              competitiveness
Administrative and
                                                                              Prospects limited by weak
support, waste
                                0.56       Low      -9%    Lagging        29% base and declining
management and
                                                                              competitiveness
remediation services
Educational services            1.12   Medium       -3%    Lagging       19% High priority retention area
Health care and social
                                1.12   Medium      14%     Leading        24% Current strength
assistance
Arts, entertainment and
                                0.81   Medium        7%    Leading        22% Current strength
recreation
Accommodation and food                 Medium                                   High priority retention area but
                                0.75               -16%    Lagging        17%
services                                to Low                                  base is weak
Personal and household
                                0.98   Medium       -2%    Lagging        26% High priority retention area
services
Public administration           1.13   Medium        2%    Leading       16% Current strength




Competitive Advantage Analysis                    September 2005                                      Page 67
Figure 5.3           Industry Classification Using Growth in Real GDP, 1997 to 2004, Saskatchewan Compared
                     with the Four Western Provinces

  40%
             provincial sector
             relative growth                                                                 current or emerging strengths



                                                                                                                   Information,
              prospects limited                                                                                       culture
  30%         by external trends                                                    Retail trade

                                                           Manufacturing


                                                   Transportation
                                                  and warehousing                                                    Wholesale
  20%                                                                                                                 Trade



                                         Health care and social
                                              assistance


  10%
                                         Arts, entertainment,
                                              recreation


                                                                                                         Finance, insurance, real
                                                                                                        estate, head offices, rental
                                                                                                                and leasing
   0%
                     Public administration                                                   Personal and household
                                                                                                    services
                                    Education services



  -10%
                       Mining,
                     oil and gas
                                                                                                            Professional, scientific,
                                                                                                            and technical services

                                                                              Construction        Administrative and
  -20%
                                                          Accommodation and                         support, waste
                                                             food services                         management and
         Utilities                                                                               remediation services




  -30%                Agriculture




                                                                                             retention targets for larger circles or
         prospects limited                                                                   prospects limited for smaller circles
  -40%
      -20%            -10%             0%            10%            20%           30%               40%              50%               60%
                                                     regional growth from 1997 to 2004




Competitive Advantage Analysis                                  September 2005                                                    Page 68
Midwest States and Prairie Provinces

The comparison with the midwest states and prairie provinces using real GDP has a similar
overall pattern to the comparison with the four western provinces although there are some
differences. Ignoring the sectors that have comparability problems:
      •     agriculture moves from a high priority retention area to one that classifies it as having
            limited prospects;
      •     manufacturing moves from a current strength to an emerging strength; and
      •     the accommodation and food services sector moves from a high priority retention area
            to one that has limited prospects because of external factors.




Competitive Advantage Analysis               September 2005                                 Page 69
     Table 5.5           Industry Targeting Classification, GDP in Saskatchewan Relative to Midwest States and
                         Prairie Provinces, 1998 to 2002

                                                    Provincial sector
                             Location quotient       relative growth
                                                                            Regional
                             Value       Class       Value        Class      Growth Classification
                                                                                     Prospects limited by external
    Agriculture, forestry,
                               2.38       High        -42%      Lagging        -5.2% trends and declining
    fishing, and hunting
                                                                                     competitiveness
                                                                                     Prospects limited by external
    Mining, oil and gas        3.68       High        -15%      Lagging        -5.1% trends and declining
                                                                                     competitiveness
    Utilities*                 1.28       High        -14%      Lagging         4.6% High priority retention area
    Construction               1.10    Medium          -1%      Lagging         3.0% High priority retention area
    Manufacturing              0.58        Low        14%       Leading         2.2% Emerging strength
    Wholesale trade            0.95    Medium         13%       Leading       13.8% Current strength
                                      Medium/
    Retail trade               0.76                   22%       Leading       25.8% Current or emerging strength
                                         Low
    Transportation and
                               1.56       High        19%       Leading         9.1% Current strength
    warehousing*
    Other services**           0.82    Medium           6%      Leading       10.5% Current strength
    Professional,
                                                                                       Prospects limited by weak base
    scientific and             0.44        Low         -4%      Lagging       14.9%
                                                                                       and declining competitiveness
    technical services
    Educational services       3.56       High          5%      Leading        7.6% Current strength
    Health care and
                               0.99    Medium         10%       Leading       13.9% Current strength
    social assistance*
    Information, arts,
    entertainment, and         0.82    Medium         23%       Leading       28.5% Current strength
    recreation
                                                                                    High priority retention area but
    Accommodation and
                               0.92    Medium          -0%    Near zero       11.8% external trends and
    food services
                                                                                    competitiveness are issues
    Personal and                                                                       Prospects limited by external
                               1.09    Medium           8%      Leading        -1.1%
    household services                                                                 trends
    Government*                0.57        Low          7%      Leading         4.0% Emerging strength

