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Section F: Gross National Product, the Capital Stock, and Productivity

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Robert B. Crozier,   Conference Board of Canada

National Income and Expenditure and Related Aggregates, 1926 to 1976 (Series F1-152)
National Income and Expenditure and Related Aggregates (Series F1-152)
Income Produced and Capital Formation before 1926 (Series F153-182)
Stock of Business and Social Capital at Mid-year, and Inventories at Year-end, (Series F183-224)
Real Domestic Product, by Industry, (Series F225-240)
Indexes of Labour Productivity and Unit Labour Cost, (Series F241-294)

The statistical data of this section are in five subsections. They contain data on national income and expenditure and related aggregates from 1926 to 1976 in series F1-152; on income produced, by industry, from 1919 to 1926 and on gross capital formation from 1901 to 1930 in series F153-182; on the stock of tangible capital from 1926 onwards in series F183-220 and on inventory book values in series F221-224; on real gross domestic product by industry in series F225-240; and on indexes of labour productivity in series F241-294.

The arrangement of this section differs somewhat from that of most of the other sections in that the first two tables on national income and gross national product, on the one hand, and gross national expenditure, on the other, for the period 1926 to 1976, are not immediately followed by data on national income or income produced for the period preceding 1926. The reason for the different arrangement is that all the data in series Fl-152 are articulated in the sense that each set of series is consistent with, or can be easily reconciled with, the other data of the subsection. Therefore, these data form a logical group.

The following official publications were used as sources of material: Statistics Canada, National Income and Expenditure Accounts, Volume 1, the Annual Estimates 1926-1974, (Catalogue 13-531); National Income and Expenditure Accounts, Volume 3, A Guide to the National Income and Expenditure Accounts: Definitions, Concepts, Sources and Methods, (Catalogue 13-549), hereafter referred to as Volume 3; Fixed Capital Flows and Stocks, 1926-1973, (Catalogue 13-211) and subsequent volumes in the same series; Indexes of Real Domestic Product by Industry of Origin, 1935-1961, (Catalogue 61-505) and Indexes of Real Domestic Product by Industry, 1961-1969, (Catalogue 61-510), plus subsequent volumes in the same series; and Aggregate Productivity Measures, (Catalogue 14-201) plus Indexes of Output per Person Employed and per Man-Hour in Canada, Commercial Non-Agricultural Industries, 1947-1963 (Catalogue 14-501) and subsequent updates to these publications.

Two privately available sources were used: K.A.H. Buckley, Capital Formation in Canada, 1896-1930, (Toronto, University of Toronto Press, 1951); and some unpublished material provided directly by Statistics Canada from an unpublished private memorandum by D.H. Jones.

The tables are available as comma separated value files (csv). They may be viewed using a variety of software. You may have to create an association between your software application and the csv files. The pdf files should be used to verify table formats. For example, footnotes appear in a column to the right of the cell they reference in the csv files; while in the pdf files footnotes appear as superscript numbers.

General Note

In contrast with other sections of this volume, detailed descriptions of the concepts and methods of estimation for most of the data of this section are found in a small number of readily accessible sources. A lengthy description of such concepts and methods for the data of the national accounts for 1926 to 1974 is found in Statistics Canada, Volume 3. Likewise, descriptions of concepts and methods used in the capital formation estimates can be found in Statistics Canada publication, Private and Public Investment in Canada, 1946-57, and the report of the Department of Trade and Commerce, Private and Public Investment in Canada, 1926-51. In addition, much of the comment on the development of estimates of construction expenditures, given in Section S, Construction and Housing, in this volume, applies to all fixed capital formation. The material on the capital stock and the explanation of concepts and methods (with the exception of inventory stocks) come from various issues of the Statistics Canada report, Fixed Capital Flows and Stocks, 1926-73 (Catalogue 13-211). Because of the accessibility of this limited number of sources and of the general familiarity of users with the concepts of the national accounts, the general description of concepts is made relatively short. Descriptions of the content of the various individual series are given, however, in sufficient detail for general use of the material.

The source volumes were used extensively for the descriptions given here, without explicit acknowledgment in each instance. Substantial parts of this text have been reproduced or paraphrased from them.

Since national income estimation draws on nearly the whole range of economic statistics, many segments of other sections of this volume are related closely to the data of this section. These data include: the distribution of labour income by industry and by province, Section E; detail of the current account balance of payments which appears in Section G; the implicit price deflators obtained in the conversion of gross national expenditure in current dollars to constant dollars, Section K; income in agriculture, Section M; capital formation in manufacturing by main groups, Section R; and some of the detail of construction expenditure, in Section S. Of the foregoing data, the industrial distribution of labour income and the implicit price deflators are taken from the National Accounts and hence are consistent with the totals of the national accounts. The remainder were modified slightly for national accounts purposes. There are also other data, in several sections, related to but not explicitly adjusted to concepts and methods used in preparing the national accounts.

The data of this section are, with one exception, national totals, whether the particular series is a component of some larger aggregate or a grand total. For example, each component of gross national product in series F1-13, as well as each of the aggregates for national income and for gross national product, is a total for all Canada. The exception is series F91-102 which gives personal income by province.

In all data of this section Newfoundland is included from 1949 onward.

Revisions for the period 1962 to 1976 are incorporated in series F1-152. They were released in December 1977, in National Income and Expenditure Accounts, 1962-1976, (Catalogue 13-201).

National Income and Expenditure and Related Aggregates, 1926 to 1976 (Series F1-152)

General Note

The first estimates of national income of Canada, prepared by scholars in Great Britain, predate World War I. The history of the official preparation of national income estimates in Canada begins in 1919, with the publication of estimates for 1911 and 1918, prepared by R.H. Coats, Dominion Statistician, even though they appeared in a private publication, the Monetary Times Annual, 3 January 1919. Thereafter at intervals, estimates of national income, with limited component detail, were published by the Dominion Bureau of Statistics until World War II. In the meantime, D.C. McGregor in 1934, the Bank of Nova Scotia in 1935 and later years, and the research staff of the Rowell-Sirois Royal Commission on Dominion-Provincial Relations in 1939 and 1940 also published historical estimates.

The development of a comprehensive set of national accounts by the Dominion Bureau of Statistics, with all the now familiar detail, began at the end of World War II. The estimates in elaborated form were eventually carried back to 1926 with the use of concepts, methods and additional raw material that rendered the earlier estimates obsolete. The earlier work was useful, however, in having resulted in the preparation and preservation of many data that were of great value for the revised estimates. A description of the historical background and of the uses and applications of the national accounts in Canada is given in, Volume 3, pp. 21-29.

