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Canada’s Tech Industry Bigger Than Previously Thought, Still Lags US on Per Capita Basis

A new study suggests that Canada’s tech industry plays a bigger role in the country’s economy than previously believed.

The report, released by the Brookfield Institute for Innovation + Entrepreneurship at Toronto’s Ryerson University, uses a broader definition for the technology sector than the one traditionally used.

“Past efforts to define the tech sector, while useful, have almost exclusively focused on the information and communications technology industry,” Creig Lamb and Matthew Seddon, the report’s authors, write. “Today, technology has become so ubiquitous across all Canadian industries that this approach understates the true impact that the tech sector has on Canada’s economy.”

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They count any industry where more than 15 per cent of workers are employed in high tech occupations—three times the national average—as being high tech.

It’s based on a measure used by U.S. Department of Labor Statistics; the Brookings Institution, a Washington, D.C.-based think tank; and Nesta, a non-profit that promotes innovation in the United Kingdom.

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“Using our more encompassing definition, we found that Canada’s tech sector is exceptionally diverse, ranging from digital technologies to aerospace and pharmaceuticals. The sector is also much broader in size, scope and geography than ever before. It is truly a pan-Canadian sector with pan-Canadian impact,” Lamb and Seddon write.

According to the report, tech contributed CAD$117 billon to Canada’s economy in 2015—around seven per cent of Canada’s total gross domestic product. The report also finds that 864,000 people, 5.6 per cent of all Canadian workers, work in tech industry.

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Those numbers suggest that Canada’s tech industry continues to lag behind its U.S. counterpart.

Around 12 per cent of U.S. workers, 17 million people, were employed in tech in 2014, according to a study conducted by the U.S. Bureau of Labor Statistics. It used a similar methodology – including any industry where 14.5 per cent of workers were in high-tech occupations as part of the tech sector.

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The Brookfield study found that 71,000 firms across Canada are part of the tech industry – many of them small.

“When compared to all other Canadian industries, Canada’s tech sector is comprised of a disproportionate number of very small firms. In 2015, 68.8 per cent of all tech sector firms with staff had four or fewer employees, compared to 54.1 per cent across all other industries,” the study’s authors wrote.

Unsurprisingly, the study found that the tech industry was the largest contributor to corporate research and development in Canada, spending $9.1 billion on R&D in 2015.

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“The tech sector’s large R&D investments are significant given that Canada’s private sector R&D has consistently lagged international comparators,” Lamb and Seddon write.

Canada currently ranks 26th out of 41 similar countries, according to the Science, Technology and Innovation Council, an independent body that studies innovation in Canada for the federal government.

On a provincial level, Quebec and Ontario have the largest percentage of tech workers – 6.4 per cent of Quebec’s workforce is employed at high tech companies, while 6.2 per cent of workers in Ontario are in tech.

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British Columbia and Alberta tie at 4.8 per cent, while Saskatchewan has the lowest percentage of tech workers, at 1.3 per cent.

Broken down by city, Toronto has Canada’s largest tech sector, employing 286,100 people. That was followed by Montreal, where 222,200 people work in tech, and Vancouver, where 111,700 people work for tech companies.

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Montreal, Toronto, Vancouver, Calgary, Ottawa-Gatineau and Kitchener-Cambridge-Waterloo all higher than average concentrations of tech workers on a per-capita basis.

Techfest Montreal - May 4th
Techfest Montreal - May 4th