*            comparability in these industry groups is compromised because the US midwest states include all public
             sector activities in the “government” category
**           finance, insurance, real estate, rental and leasing, head offices, waste management and remediation




Competitive Advantage Analysis                           September 2005                                        Page 70
Figure 5.4          Industry Classification Using Growth in Real GDP, 1998 to 2002, Saskatchewan Compared
                    with the Midwest States and Prairie Provinces

  40%
             provincial sector
             relative growth                                                                current or emerging strengths


                                                                                                               Information, arts,
  30%         prospects limited                                                                            entertainment, recreation
              by external trends                      Transporation and                     Retail trade
                                                        warehousing*



  20%                            Manufacturing

                       Government*
                                                                                Wholesale trade

                                                                                                   finance, insurance, real
  10%                                                                            Health care*     estate, rental and leasing,
                                                                                                     head offices, waste
           Personal and                               Education*                                      management and
         household services                                                                              remediation
                                                                            Accommodation and food
                                                                                  services
   0%
                        Construction
                                                                                  Professional, scientific,
                                                                                  and technical services

  -10%


              Mining, oil and gas
                                                          Utilities*

  -20%




  -30%
                                                                                      * treat with caution because
                                                                                    comparability compromised by
                                                                             definition of "government " in US accounts


  -40%
                 Agriculture




  -50%


                                                                                            retention targets for larger circles or
         prospects limited                                                                  prospects limited for smaller circles
  -60%
      -10%           -5%            0%           5%           10%         15%             20%          25%           30%              35%
                                                      regional growth from 1998 to 2002




Competitive Advantage Analysis                                 September 2005                                                    Page 71
5.3   Summary

The industry classifications vary according to the comparison region. Table 5.6 summarizes the
comparison with the four western provinces and Table 5.7 summarizes the comparison with the
midwest states and prairie provinces.

This summary will concentrate on the comparison with the four western provinces because the
data are the most reliable and the time frame is long enough to remove annual fluctuations.

One of the observations about the data is that no industry sector in Saskatchewan is considered
a current strength in both economic measures although some are seen as strong using either
employment or the GDP as indicators. And no industry sector is classified as an emerging
strength, that is, a small sector with growth potential except for one industry in one comparison
namely manufacturing when compared with the midwest states and prairie provinces using the
GDP measure.

High Priority Retention Areas

This classification of a high priority for retention arises when an industry is relatively important in
the province and showing positive growth in the four western provinces but is lagging growth in
Saskatchewan. There is no indication in the methodology what should be done to retain these
industries but their growth in the region is seen as an indication that growth is possible. A
relatively large number of industry groups in Saskatchewan are given this classification either in
the GDP base, the employment base, or both.

In two industry groups both economic measures agree – accommodation and food services,
and personal and household services. Of the two, personal and household services is seen
as the more vulnerable. The accommodation and food services sector is also seen as a target
for retention when one uses the GDP measure for the midwest states and prairie provinces. In
that case, however, personal and household services is seen as having limited prospects.