Gross national product is defined as the value of the unduplicated total of all goods and services produced in a given period by Canadian residents. It can also be regarded as a money measure of the income and other costs generated in the production of these goods and services. Gross national product is 'gross' because it is a measurement of output before any allowance is made for capital consumption, the using up of capital in the form of depreciation, obsolescence, fire loss and the like during the period for which output is measured. The basic measurement is made in terms of the prices at which these goods and services are valued in the market in the period in which they are produced, though for some purposes measurement is made in constant dollars, the dollars of some base period. The period of measurement for all the data given here is a year. Statistics Canada also publishes quarterly data which are available as far back as 1947.

National income is the total of all income paid to or accruing to Canadian residents for the services of factors of production owned by them. In it, property income is a net measurement after making provision for capital consumption. The addition to national income of indirect taxes less subsidies and of capital consumption allowances and miscellaneous valuation adjustments yields a total containing all the charges against gross national product as defined. In conformity with common practice, gross national product in Canada is calculated as the sum of the three foregoing items.

Gross national expenditure at market prices is also a measure of the value of all goods and services produced by Canadian residents in a given period, but it is arrived at by tracing and adding together all final sales of the national output to final purchasers, making allowance for any unsold economic production which takes the form of additions to inventory stocks. Conceptually it is exactly equal in size to gross national product.

Canadian residents are defined as both individuals and institutions such as government agencies, corporations, and non-profit institutions which are normally resident in Canada. Canadian tourists and commercial travellers travelling abroad and members of the Canadian diplomatic service or official missions and of the armed forces abroad are treated as Canadian residents. Their counterparts from other countries, temporarily in Canada, are not treated as Canadian residents.

Underlying the derivation of gross national product and expenditure is a vast network of transactions which reflects the flows of income and expenditure taking place among different parts or sectors of the economy. In the organizing framework of the national accounts, the economy is viewed as consisting of four separate groups of transactors or sectors. These are: persons, governments, businesses, and non-residents; each representing a class of transacting unit which is separately distinguishable from other groups of transactors on the basis of the particular role or function which each group occupies in the operation of the economy. The personal or household sector is essentially concerned with the transactions of members of the community in their capacity as final consumers. The government sector is focused around the transactions of the public authorities (all levels of government) as they relate to taxation and public expenditures. The business sector encompasses that group of transactors who produce goods and services for sale at a price which is calculated to cover costs and yield a profit (this profit-motivated group of transactors produces the bulk of the nation's output). All three of these sectors or group of transactors are motivated and behave in ways which are relatively homogeneous within groups but are essentially quite different between groups. This principle of homogeneity of transacting groups from the standpoint of motivation and behavior is the basic idea behind the division of the economy into separate sectors.

The fourth sector, the non-residents sector, groups together the transactions taking place between Canada and the rest of the world. In this particular instance, the principle of grouping together transactors in accordance with the similarity of their economic behavior and motivation cannot be followed. This is because the transactors involved are in reality the business, personal and government sectors of the national economy and the economies of the rest of the world. The motivation and behavior of these sectors are different, regardless of whether the transactions take place internally or with the rest of the world. The treatment of setting up a separate sector to show transactions with non-residents simply meets the practical test of facilitating the analysis of economic inter-relationships in these accounts.

The transactions of each one of these four sectors of the economy can he broken down into an income and outlay account, and a capital finance (saving and investment) account. These accounts can, in turn, be recombined and consolidated to yield the gross national product, the gross national expenditure, and the capital finance account for the economy as a whole. The complete system of sector accounts is not given in the tables in this section, but the personal income and outlay account is shown, as well as the revenue and expenditure transactions of the government sector. In addition, a consolidated capital finance account for the economy as a whole is shown. For a fuller description of the logic of the sector accounts, see Statistics Canada, Volume 3, Chapter 4.

There are two basic types of transactions distinguished in these accounts, transactions which take the form of requited payments involving a two-way exchange between transactors, in which there is compensation, and transactions which take the form of unrequited payments involving a unilateral transfer in which there is no compensation.

Requited payments fall into three classes: payments for goods and services received (for example, personal expenditure on consumer goods and services); payments to factors of production (such as, wages and salaries, profits and rents); and payments in exchange for financial assets (for example, lending involving the acquisition of bonds and mortgages, or direct purchases of equity stocks). Transactions of the last class, financial assets, appear in the national accounts only in the capital finance accounts, as consolidated net lending or borrowing.

Unrequited transactions, or 'transfer payments', are divided into two classes: current transfers, involving a redistribution of incomes earned in the course of current production (for example, welfare-type transfers from governments to persons, or tax transfers from persons and businesses to governments); and capital transfers. Almost all transfer payments in these accounts are 'current' transfers. However, one class of transactions, migrants' funds and inheritances (both receipts and payments), are defined as capital transfers since they are more closely identified with transfers of accumulated wealth than with transfers of current income from productive activity.

Only requited payments in the form of payments to factors of production or payments for goods and services enter into the gross national product and expenditure. Such requited transactions measure, on the one hand, the incomes generated in the course of current production and, on the other hand, the sale of this production to final users. Unrequited payments in the form of current transfers simply represent a redistribution of the incomes earned in current production and do not add to the total of the national income.

Attention is drawn to a few of the conventions followed in the construction of the national accounts.

First, the personal sector covers consumers and savers, in addition to individuals and families, in their capacity as income receivers; private non-commercial institutions and private pension funds. Private non-commercial institutions are bodies whose service charges are not expected to cover expenses and include universities, labour unions, professional organizations, fraternal societies and charitable institutions. These institutions are, in effect, treated as associations of individuals. Their operating expenditures are included with personal expenditure, their investment income is included with investment income of persons, and gifts to them from government and business are treated as transfer payments to persons. In the following notes, the word 'persons' is to be interpreted as meaning the 'personal sector' as described in this paragraph.

Second, personal insurance with all insurance companies, in their strictly insurance operations, is regarded as having two aspects. The contribution to output of various types of insurance services purchased by persons (life, accident, theft, personal property, casualty and automobile) cannot be measured by simply taking the premiums for such insurance as equal to the value of the insurance service, since the premiums include moneys to be disbursed in the form of claims either in the same year or in future years. Since the premiums paid and the claims received constitute to a large extent simply a redistribution of income within the persons and unincorporated business sector, both premiums and claims are ignored in these accounts. The value of the service of the institutions which facilitate this process of redistribution is measured by their administrative expenses, that is, premiums minus claims, which are included in personal expenditure on consumer goods and services.

Life insurance companies and fraternal societies have, however, an additional characteristic which must be considered in their treatment in the accounts. These institutions not only redistribute income of persons; they also perform a saving function on behalf of persons. The personal savings accumulated in the life insurance group give rise to investment income which accrues on behalf of individuals. In order not to omit this investment income from the income of this sector, life insurance companies are treated as 'associations of individuals' insofar as their investment function is concerned. Their investment income is included in the 'interest, dividends, and miscellaneous investment income' of the personal sector. The administrative expenses of life insurance companies include the investment expenses of these companies, that is, a 'fee' which persons pay to the insurance companies for the management of their investments.

