Study: Hollowing-out: An analysis of head offices in Canada

A new study has found only limited support for the contention that corporate Canada is shedding head office employment. The possible decline of head offices, commonly referred to as "hollowing-out," has received considerable attention over the last two years, especially from those concerned with the migration of head offices to other countries.

Overall, the study found relatively few sectors that showed patterns of decline in head office employment. Most importantly, in some important sectors - for example, mining and oil and gas extraction, and professional, scientific and technical services - employment in head offices actually increased.

The analysis was based on a detailed count of the number of head offices in Canada and their employment, provided by Statistics Canada's Business Register for 1999 to 2002.

During this four-year period, the number of head office units in Canada increased slightly, as did employment in head offices.

Recently, there has been concern that Canadian firms were becoming "hollowed-out" corporations that would no longer demand the services of financial markets, or of key business services.

Much of the discussion surrounding the hollowing-out phenomenon has been based on anecdotal or indirect evidence. This new study provides a more comprehensive and direct analysis of the recent evolution of Canada's head office sector.

Marginal gain in head office units, employment

From 1999 to 2002, the number of head office units increased marginally from 3,936 to 3,969.

Over this four-year period, growth in head office units was strongest in manufacturing (+17%), real estate and rental leasing (+14%), and information and cultural industries (+13%).

Head office counts declined the most in wholesale trade (-8.8%), mining and oil and gas extraction (-8.2%), and construction (-8.0%).

Employment in head offices rose a modest 2.7% from 1999 to 2002.

Employment growth was strongest in real estate rental and leasing (+41%), professional and technical services (+25%) and finance and insurance (+22%).

Head office employment declined most in accommodation and food services (-16%), agriculture, forestry, fishing and hunting (-15%) and construction (-13%).

Successful firms increased their head office employment

The growth of head office employment results from the decisions of individual businesses, some of which grow as a result of successful choices, while others decline as a result of inappropriate choices.

Firms whose employment grew from 1999 to 2002 also increased their share of employment in head offices on average. Firms whose employment fell over the same period decreased their share of employment in head offices on average. Thus, firms that were growing their overall employment were increasing their management function.

Head office employment highest in Ontario and Quebec

Provincially, head office employment was highest in Ontario and Quebec. In 2002, Ontario had 74,000 head office workers, while Quebec had 41,000. Alberta followed with 21,100, and British Columbia with 16,500.

Growth in head office employment was concentrated in Alberta and Ontario. From 1999 to 2002, Ontario increased its head office employment by 5,600 (+8.3%) and Alberta, by 4,100 (+24%).

In contrast, British Columbia and Manitoba experienced the largest declines. British Columbia's head office employment fell by 3,100 (-16%) and Manitoba's, by 900 (-11%).

Among cities, Toronto solidified its position as Canada's leading head office centre. Head office employment there grew from 51,400 in 1999 to 56,000 in 2002, a 9.0% increase. In contrast, Montréal's head office employment fell from 37,100 to 34,600, a 6.8% decline.

In Western Canada, Calgary established itself as the leading head office centre in 2002, supplanting Vancouver.

Calgary's head office employment increased from 12,000 to 16,200 (+35%) between 1999 and 2002, while Vancouver's employment fell 16% from 17,300 to 14,500.

The research paper Hollowing-out, Trimming-down or Scaling-up? An Analysis of Head Offices in Canada, 1999-2002 (11F0027MIE2003019, free) is now available online. From the Our products and services page, under Browse our Internet publications, choose Free, then National accounts. More information on papers related to economic geography is also available online (/english/studies/eaupdate/geo.htm).

For more information, or to enquire about the concepts, methods or data quality of this release, contact John Baldwin (613-951-8588) or Mark Brown (613-951-7292), Micro-economic Analysis Division.