A large number of industries are classified as retention areas in the employment measure but are
classified as a current strength in the GDP measure. Together these sectors accounted for
almost one half of the province’s GDP in 2004:
      •     Wholesale trade;
      •     Retail trade;
      •     Transportation and warehousing;
      •     Finance and insurance;
      •     Information, culture and recreation; and
      •     Health care and social assistance.
Apparently labour productivity is increasing in these sectors so they are deemed to be in need of
retaining from an employment point of view although their GDP is leading growth in the province.
Education services are the opposite – this sector is deemed to be a retention area in terms of
GDP but a current strength in terms of employment.

Construction is deemed as a retention area in terms of GDP but is seen as having limited
prospects in terms of the employment measure. This is because it has a low location quotient in
the employment measure but a medium one in the GDP measure. Construction is lagging
growth in terms of both employment and GDP in Saskatchewan whereas it is growing regionally.




Competitive Advantage Analysis                 September 2005                                  Page 72
Table 5.6         Industry Targeting Classification for Saskatchewan Relative to the Four Western Provinces

                Employment (1992 to 2004)                                        GDP (1997 to 2004)
                               Prospects limited by
Agriculture                    external trends and            Agriculture, forestry, fishing
                               declining competitiveness                                     High priority retention area
                                                              and hunting
Forestry, fishing, hunting     Prospects limited overall
                                                                                             Prospects limited by
Mining, oil and gas            Current strength               Mining, oil and gas            external trends and
                                                                                             declining competitiveness
                                                                                             Prospects limited by
                               Prospects limited by
Utilities                                                     Utilities                      external trends and
                               external trends
                                                                                             declining competitiveness
                               Prospects limited by weak
Construction                   base and declining             Construction                   High priority retention area
                               competitiveness
                               Prospects limited by weak
Manufacturing                  base and declining             Manufacturing                  Current strength
                               competitiveness
Wholesale trade                High priority retention area   Wholesale trade                Current strength
Retail trade                   High priority retention area   Retail trade                   Current strength
Transportation and                                            Transportation and
                               High priority retention area                                  Current strength
warehousing                                                   warehousing
Accommodation and food                                        Accommodation and food
                               High priority retention area                                  High priority retention area
services                                                      services
Personal and household                                        Personal and household
                               High priority retention area                                  High priority retention area
services                                                      services
                               Prospects limited by weak                                     Prospects limited by weak
Professional, scientific and                                  Professional, scientific and
                               base and declining                                            base and declining
technical services                                            technical services
                               competitiveness                                               competitiveness

Finance and insurance          High priority retention area   Finance and insurance,
                                                              real estate and renting and
                               Prospects limited by weak      leasing and management         Current strength
Real estate and leasing        base and declining             of companies and
                               competitiveness                enterprises

                               Prospects limited by weak      Administrative and support, Prospects limited by weak
Business, building and
                               base and declining             waste management and        base and declining
other support services
                               competitiveness                remediation services        competitiveness
                                                              Arts, entertainment and
                                                                                             Current strength
Information, culture and                                      recreation
                               High priority retention area
recreation                                                    Information and cultural
                                                                                             Current strength
                                                              industries
Educational services           Current strength               Educational services           High priority retention area
Health care and social                                        Health care and social
                               High priority retention area                                  Current strength
assistance                                                    assistance
                               Prospects limited by
Public administration          external trends and            Public administration          Current strength
                               declining competitiveness




Competitive Advantage Analysis                         September 2005                                           Page 73
    Table 5.7             Industry Targeting Classification for Saskatchewan Relative to the Midwest States and
                          Prairie Provinces