Third, banks and similar institutions render services to persons without specific charge. They recover the cost of these services from the excess of interest received on their own loans and investments, over payments of deposit interest. An imputed amount equal to the value of these services is included in both personal income and national income and expenditure. Deposit interest paid to persons is also included as a part of personal and national income. In this aspect of their operations, banks are treated somewhat like associations of individuals.

Fourth, in common with the practice of nearly all countries which have a highly developed market economy, the measurement of gross national product and expenditures covers mainly provision of goods and services through transactions in markets. But there are exceptions. Income in kind of farmers and of employees in non-farm sectors is included in both income and expenditure. Imputed income and expenditure on owner-occupied homes and imputed capital consumption allowances on them are also included. The current operation of these owner-occupied buildings is regarded as taking place in the business sector, however, and all capital consumption allowances are allocated to it. While owner-occupied residential construction is included with business gross fixed capital formation, government building construction is included with government capital formation.

Fifth, the operation of extra-budgetary government funds, such as those of the Unemployment Insurance Commission, Workmen's Compensation and the Canada and Quebec Pension Plans, are consolidated in the government account.

Finally, government enterprises that operate mainly on a commercial basis, meeting their operating expenditures from the sale of goods and services, are included with the business sector and only net profits and interest on advances or loans to them are credited to government receipts. Their capital expenditure is also classified as business gross fixed capital formation.

The raw material for constructing the national accounts is drawn from a major part of all economic statistics. Much of it appears in other sections of this volume. The source material becomes progressively better from earlier to later years, less improvisation in its use is needed and the final estimates become correspondingly more accurate.

Five main categories of estimating techniques are used, either separately or in combination. First, a substantial part of the final data is obtained more or less in the form required from annual surveys or reports frequently covering the whole period, or, in other cases, only the later years. Relatively little manipulation of the data is required to obtain the final estimates. Second, some of the data are available in fairly full coverage in the form desired for benchmark years. Interpolation or extrapolation to other years is made by use of related but less complete data. Third, the estimates may be built up by combining data on quantities of goods and services with their prices in unit value or index form to obtain a value estimate. In some cases, the price and quantity data are those actually desired; in others, particularly for price series, data for closely related items are used. Fourth, some of the income data, particularly for unincorporated business, are estimated by construction of synthetic operating accounts, income being obtained by subtracting expenses from gross income. Fifth, certain incomes are obtained by their calculation as a percentage of some larger total.

The general method used in the preparation of the labour income estimates consists of calculating the payments made on the labour account by the various industrial groups and summing the results. In recent years, by far the greater portion of the estimate is based on monthly and annual sample or full-coverage surveys conducted by Statistics Canada, the decennial and quinquennial censuses of Canada, and published statements of governments. In areas where the annual coverage is incomplete, the problems of estimation are more difficult, and greater reliance must be placed on directly related data. In such cases, benchmark estimates are developed from the decennial censuses of population, agriculture and distribution, and interpolation or projection techniques are employed to obtain estimates for intercensal years using indexes of aggregate earnings, employment and wage rates from various sources. In a number of cases, methods of estimation have had to be devised from indirect evidence, but such instances are few and, in the aggregate, quite small.

In recent years, a major new source of information has become available in the labour income field. This consists of the tabulation of total wages and salaries from 'T4' forms submitted by employers with respect to employees' earnings, undertaken by the Department of National Revenue in connection with the administration of the Canada Pension Plan. This information has been available on a regular basis since 1966. The coverage is very comprehensive and closely approximates the total of wages and salaries as required for national accounting purposes. This new information has revealed that the estimates prepared by Statistics Canada on the industry-by-industry basis were somewhat understated and since 1966 this material has served to provide a control for the total labour income estimate. The data for all years from 1947 to 1966 have also been adjusted to compensate for this undercoverage.

The value of board and lodging (income in kind) received by employees is estimated separately for industries where they are important. In agriculture, census benchmark data are adjusted to arrive at estimates for intercensal years in accordance with changes in employment and farm living costs. In forestry, income in kind is estimated, from 1944 on, on the basis of data from annual surveys. The 1944 benchmark is projected back to other years on the basis of an index combining food prices and employment in logging. In other groups, such as water transport, hospitals, religious institutions and domestic service, similar techniques are employed. Income in kind consumed by farm proprietors is not a part of the labour income estimates but is included with accrued net income of farm operators from farm production. Food and clothing supplied to the Canadian forces are a form of employee income, but are included under military pay and allowances.

Supplementary labour income, that is, employers' contributions to pensions, social insurance and welfare funds on behalf of employees are also estimated separately by industry. For the period 1926 to 1960, contributions to pension and welfare funds in manufacturing, electric power, trade, mining and telephone industries were based on a survey made in 1944 and projected to other years on the trend of total wages and salaries in each industry. Figures for pension contributions after 1946 and for welfare contributions after 1954 were obtained from Taxation Statistics, published by the Department of National Revenue. In steam railways, insurance, banking, and federal and provincial governments, the estimates of employer contributions were made available through correspondence, through annual surveys, or from publications of the agencies concerned. For municipal governments, estimates for the years 1938 to 1944 were based on an analysis of financial statements of a number of larger cities, and since 1945, on questionnaires collected by Statistics Canada.

For the period since 1960, employers' contributions to pension funds, except those to the Canada and Quebec Pension Plans, are derived from Statistics Canada's Trusteed Pension Plans, Financial Statistics, (Catalogue 74-201), supplemented by data from annual surveys conducted by Statistics Canada. Employers' contributions to the Canada and Quebec Pension Plans are obtained from the tabulation by the Department of National Revenue of employers' taxation reports. Employers' contributions to welfare funds for the 1961 to 1964 period are derived by industry, mainly from Taxation Statistics supplemented by data obtained from annual surveys conducted by Statistics Canada, with projections to date based on the movement of wages and salaries.

Employers' contributions to the Unemployment Insurance Fund are obtained from data supplied by the Unemployment Insurance Commission. Employers' contributions to Workmen's Compensation Funds are obtained from the reports of the Workmen's Compensation Board in each province.

The estimates of corporation profits are based essentially on data compiled from the financial statements of corporations filed with the Department of National Revenue under the Income Tax Act, or, in the years since 1964, on tabulations of corporation financial data undertaken by Statistics Canada in collaboration with the Department of National Revenue under the Corporations and Labour Unions Returns Act.

