By Mark Milke
and Lennie Kaplan
Canadian Energy Centre
It’s hard for anyone but mathematicians and economists to conceptualize numbers in the billions. To get around that problem, and as a prelude to comparing major Canadian industries, let’s start with a smaller number and a question: How would you like to make $2,740 every week?
If you answered “Yes,” you won’t appear on a television game show or win a raffle.
Instead, you’ve agreed that $2,740 is a decent weekly income. It also happens to be the average weekly earnings in the oil and gas extraction sector in 2019. (That involves getting oil and natural gas out of the ground, but not pipeline work and other activity related to the industry, such as in refineries).
The weekly wages in the aerospace and automotive sectors (product and parts manufacturing in both) are $1,534 and $1,427, respectively. Those are both decent incomes, above the $1,029 average weekly wage across all Canadian industries.
The automotive sector pays 39 percent better than the average wage across all industries, the aerospace sector pays 49 percent more, and the oil and gas extraction sector pays 166 percent better.
And there are other ways to compare the three industries, which is where we return to numbers in the billions.
In 2014 when Canada’s oil and gas extraction sector was firing on all economic cylinders, it was worth almost $110 billion in nominal gross domestic product (GDP). By 2017, the latest year available for this specialized data from Statistic Canada, GDP for oil and gas extraction had dropped to just under $63 billion.
Even in a slump year, Canada’s oil and gas sector in 2017 was worth over three times the nominal GDP of the motor vehicle and parts manufacturing sector ($18.8 billion) and nearly seven times the aerospace manufacturing and parts sector ($9.4 billion).
The oil and gas extraction sector amounted to 5.9 percent of nominal Canadian GDP in 2014 and 3.1 percent in 2017. That was still about three times the automotive sector (0.9 percent of GDP) and nearly seven times the aerospace sector (0.5 percent of GDP).
Employment in oil and gas extraction in 2017 stood at 55,853 direct jobs. The motor vehicle parts and manufacturing industry employed more, at 74,297, with aerospace employing fewer, at 51,349 people.
Why is oil and gas extraction such a large part of GDP, even in a slump year, but employs 25 percent fewer people than the automotive sector?
Because labour productivity is extremely high in Canada’s oil and gas extraction sector compared to other industries.
As we noted in a report on oil and gas labour productivity, higher productivity allows you to do more with less. Think of farming 500 years ago – the 1565 painting by Flemish artist Pieter Bruegel the Elder, The Harvesters, shows workers gathering wheat and tying the stacks by hand.
Restart Canada’s economic engine with oil and gas by Tim McMillan
The modern oil and gas extraction industry in Canada is like farming – doing much more with less. Twenty people cutting wheat by hand and bundling it would be far less productive than 20 people driving tractors over much more land. Much more is produced with much less.
Other industries also contribute significantly to the Canadian economy and jobs, but oil and gas extraction contributes significantly more to GDP than either the automotive or aerospace sectors. It also pays significantly more than both.
Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report, Fueling Canada’s Economy: Comparing the Oil and Gas Extraction Sector to the Automotive and Aerospace Sectors.
Mark and Lennie are among our contributors. For interview requests, click here.
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