                    Paid Employment (2001 to 2003)                                      GDP (1998 to 2002)
                                                                                                   Prospects limited by
    Agriculture, forestry, fishing                                  Agriculture, forestry,
                                     High priority retention area                                  external trends and
    and hunting                                                     fishing, and hunting
                                                                                                   declining competitiveness
                                                                                                   Prospects limited by
                                     Prospects limited by
    Mining, oil and gas                                             Mining, oil and gas            external trends and
                                     external trends
                                                                                                   declining competitiveness
    Utilities                        Current strength               Utilities*                     High priority retention area
    Construction                     Current strength               Construction                   High priority retention area
    Manufacturing                    Prospects limited overall      Manufacturing                  Emerging strength

                                     Prospects limited by           Wholesale trade                Current strength
    Retail and wholesale trade
                                     external trends                Retail trade                   Current strength
                                     Prospects limited by weak
    Transportation and                                              Transportation and
                                     base and declining                                            Current strength
    warehousing                                                     warehousing*
                                     competitiveness
    Accommodation and food                                          Accommodation and food
                                     High priority retention area                                  High priority retention area
    services                                                        services
    Personal and household                                          Personal and household         Prospects limited by
                                     Current strength
    services                                                        services                       external trends
                                                                                                   Prospects limited by weak
    Professional, scientific and     Prospects limited by           Professional, scientific and
                                                                                                   base and declining
    technical services               external trends                technical services
                                                                                                   competitiveness
    Finance, insurance, real
                                     Current strength
    estate and leasing
                                                                    Other services                 Current strength
    Business, building and           Prospects limited by weak
    other support services           base and weak base
    Information, arts,                                              Information, arts,
                                     Prospects limited by
    entertainment, and                                              entertainment, and             Current strength
                                     external trends
    recreation                                                      recreation
    Educational services             Current strength               Educational services           Current strength
    Health care and social                                          Health care and social
                                     Current strength                                              Current strength
    assistance                                                      assistance*
    Public Administration            High priority retention area   Government*                    Emerging strength

*               comparability in these industry groups is compromised because the US midwest states include all public
                sector activities in the “government” category




Competitive Advantage Analysis                               September 2005                                           Page 74
Agriculture is, of course, not small in the province but, like construction, it is classified as a
retention target in terms of GDP growth but as having limited prospects in terms of employment.
The limitation is because of external factors – undoubtedly the fall in commodity prices – and
declining competitiveness. It has the same classification in the GDP comparison for the midwest
states and prairie provinces.

Limited Prospects

The remaining sectors are classified as having limited prospects for a variety of reasons in one or
both of the economic measures.

In once case – professional, scientific, and technical services – the two measures agree that
the sector has limited potential because of a weak base and declining competitiveness. That is,
the sector has a low location quotient is growing regionally but lagging growth in Saskatchewan
and that this is true for both the employment and GDP measures. This sector is also seen as
having limited prospects when compared with the midwest states and prairie provinces.

Manufacturing is put in the same category according to the employment measure but it has a
medium location quotient for GDP and is leading GDP growth in the province and so is
considered a current strength using the GDP measure. In the comparison with the midwest
states and prairie provinces, manufacturing in Saskatchewan is particularly small so it is seen as
an emerging rather than current strength using the GDP measure.

Public administration is also seen as a current strength using the GDP measure but has limited
prospects because both declining competitiveness and external factors limit prospects.

The two measures for the utility sector agree that the sectors’ prospects are limited although in
the employment measure, external trends are mentioned whereas in the GDP measure, both
declining competitiveness and external trends are mentioned.

The other sector, mining and oil/gas, has two directly opposite classifications. In terms of
employment it is classified as a current strength with a high location quotient positive regional
growth and it is leading employment growth in the province. In the GDP measure, it is classified
as having limited potential because of external factors and declining competitiveness because
GDP growth is lagging provincially and negative regionally. The same limited prospects are
evident when one uses the GDP comparison with the midwest states and prairie provinces.