During the period 1944 to 1964 inclusive, the Department of National Revenue compiled corporation financial statistics from the 'T2' income tax returns filed by corporations under the Income Tax Act. These statistics were published in the Department of National Revenue annual report, Taxation Statistics, and constituted the basic source of the data on corporation profits entering the national accounts for the period 1944 to 1964. For the period prior to 1944, a special sample study of corporation financial statistics was undertaken within the Department of National Revenue, drawing upon income tax records. The results of this sample study have provided the basic source of information on corporation profits for the period 1926 to 1944.

The Corporations and Labour Union Returns Act, passed in 1962, created an additional requirement to those imposed by the Income Tax Act for the reporting of financial data by a substantial number of corporations in Canada. This involved considerable duplication of the tabulations of corporation financial data already being carried out by the Department of National Revenue. In order to prevent this duplication, legislation was passed that enabled a joint statistical operation to be undertaken. An amendment to the Corporations and Labour Unions Returns Act in 1965 relieved corporations from filing financial statements under the Income Tax Act. At the same time, access to corporation income tax returns was made available to the Chief Statistician of Canada.

Commencing in 1965, Statistics Canada began publication of Corporation Financial Statistics, (Catalogue 61-207), and Corporation Taxation Statistics, (Catalogue 61-208), which in combination replace and extend the annual information on corporation statistics previously available in the Department of National Revenue reports. These two publications now constitute the basic source of information for estimating corporation profits as entered in the national income and expenditure accounts. All of the profits estimated since 1965 are based on these sources.

Interest and miscellaneous investment income is divided between that received by or accruing to persons on the one hand and governments on the other. Income of this kind received by corporations is reflected in profits. Investment income of farm operators and most other unincorporated business, from outside their own businesses, is included with personal investment income. Dividends received from Canadian corporations are not included since corporate profits are calculated before dividend payments.

Basic sources of data for estimating investment income received and paid by businesses and government are found, for all years, in Taxation Statistics and the corporate sample study (see above); in reports of the Superintendent of Insurance for Canada for federally registered insurance companies, loan and trust companies, and fraternal and mutual benefit societies; in the reports required of provincially-registered loan and trust companies and fraternal societies, particularly in Ontario and Quebec; in material on credit unions, assembled by the federal Department of Agriculture; in federal and provincial public accounts and departmental and agency reports. In addition, the Central Mortgage and Housing Corporation, in operation since the end of World War II, has collected much information on mortgages, housing and housing rentals.

Personal investment income is in most cases calculated for each of its various categories as a residual. First, estimates of total net interest and like payments are made. Then that portion paid to business and government is calculated. The remainder is then assigned to the personal sector.

The calculation of net farm income of unincorporated farmers from farm production is described in Section M. Adjustments for national income purposes are explained in the notes to series F6 of this section.

Net income of non-farm unincorporated business consists of the earnings of working proprietors from their own businesses. Such businesses are 'unincorporated' as distinct from the corporate form of organization. The estimates represent a mixture of labour and investment income that cannot be segregated on anything but an arbitrary basis. To the extent that working proprietors supply their own labour, they earn wages and salaries: to the extent that they supply their own capital, they earn profits, interest and rents. These elements are inextricably mixed in the estimates of the net income field. The net rental income of persons is also included here in order to consolidate all forms of income from non-farm unincorporated business activity in a single category.

The methods of estimating net unincorporated business income can be classified broadly into four main groups: the synthetic operating account method wherein estimates of gross income are obtained and brought to a net basis by subtracting expenses; the ratio method wherein estimates of gross income are obtained and brought to a net basis by the application of a ratio of 'net to gross income' based on survey or income tax data; direct enquiry; projection from benchmark data. In a number of the industrial groups, a combination of two or more methods is required to complete the series back to 1926. To a considerable extent, information in the net income field is of a fragmentary nature and for this reason a number of the estimates are in some degree arbitrary.

The estimates themselves can be grouped under three broad headings: net professional income, net income of other unincorporated non-farm businesses and net rental income of persons.

Net professional income includes independent professional practitioners such as doctors, dentists, lawyers and engineers. In general, the estimates for the more recent years are obtained by multiplying average net income by the number of independent practitioners. For the earlier years, the estimates are projected on related data.

An example may serve to illustrate the methods used in this area. From 1957, the average net income of independent doctors is obtained from Earnings of Physicians in Canada which was first published in that year by the Department of National Health and Welfare. For the years 1947 to 1956, average net income is obtained from Taxation Statistics. Average net income for the years 1939, and 1944 to 1946, is obtained from the Survey of Incomes in the Medical Profession in Canada, conducted by Statistics Canada in 1939, 1944, 1945 and 1946. For the years 1938, and 1940 to 1944, average net income is estimated on the basis of dentists' average gross income obtained from Survey of Incomes in the Profession of Dentistry, 1941-44 and adjusted for expenses by the ratio of 'net to gross income' obtained from the survey of the medical profession.

The number of active independent doctors in Canada is obtained, for the years 1941 to 1956, from surveys carried out by the Department of National Health and Welfare since 1946, linked to a census benchmark for the 1951 Census, and extrapolated to the years 1941 to 1945, on the trend of medical graduates from universities. For the years 1938 to 1941 the number is obtained on the basis of the decennial censuses of 1931 and 1941. The figures are adjusted to exclude salaried doctors and doctors in the Canadian forces.

The non-professional unincorporated business group covers a heterogeneous range of industries. Little actual information on net unincorporated income in these industries is available for many of the years covered by this report. For the most part, the estimates rest upon directly related material but in a number of cases indirect information is used.

Rental figures are reflected on both the income and expenditure sides of the national accounts. On the income side, net rental income of persons and unincorporated businesses, including imputations for owner-occupied dwellings, are consolidated with and shown as part of 'net income of non-farm unincorporated business, including rent'. Net rental income of corporations is implicitly included in corporation profits. The facility and space expenses deducted in arriving at residential net rents are included implicitly in the other components of gross national product. On the expenditure side, gross rents on residential tenant-occupied dwellings and an estimate of gross imputed rents on owner-occupied dwellings are explicitly included in personal expenditure on consumer goods and services. Non-residential rents, which are business expenses, are reflected in the price of products sold and therefore in the gross national expenditure.

The calculation of the net rent estimates of persons and unincorporated businesses is divided into three parts: non-farm rents, residential; non-farm rents, non-residential; farm rents, both residential and non-residential.

Of these three classes, the first is the most important in size and is also the one for which statistical coverage is the most satisfactory. Residential non-farm rents, including garages, are divided into rents paid on tenant-occupied dwellings and rents imputed on owner-occupied dwellings. The steps used in both cases are similar and can be outlined as follows:

Gross paid rents

Less: expenses of facilities supplied by landlords and included in paid rent;

Equals: gross space rent paid by tenant occupants;

Plus: gross space rent imputed to owner occupants;

Equals: gross paid and imputed rent for space;

Less: space expenses for tenant and owner-occupied dwellings: repair and maintenance, municipal property taxes, depreciation, insurance premiums and mortgage interest;

Equals: net paid and imputed rents;

Less: net rents paid to non-personal sectors;

Equals: net rent paid and imputed, received by individuals.

The basic data sources from which these estimates are calculated vary considerably but they include information from Central Mortgage and Housing Corporation, the Construction Division of Statistics Canada, reports of the Superintendent of Insurance and family expenditure surveys conducted by Statistics Canada.

Imputed returns for services provided without direct charge by banks and other financial institutions are made from their operating expenses.

Indirect taxes and subsidies are from the public accounts and department and agency reports, all available annually.

Depreciation allowances were obtained directly from annual data for private incorporated business and government enterprises and, less directly, for the remaining part. Information on corporate depreciation as it applies to the stock of business plant and equipment (non-residential construction and machinery and equipment) is obtained essentially from the same sources as the estimates of corporation profits which were discussed earlier in this section. For the years prior to 1944, the results of a special corporation sample study were used. For the years from 1944 to the mid-1960s, the estimates are based on information from Taxation Statistics up to that time. For the more recent years, the figures are based for the most part on corporate depreciation as published in Corporation Financial Statistics, (Catalogue 61-207), and Corporation Taxation Statistics, (Catalogue 61-208). Other sources of information include Financial Institutions, Financial Statistics, (Catalogue 61-006), and Industrial Corporations, Financial Statistics, (Catalogue 61-003).

While most of the basic data is available from the abovenoted sources, in some instances additional sources were drawn on. In the case of banks, the estimates are based on published reports of the chartered banks; estimates of depreciation on real estate holdings and equipment owned by insurance companies are based on reports of the Superintendent of Insurance; and depreciation on co-operatives is derived from information from the Department of Agriculture.

Information on depreciation in the persons and unincorporated business sector comes from a variety of sources. The replacement cost estimates of capital consumption in agriculture are calculated by the Agriculture Division of Statistics Canada and form an item of expense in the synthetic operating account from which estimates of farm net income are derived. The replacement cost estimates of capital consumption on housing are based on estimates of fixed reproducible capital at market value made by the Construction Division of Statistics Canada. The historical cost estimates for other unincorporated businesses, including independent professional practitioners, are built up industry by industry, using data obtained from tabulations of the Department of National Revenue. The claim portion of business and residential insurance, the largest part of the miscellaneous valuation adjustments, is based on information from reports of the Superintendent of Insurance.

Methods similar to those used in calculating incomes are used on the expenditure side. Government expenditure comes from public accounts and department and agency reports. The estimation of private construction expenditure is dealt with in Section S; gross expenditure on machinery and equipment, the other component of business gross fixed capital formation, is obtained by methods very similar to those used for construction. The estimation of exports and imports is described in Section G.

The estimates of personal expenditure on consumer goods and services are calculated under three broad categories: personal expenditures on commodities or goods, personal expenditures on services and net personal expenditures abroad.

The method of estimating consumer spending on goods involves a number of procedures in which basic primary data on total retail sales are adjusted and supplemented by data from other sources, to build up an estimate of total consumer outlays for goods consistent with the concepts and definitions of these accounts. For the period since 1947, benchmark values of total retail sales are first established from the censuses of merchandising and services for the years 1951, 1961 and 1966. To these totals are added estimates of the value of commodities purchased by individuals through non-retail trade outlets. The totals thus obtained are then broken down into appropriate trade groupings: shoe stores, furniture and appliance stores, hardware stores, clothing stores, grocery and combination stores and so forth. The sales of each one of these trade groupings are then adjusted where necessary to remove non-personal commodity purchases at retail, for example, business purchases of new passenger cars, commercial vehicles, auto parts, and oil, gas and grease, which should not be included in personal expenditure; and to remove receipts for services sold at retail, which should not be included in personal expenditures on goods. In addition, a deduction is made to adjust for the trade-in value of used goods. Further adjustments are made to remove the sales of commodities which are only partially or inadequately reflected in retail sales in order that more complete estimates can be derived independently and added back, for example, sales of alcoholic beverages and tobacco.

Each of the major trade groups derived as above is in turn broken down into various commodity groupings: food and non-alcoholic beverages, men's and boys' clothing, footwear and repair, household appliances, furniture and carpets, books, newspapers and magazines, drugs and sundries, and so forth. In the majority of cases, except where independent commodity estimates are made, these trade groups are broken down into their commodity components using the commodity distribution of retail trade establishment sales from the 1951, 1961 and 1966 censuses, together with data from a retail commodity survey taken in 1968. The commodity distribution of sales made through non-retail outlets is also based on census data and on annual surveys.

For the non-census years, annual estimates of consumer spending on goods are derived essentially by taking the census benchmark figures of sales for each trade group as estimated above, and interpolating or projecting the figures using the movement of sales of equivalent kind-of-business groupings found in the annual retail trade publications published by Statistics Canada. A large amount of annual information on retail sales is available from these sources. Matching this annual information to the census benchmark trade groups and then carrying the benchmark estimates forward, or interpolating, on the basis of the change in the relevant annual series, provides the principal means of deriving annual estimates of consumer spending on goods by major retail trade groups. For the non-retail trade groups, census benchmark estimates are interpolated or projected to non-census years on the basis of data from a variety of sources: surveys of wholesale and service trade, annual surveys of direct selling and surveys of vending machine sales.

The annual estimates of consumer spending on goods by major trade groups calculated as above are then broken down to yield sales by major commodity groups. For the most part, these breakdowns are based on information from the regular annual retail trade surveys, combined with census estimates of the commodity detail of sales of goods.

Personal expenditure on services includes the value of services rendered directly to individuals as distinct from those rendered to business or to government. For many classes of services, a preponderant proportion of total revenue is represented by sales to individuals and the presence of business services is not an important source of error. In those classes where sales to business or government form an important part of total revenue, for example, air transportation, telephone service, data as to the amount of such sales are not always available and arbitrary allowances must be made.

For certain classes of services, annual surveys, or published reports of Statistics Canada and other agencies give information regarding personal expenditure. Other groups depend upon the decennial censuses and the 1966 Census of Merchandising and Services, with projections to other years being made on directly related series. In some cases, benchmark estimates are taken from census data but projections must be made on indirect evidence regarding trends. In a considerable number of cases, the estimates are explicitly articulated with calculations on the income side.

As already noted, services of private non-commercial institutions (universities, charitable institutions and so on) are measured by the expenses of these institutions rather than by the fees paid by individuals. Services of insurance companies are also measured by their expenses.