Competitive Advantage Analysis               September 2005                               Page 75
Competitive Advantage Analysis   September 2005   Page 76
SECTION 6 SUMMARY


There are great deal of statistics arising from the comparative advantage analysis undertaken in
this report and they are difficult to summarize. One of the reasons is the difficulty in comparing
different economic measures over different time frames. Data comparison difficulties with the US
states compounds the problem4.

Indeed, there are only a few conclusions that can be drawn from the analysis without fear of
contradiction.
     •      Agriculture and the resource sector are the dominant industries in Saskatchewan
            relative to either the four western provinces or the midwest states and prairie
            provinces.
     •      At the other end of the scale, the professional, scientific, and technical services group
            and the construction sector are both relatively small in the province.
     •      Saskatchewan’s manufacturing sector is relatively small compared with the sector in
            the four western provinces and midwest states and prairie provinces but has shown
            strength in recent years.

Nevertheless, some consistent messages emerge from the comparative advantage analysis.
Some of these are not a surprise for those familiar with the provincial economy. In this section,
we aggregate the findings for seven industry groups that emerged from the analysis as either
important in the Saskatchewan economy or differ in a major way from those in the comparison
economies. On a practical note, the seven were limited to those where comparable data were
available.

Five of the sectors are in the goods-producing sector:
      •     agriculture;
      •     resources;
      •     utilities;
      •     construction; and
      •     manufacturing.
Two are in the services-producing sector:
      •     accommodation and food services; and
      •     professional, scientific, and technical services.




4
       A more extensive follow-up to this analysis might prove useful if the data for the US states could be
       extracted for comparable time periods and using the same methodology.



Competitive Advantage Analysis                       September 2005                                            Page 77
Agriculture

Agriculture has a high location quotient relative to both the four western provinces and midwest
states and prairie provinces. Growth is lagging in both the comparison regions and in
Saskatchewan but there is also a negative provincial effect that indicates that growth in the
province is even slower than in the surrounding area.

Relative to the four western provinces, agriculture is classified as a retention target in terms of
GDP growth but as having limited prospects in terms of employment. Relative to the midwest
states and prairie provinces, it is classified as having limited prospects in terms of GDP growth
but for paid employment, a small part of the sector in Saskatchewan, it is classified as a high
priority retention area.

The comparative advantage analysis describes agriculture well in the province. It is an important
sector and for that reason is a retention target although growth prospects are limited, particularly
for employment.




    Table 6.1          Comparative Advantage Summary for Agriculture

                                                                               Employment                               Real GDP

    Relative to the        Location quotient in
                                                                                        High                                  High
    four western           2004
    provinces
                           Provincial effect1                                      Negative                               Negative

                           Leading/Lagging2                                Lagging/Lagging                       Lagging/Lagging

                           Industry Classification           Prospects limited by external
                                                                    trends and declining              High priority retention area
                                                                          competitiveness

                                                                          Paid employment                               Real GDP

    Relative to the        Location quotient3                                           High                                  High
    midwest states
    and prairie            Provincial effect4                                      Negative                               Negative
    provinces
                           Leading/Lagging5                                Leading/Lagging                       Lagging/Lagging

                           Industry Classification                                                 Prospects limited by external
                                                                High priority retention area              trends and declining
                                                                                                               competitiveness

1      Change that is unique to the province, 1992 to 2004 for employment, 1997 to 2004 for GDP
2      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 1992 to 2004 for employment,
       1997 to 2004 for GDP
3      2002 for paid employment; 2003 for GDP
4      Change that is unique to the province, 2001 to 2003 for employment, 1998 to 2002 for GDP
5      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 2001 to 2003 for employment,
       1998 to 2002 for GDP



Competitive Advantage Analysis                               September 2005                                               Page 78
Resources

The comparative advantage analysis for the resource sector doesn’t show the industry in as
positive a light as many would expect. The location quotient shows that it is an important,
exporting, sector in the province, even when compared with the resource-rich midwest states and
prairie provinces.