An adjustment for net personal expenditures abroad is necessary to include, in personal expenditure, the expenditures of Canadian residents in foreign countries and to exclude the expenditures of non-residents in Canada. The adjustment covers net expenditures of members of the Canadian forces, as well as net tourist expenditures. To the extent that gifts in kind sent abroad do not appear in retail sales, for example, Red Cross parcels, an estimate of their value is also added. An arbitrary adjustment is made to Canadian tourist expenditures abroad to exclude expenditures chargeable to business expense accounts. The basic data are obtained from the Balance of Payments Division, Statistics Canada.

Inventory holdings consist of non-farm business inventories plus inventories held on farms and grain in commercial channels. Estimates of annual book values of non-farm business inventories for the majority of industries are available, for current years, from annual censuses or sample surveys carried out by the Manufacturing and Primary Industries Division, the Merchandising and Services Division and the Business Finance Division of Statistics Canada. When these data are inflated to full coverage for the relevant industries, by the use of inventory-to-production or inventory-to-sales ratios, they account for between 80 and 90 per cent of total inventory book values. Estimates for the remaining industries are based on data from a range of other sources including special tabulations in Statistics Canada, summaries of taxation statistics by the Department of National Revenue and the published annual reports of companies. For earlier years, mainly before 1944, sources include a special corporation sample study analysis of the records and reports of the Industry Statistics Branch of Statistics Canada and projections from annual and decennial census data.

In general, before 1947, year-end holdings of inventory are reported on a fiscal year-end basis. Since 1947, data are available for the manufacturing industry which permit adjustment to a calendar year basis. New sample surveys, introduced to cover the years from 1954 onward, for wholesale and retail trade permit more comprehensive coverage of these groups on a calendar year basis.

For inventories held on farms and grain in commercial channels, comprehensive figures on the quantities of physical stocks are available from the Agriculture Division of Statistics Canada. These are valued at appropriate prices, as indicated below, and the value of the physical change is calculated directly. The value of the physical change in inventories of field crops on farms is computed on the basis of annual changes in physical quantities valued at average annual prices for the years 1926 to 1946 inclusive. From 1947 on, use is made of the sum of the physical change in each of the four quarters of the year, valued at quarterly average prices. The physical change in livestock and poultry held on farms is valued for all years on the basis of an average of three price quotations obtained from regular surveys, namely, December, June and December. The sum of the field crop, livestock and poultry estimates provides the total estimate of farm inventory change.

In the case of inventories of grain in commercial channels held by private dealers, the value of the physical change is calculated on the basis of average annual prices 1926 to 1946 and average quarterly prices from 1947.

National Income and Expenditure and Related Aggregates (Series F1-152)

Table F1-13 National income and gross national product, by components, 1926 to 1976. Opens a new browser window.

Table F1-13
National income and gross national product, by components, 1926 to 1976

Source: for 1971 to 1976, National Income and Expenditure Accounts, 1962-1977, (Catalogue 13-201); for 1926 to 1970, Statistics Canada, National Income and Expenditure Accounts, Volume 1, The Annual Estimates, 1926-1974, (Catalogue 13-531).

For methods of estimation, see the general note to series F1-152.

F1. Wages and salaries cover all of the earnings from employment of Canadian residents paid for work performed, including payments in kind such as free board and lodging. Also included are such payments as commissions, directors' fees, tips and bonuses, and taxable allowances such as cost-of-living allowances and allowances in respect of holidays and sick leave. The estimates do not include earnings from self-employment or partnership, income from independent professional practice, income of farmers from farming operations, or military pay and allowances. Wages and salaries are estimated before tax deductions and before contributions of employees to unemployment insurance, pensions and other social insurance schemes. Bonuses, commissions and retroactive wage increases are included in the period in which they are paid because of statistical difficulties of allocating these items to the period in which they were earned.

Supplementary labour income consists of other expenditures by employers on labour account that can be regarded as payment for employees' services. Included here are employers' contributions to pension funds, employee welfare funds, unemployment insurance and workmen's compensation.

F2. Military pay and allowances consist of payments to members of the Canadian forces in Canada and overseas and are treated as compensation for services rendered. Under this heading are included military pay, various types of allowances and employer contributions to the Canadian Armed Forces Pension Fund. War service gratuities and all post-discharge re-establishment benefits are excluded and treated as transfer payments. Prior to 1966, the estimated value of food and clothing issued in kind is also included. Since 1966, the amounts involved have been small.

F3. The estimates of corporation profits before taxes used in the national accounts are closely based on business accounting practice as reflected in business 'book profits'. However, a number of adjustments are needed to convert data drawn from business accounting records to a basis compatible with national accounts concepts and definitions. For the most part, these adjustments relate to the treatment of items which are charged as operating expenses by business but which are not regarded as a charge against production as measured by the national income. Thus, depletion charges, which are treated as an operating expense on the books of business, are added back to net profits in these accounts. Discoveries of new natural resources are not capitalized in the accounts (they are not counted as a part of gross fixed capital formation) and the exhaustion of natural resources is not therefore regarded as a charge against national income. Provincial mining and logging taxes, which are treated as an operating expense by business, are also added back to profits in these estimates. They are defined in the accounts as direct taxes. Similarly, appropriations for losses of chartered banks are added back to profits and national income since they are not considered a charge against current production. Bad debts owed by persons to corporations and written off on company books are treated in these accounts as a transfer payment from corporations to persons. An adjustment is therefore made to add back to net profits the amounts applicable. Charitable contributions made by corporations, also deducted as an expense by business, are added back on the grounds that they are not a direct cost of production but merely a distribution of earnings and, therefore, a transfer payment. All capital gains or losses of corporations are excluded, since these have no counterpart in current productive activity.

Mining development and exploration costs, which involve the acquisition of durable tangible assets, and construction and drilling costs, are included in the accounts as gross fixed capital formation. In some cases such costs are treated by business as current operating expenses and where this occurs the amounts must be added back to profits in the accounts. In other instances, costs such as geological and geophysical survey costs, which are not regarded as gross fixed capital formation in the accounts, are charged to capital account by business. In such cases, profits as reported by business must be reduced by these amounts before inclusion in the national income.

A variety of other adjustments are made to business book profits. All profit figures are adjusted from a fiscal to calendar year basis, insofar as this is possible. The profits of incorporated co-operatives are included as a part of corporation profits in these estimates. In addition, corporate losses are deducted from estimated total profits in order to bring the figures to a 'profits less losses' basis. It should be noted also that business accounting records include in book profits the dividends received from other Canadian corporations. An adjustment is therefore necessary to eliminate the double counting which this involves. Profits of government business enterprises are not included here but are included in series F5.

The profits of corporations as given in series F3 reflect income from interest on their holdings of the public debt and from consumer financing. Since these payments are treated as transfer payments, they must be eliminated in arriving at a total of national income. For the way in which this adjustment is made, see the note to series F5.

F4. Dividends paid to non-residents are deducted here in order to eliminate from corporate profits, and the national income, the earnings of non-resident factors of production. This deduction is required because the national income is defined to include only the earnings of Canadian factors of production. In principle, all earnings of non-residents, both distributed and undistributed earnings, should be eliminated from the national income. In practice, because of statistical problems, only that portion of profits which is actually distributed to non-residents, that is dividends, is eliminated. The undistributed profits of corporations which accrue to foreign owners are thus included as a part of the national income of Canada.

F5. Interest and miscellaneous investment income consists of the interest income of persons, and government investment income. These items are measured before deduction of direct taxes and cover the earnings of Canadian residents only. The component also includes a major adjustment needed to eliminate from the national income all interest on the public debt as well as the transfer portion of interest on consumer debt.

Interest income of persons includes the interest received by or accruing to persons (includes individuals, private non-commercial institutions, estates and trust funds); the interest income of life insurance companies, fraternal and mutual benefit societies and trusteed pension plans, accruing on behalf of persons; and small amounts of miscellaneous income. Interest paid to corporations and government business enterprises is automatically included in the profits of these institutions and is not counted here. Interest paid to government is included in government investment income.

Interest income of persons is thus made up of the following items: Canadian bond and mortgage interest received by or accruing to persons; paid and imputed interest on deposits with chartered banks and similar financial institutions, received by or accruing to persons; investment income received on behalf of persons by life insurance companies, fraternal and mutual benefit societies and trusteed pension plans (all of which are treated as associations of individuals for this purpose); interest and dividends received by persons from non-residents; and some smaller categories of income, namely, royalties received by persons, the interest credited to persons from federal government annuities accounts and the profits and interest of mutual non-life insurance companies.

Government investment income includes the profits of government business enterprises, royalties, interest on government loans and advances, interest on publicly held funds such as government pension and social insurance funds, and imputed interest. Profits of government business enterprises consist of profits, less losses, of those government agencies which conduct their activities on an essentially commercial basis, setting a price for their services which is calculated to cover costs. Included here are profits of the Canadian National Railways and other Crown corporations, and provincial and local public utilities such as hydroelectric systems, telephone systems, transit systems and so forth. The profits of the federal Post Office Department are included here, its gross expenditures being offset against its gross revenues to arrive at an estimate of profits. Interest on government loans and advances includes interest on loans to government agencies, such as various public utilities and interest on loans to foreign and domestic governments.

Interest on the public debt is made up of two parts. One part is paid to Canadian residents and is regarded as a transfer payment rather than as a payment to a factor of production for a productive service, and which is therefore excluded from the national income. In this instance, an explicit deduction is made in the interest and miscellaneous investment income component to exclude from the national income that portion of the interest received by Canadian residents. Not all interest on the public debt received by Canadians accrues to persons and governments but the full adjustment is nevertheless made in this component of the accounts. If it were statistically possible to identify the amounts, corporation profits as well as the interest income of persons and governments would each be reduced by their relevant share of the debt interest received.

The other portion requires special treatment. Such interest payments represent a direct claim by non-residents on the pool of goods and services produced domestically. Accordingly, an explicit subtraction is made to reduce the national income, an adjustment which reflects the charge against domestic production which must be paid to non-residents. This adjustment is balanced on the expenditure side of the accounts by an entry under 'Imports of goods and services'.

Part of the interest on consumer debt is also treated as a transfer payment and is excluded from the national income by an explicit deduction in the interest and miscellaneous investment income component. All consumer outlay is regarded as current consumption in these accounts, except outlay on housing which is regarded as capital expenditure. Since consumer goods, except housing, cannot give rise to investment income, it is necessary to exclude interest on the debt which finances such goods. The administrative expenses which are incurred in rendering services to borrowers are, however, included in personal expenditure and also in the gross national product.

F6. Accrued net income of farm operators from farm production includes the net income that could properly be attributed to unincorporated farm operators for their own contribution of labour and entrepreneurial inputs, for labour provided by unpaid family workers and for the services of farm capital, land, structures and equipment owned by farm operators, except housing. It covers sales of farm products, plus the imputed value of farm output consumed by the farmer and his family, plus the value of the physical change in farm inventory, less farm operating expenses and capital consumption allowances on farm buildings and equipment. Farm production includes the sale of logs cut from forests on farm lots and income from fur farming. It excludes, however, other forms of income of farmers such as net rental or interest receipts and inputed net rent of owner-occupied houses. These are included in series F5 and F7. It also excludes transfer payments such as payments under the Prairie Farm Assistance Act since these are not in exchange for goods or services and are therefore excluded from national income. Since the national income attempts to measure earnings arising out of current production rather than cash receipts, the accrued earnings of farm operators arising out of the operations of the Canadian Wheat Board are included as is the accrued income represented by inventories held on the farm.

The estimates given here do not include profits of incorporated farms, which are treated like any corporation, wages and income in kind paid hired labour, rent paid others for farm lands, buildings and other facilities and rents on housing. Also excluded is any outside income such as property income from ownership of outside property or labour income for services provided to others outside the operator's own farm.

The total given here, therefore, is much less than gross domestic product originating on farms, series F56, even after allowing for the fact that capital consumption allowances are included in the latter. Nor is it a measure of income available to farmers because it excludes rental income and other receipts of outside income.

F7. Net income of non-farm unincorporated business consists of the earnings of working proprietors from their own businesses. Such businesses are 'unincorporated' as distinct from the corporate form of organization. The estimates cover a heterogeneous range of industries which includes unincorporated retail stores, unincorporated operators in construction and in transportation and communication, unincorporated manufacturing establishments and many types of unincorporated service establishments. It also includes the net income of independent professional practitioners such as doctors, dentists, lawyers and engineers.

As in the case of accrued net income of farm operators from farm production, net income of non-farm unincorporated business represents a mixture of both labour income and investment income which cannot be segregated on anything but an arbitrary basis. To the extent that working proprietors supply their own labour, they earn wages and salaries; to the extent that they supply their own capital, they earn profits, interest and rents. These elements are inextricably mixed in the estimates of the net income field.

Net rental income of persons acting in a landlord capacity is included in these estimates. Such rental income covers net rents, either paid or imputed, received from the ownership of residential property, and also net paid rents from the ownership of non-residential property. In each case, the net rent received by persons is equivalent to gross rents received less landlord expenses such as heating costs, property taxes, capital consumption allowances, mortgage interest, insurance and repairs. The inclusion of net rental income of persons in this component of the national income consolidates all forms of income from non-farm unincorporated business activity in a single category.