Relative to the comparison economies, employment growth is resources is leading growth in the
province and there is a positive provincial effect so the number of jobs in the sector is growing at
an above average rate. Growth in real GDP is lagging growth in other sectors, however, both in
Saskatchewan and in the other regions. One of the consequences is that growth is classified as
having limited potential in the comparative advantage analysis framework.

Employment in the resource sector is not a good measure of the sector’s overall economic
performance so the GDP indicator is more appropriate. It is important to remember that the
comparative advantage analysis measures change in real GDP which would not be affected by
the recent rise in commodity prices because it measures the volume not the value of the output.
That helps explain why this important sector is seen as having limited growth potential because
the output measured in constant dollars is not increasing as quickly as in the comparison
economies or in other sectors. Given the recent strength, however, an additional year or two of
data might make the picture look different.




    Table 6.2          Comparative Advantage Summary for Mining and Oil/Gas Extraction

                                                                               Employment                               Real GDP

    Relative to the        Location quotient in
                                                                                        High                                  High
    four western           2004
    provinces
                           Provincial effect1                                       Positive                              Negative

                           Leading/Lagging2                                Leading/Leading                       Lagging/Lagging

                           Industry Classification                                                 Prospects limited by external
                                                                           Current strength               trends and declining
                                                                                                               competitiveness

                                                                          Paid employment                               Real GDP

    Relative to the        Location quotient3                                           High                                  High
    midwest states
    and prairie            Provincial effect4                                       Positive                              Negative
    provinces
                           Leading/Lagging5                                Lagging/Leading                       Lagging/Lagging

                           Industry Classification                                                 Prospects limited by external
                                                             Prospects limited by external
                                                                                                          trends and declining
                                                                                   trends
                                                                                                               competitiveness

1      Change that is unique to the province, 1992 to 2004 for employment, 1997 to 2004 for GDP
2      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 1992 to 2004 for employment,
       1997 to 2004 for GDP
3      2002 for paid employment; 2003 for GDP
4      Change that is unique to the province, 2001 to 2003 for employment, 1998 to 2002 for GDP
5      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 2001 to 2003 for employment,
       1998 to 2002 for GDP



Competitive Advantage Analysis                               September 2005                                               Page 79
Utilities

The utility sector in Saskatchewan – electricity, natural gas, and water utilities – has a high
location quotient relative to both the four western provinces and midwest states and prairie
provinces. There is a positive provincial employment effect but a negative one for GDP. This
would occur if employment in the province is growing relative to output whereas in the
comparison regions, the opposite is true.

Real GDP is lagging growth in other sectors both regionally and in Saskatchewan although
employment is leading growth in the comparison regions. Relative to the four western provinces,
the utility sector is classified as having limited prospects whereas relative to the midwest states
and prairie provinces, it is classified as a current strength in Saskatchewan and a high priority
retention area.

Parts of the utility sector in the four western provinces are in the private sector whereas in
Saskatchewan it is exclusively in the public sector. The analysis suggests that the sector has
limited prospects for expansion because of low productivity.




    Table 6.3          Comparative Advantage Summary for Utilities

                                                                               Employment                               Real GDP

    Relative to the        Location quotient in
                                                                                        High                                  High
    four western           2004
    provinces
                           Provincial effect1                                       Positive                              Negative

                           Leading/Lagging2                                Lagging/Leading                       Lagging/Lagging

                           Industry Classification                                                 Prospects limited by external
                                                             Prospects limited by external
                                                                                                          trends and declining
                                                                                   trends
                                                                                                               competitiveness

                                                                          Paid employment                               Real GDP
                                                3
    Relative to the        Location quotient                                            High                                  High
    midwest states
    and prairie            Provincial effect4                                       Positive                              Negative
    provinces
                           Leading/Lagging5                                Leading/Leading                       Lagging/Lagging

                           Industry Classification                         Current strength           High priority retention area

1      Change that is unique to the province, 1992 to 2004 for employment, 1997 to 2004 for GDP
2      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 1992 to 2004 for employment,
       1997 to 2004 for GDP
3      2002 for paid employment; 2003 for GDP
4      Change that is unique to the province, 2001 to 2003 for employment, 1998 to 2002 for GDP
5      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 2001 to 2003 for employment,
       1998 to 2002 for GDP



Competitive Advantage Analysis                               September 2005                                               Page 80
Construction

The location quotient for construction in Saskatchewan is low to medium which would indicate
that some of the construction activity in the province is performed by out-of-province firms, that
is, services are being imported. The provincial effect is generally negative which would indicate
that growth in the province is poor relative to growth in other sectors and other regions. This is in
spite of the fact that growth is leading in Saskatchewan whereas it is lagging in the comparison
regions.

The construction sector is generally seen as having growth potential in the province and is a
target for retention in the comparative advantage analysis framework.




    Table 6.4          Comparative Advantage Summary for Construction

                                                                               Employment                               Real GDP

    Relative to the        Location quotient in
                                                                                         Low                               Medium
    four western           2004
    provinces
                           Provincial effect1                                      Negative                               Negative

                           Leading/Lagging2                                Leading/Lagging                       Leading/Lagging

                           Industry Classification              Prospects limited by weak
                                                                      base and declining              High priority retention area
                                                                         competitiveness

                                                                          Paid employment                               Real GDP
                                                3
    Relative to the        Location quotient                                        Medium                                 Medium
    midwest states
    and prairie            Provincial effect4                                       Positive                              Negative
    provinces
                           Leading/Lagging5                                Leading/Leading                       Lagging/Lagging

                           Industry Classification                         Current strength           High priority retention area

1      Change that is unique to the province, 1992 to 2004 for employment, 1997 to 2004 for GDP
2      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 1992 to 2004 for employment,
       1997 to 2004 for GDP
3      2002 for paid employment; 2003 for GDP
4      Change that is unique to the province, 2001 to 2003 for employment, 1998 to 2002 for GDP
5      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 2001 to 2003 for employment,
       1998 to 2002 for GDP



Competitive Advantage Analysis                               September 2005                                               Page 81
Manufacturing and Processing

Relative to the comparison regions, Saskatchewan’s small manufacturing sector is growing
whereas it is in decline in the four western provinces. In the comparison with the midwest states
and prairie provinces, which is over a shorter time period, it is lagging growth but still has a
positive provincial effect.

The comparative advantage analysis suggests that the sector is worth nurturing as an emerging
strength in the province. This is in spite of the fact that the sector is seen as having limited
prospects for employment growth – increasing productivity is one of the strengths of the sector in
Saskatchewan.




    Table 6.5          Comparative Advantage Summary for Agriculture

                                                                               Employment                               Real GDP

    Relative to the        Location quotient in
                                                                                         Low                               Medium
    four western           2004
    provinces
                           Provincial effect1                                      Negative                                Positive

                           Leading/Lagging2                                Leading/Lagging                       Leading/Leading

                           Industry Classification              Prospects limited by weak
                                                                      base and declining                         Current strength
                                                                         competitiveness

                                                                          Paid employment                               Real GDP
                                                3
    Relative to the        Location quotient                                             Low                                   Low
    midwest states
    and prairie            Provincial effect4                                       Positive                               Positive
    provinces
                           Leading/Lagging5                                Lagging/Lagging                       Lagging/Leading

                           Industry Classification                Prospects limited overall                    Emerging strength

1      Change that is unique to the province, 1992 to 2004 for employment, 1997 to 2004 for GDP
2      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 1992 to 2004 for employment,
       1997 to 2004 for GDP
3      2002 for paid employment; 2003 for GDP
4      Change that is unique to the province, 2001 to 2003 for employment, 1998 to 2002 for GDP
5      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 2001 to 2003 for employment,
       1998 to 2002 for GDP



Competitive Advantage Analysis                               September 2005                                               Page 82
Accommodation and Food Services

The accommodation and food services sector thrives on tourism and population growth. In
Saskatchewan it has a low to medium location quotient and a negative provincial effect which is
indicative of poor growth that is unique to the province. Growth in the sector is below average in
the comparison regions but generally leading growth in the province.

The industry classification scheme in the comparative advantage analysis yields the same result
for both comparison regions and both economic indicators, namely that the sector is a high
priority retention area. Whatever factors are yielding a negative provincial effect would need to
be addressed in order to enable the sector to become stronger in Saskatchewan.




    Table 6.6          Comparative Advantage Summary for Accommodation and Food Services

                                                                               Employment                               Real GDP

    Relative to the        Location quotient in
                                                                                    Medium                                     Low
    four western           2004
    provinces
                           Provincial effect1                                      Negative                               Negative

                           Leading/Lagging2                                Leading/Lagging                       Lagging/Lagging

                           Industry Classification              High priority retention area          High priority retention area

                                                                          Paid employment                               Real GDP
                                                3
    Relative to the        Location quotient                                        Medium                                 Medium
    midwest states
    and prairie            Provincial effect4                                      Negative                               Negative
    provinces
                           Leading/Lagging5                                Leading/Lagging                       Leading/Lagging

                           Industry Classification              High priority retention area          High priority retention area

1      Change that is unique to the province, 1992 to 2004 for employment, 1997 to 2004 for GDP
2      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 1992 to 2004 for employment,
       1997 to 2004 for GDP
3      2002 for paid employment; 2003 for GDP
4      Change that is unique to the province, 2001 to 2003 for employment, 1998 to 2002 for GDP
5      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 2001 to 2003 for employment,
       1998 to 2002 for GDP



Competitive Advantage Analysis                               September 2005                                               Page 83
Professional, Scientific, and Technical Services

This sector is comprised of services normally provided to other businesses and includes legal,
accounting, and information technology consultants. The sector has a low location quotient
which confirms the fact that many of these services are imported to Saskatchewan, that is,
provided by out-of-province firms.

Although the sector is leading growth in the province, the comparative advantage analysis
documents the fact that it is not growing as strongly as in the comparison regions. While many
would disagree, the analysis suggests that the sector is too small, given the weak base in the
province, and has limited prospects as a result.




    Table 6.7          Comparative Advantage Summary for Professional, Scientific, and Technical Services

                                                                               Employment                               Real GDP

    Relative to the        Location quotient in
                                                                                         Low                                   Low
    four western           2004
    provinces
                           Provincial effect1                                      Negative                               Negative

                           Leading/Lagging2                                Leading/Lagging                       Leading/Lagging

                           Industry Classification              Prospects limited by weak              Prospects limited by weak
                                                                      base and declining                     base and declining
                                                                         competitiveness                        competitiveness

                                                                          Paid employment                               Real GDP

    Relative to the        Location quotient3                                       Medium                                     Low
    midwest states
    and prairie            Provincial effect4                                       Positive                              Negative
    provinces
                           Leading/Lagging5                                Lagging/Leading                       Leading/Lagging

                           Industry Classification                                                     Prospects limited by weak
                                                             Prospects limited by external
                                                                                                             base and declining
                                                                                   trends
                                                                                                                competitiveness

1      Change that is unique to the province, 1992 to 2004 for employment, 1997 to 2004 for GDP
2      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 1992 to 2004 for employment,
       1997 to 2004 for GDP
3      2002 for paid employment; 2003 for GDP
4      Change that is unique to the province, 2001 to 2003 for employment, 1998 to 2002 for GDP
5      Leading growth or lagging growth in the province/Leading growth or lagging growth in the region, 2001 to 2003 for employment,
       1998 to 2002 for GDP



Competitive Advantage Analysis                               September 2005                                               Page 84