F8. Inventory valuation adjustment is to correct for the fact that corporation profits and the net income of those non-farm unincorporated businesses that deal in commodities contain an element of capital gain or loss which arises from the method by which business firms record the value of their inventories. Production in the national income and expenditure accounts must be measured at the current market prices of the period in question. This means that net investment, or disinvestment, in inventories, represented by the change in inventories from one period to the next, should be valued at the average prices of the period in question. However, the principles of inventory valuation used in business accounting are usually quite different from those required for the accounts. In periods of rising prices, changes in recorded business inventory book values will frequently include an element of capital gain which simply reflects the fact that beginning-of-period inventories and withdrawals have been recorded at original cost, while purchases and end-of-period inventories are recorded at a higher price. In other words, the recorded money value of the 'book change' in inventories will have increased by more than the physical change in inventories valued at current, or replacement cost, prices.

In these circumstances, corporation profits and net incomes of non-farm unincorporated businesses included in national income will contain an element of capital gain, stock appreciation, which is not related to the measurement of current production and which is not consistent with the way in which other flows and transactions in the national accounts system are valued. The inventory valuation adjustment is thus designed to remove from the national income any such capital gains, or losses, resulting from the inventory accounting procedures of business firms.

The method of carrying out the inventory valuation adjustment is described in detail in Volume 3, Chapter 7. The adjustment represents the difference between the 'change in book values' as recorded on the books of business firms and the 'value of physical change', valued at the prices prevailing in the current period.

F9. Net national income at factor cost is the sum of all factor renumerations received by or accruing to Canadian residents from the contributions of services of the factors to production. It is the sum of the entries in series F1-8.

F10. Indirect taxes represent a part of the market price of goods and services which is not received by factors of production. They are, therefore, not included in the national income but must be added to factor costs to arrive at total costs entering into market prices. Business accounting procedures provide a guide as to whether a tax is to be regarded as direct or indirect. Thus, all taxes which represent a business cost and which are likely to be partly or fully reflected in final or market prices paid by the purchaser, such as sales and excise taxes, import duties, and property taxes, are taken as indirect. Such taxes make up a part of the producers' costs but they do not form a part of the income of the factors of production. In effect, they are taxes on expenditure, not on income. Taxes which are levied directly on the net incomes of the factors of production, whether of individuals or corporations, are regarded as direct taxes.

Indirect taxes include: customs import duties, federal excise duties and excise (sales) taxes, and miscellaneous small other federal indirect taxes; provincial government amusement taxes, corporation taxes (not on profits), gasoline and retail sales taxes, revenue from licences, permits and fees, the business share of motor-vehicle licences and permits, miscellaneous taxes on natural resources and small amounts of other miscellaneous indirect taxes; municipal real and personal property taxes, retail sales taxes, and miscellaneous other indirect taxes and licences, permits and fees.

Subsidies represent amounts contributed by governments toward current costs of production. For this reason, they must be deducted from factor costs to arrive at gross national product at market prices. The larger part of the subsidy figure consists of federal production and consumption subsidies. There are a variety of purposes, some of them inter-related, behind the payment of subsidies. Producer subsidies are usually made to encourage certain types of economic production (Emergency Gold Mines Assistance), to assist producers in areas of special difficulty (railway subsidies under the National Transportation Act), to protect the producer against a decline in the price of his product (Canadian Dairy Commission payments), or to support activities which are regarded as socially desirable (broadcasting activities of the Canadian Broadcasting Corporation). Consumer subsidies are usually paid in order that the consumer may benefit from lower prices, as in the case of many of the subsidies paid on agricultural products during World War II.

F11. Capital consumption allowances represent the using up or 'consumption' of capital through the depreciation, wear, tear and obsolescence associated with the processes of economic production. Since productive assets in the form of capital goods such as machinery and equipment and buildings are for the most part highly durable products, this 'using up' of productive assets, or loss in value, is a gradual process occurring over periods of time often covering many years. Businesses therefore customarily charge to each year's operating expenses a 'depreciation charge' or 'capital consumption cost' designed to cover the cost of the wearing out of capital assets which has occurred during the accounting period in question. Thus, depreciation or capital consumption charges represent business costs which are implicitly included in the market price of goods and services sold to final users.

In these accounts there are three major types of productive assets for which depreciation charges are calculated: business plant and equipment, housing, and government fixed assets. Depreciation on business plant and equipment is quantitatively the most important of the three sets of estimates. The estimates of depreciation in this area, except for agriculture, are based on the original cost of the assets. In the case of housing and government fixed assets, the estimates of depreciation are based on replacement cost and not original cost.

Charges for the depletion of exhaustible natural resources are not included in the consumption of fixed capital in these accounts, even though they are charged by business as operating costs. The discovery of such natural resources is not regarded as gross fixed capital formation.

The definition of gross fixed capital formation for the national accounts is framed in terms of the tangibility and durability of the goods in question. Certain durable items such as furniture, office equipment, tools and so forth are sometimes not capitalized by business but are charged as a current operating expense. In order to include depreciation on all durable equipment defined as fixed capital in these accounts, these capital outlays charged to current expense are included in capital consumption allowances in the gross national product. In other words, the assumption is made that these items are all used up in the year in which they are purchased.

Included under the category of miscellaneous valuation adjustments are two adjustments which are needed to bring information based on business accounting records into conformity with the definitions employed in the national income and expenditure accounts, or to maintain balance between the income and expenditure side of the accounts. The first of these adjustments concerns non-capital outlays charged to capital account by business. In some instances, non-tangible items such as brokerage fees on the purchase and sale of stocks and bonds are capitalized by business. In keeping with the tangibility criterion used in the accounts, such items are excluded from gross fixed capital formation on the expenditure side. In order to keep the accounts in balance, however, a negative adjustment must be made on the income side to offset the overstatement of business net income inherent in the income figures.

The second adjustment relates to the claim portion of business and residential insurance paid out to compensate for fire and other types of losses. These are treated in the accounts as a form of capital consumption and an explicit entry is made to account for them.

F12. Residual error of estimate is an allowance for inaccuracies of the statistical estimates of series F1-11. Conceptually, gross national product and gross national expenditure should be exactly equal. In the calculations, owing to shortcomings in the accuracy of estimates of the components of gross national product and gross national expenditure, the components of each do not add to exactly the same totals. The totals are made equal by adding half the difference to the lower unadjusted total and subtracting half the difference from the higher unadjusted total. Thus, series F13 is made equal in absolute value to series F32.

F13. Gross national product at market prices is the sum of series F9-13.

Table F14-32 Gross national expenditure, by components, 1926 to 1976. Opens a new browser window.

Table F14-32
Gross national expenditure, by components, 1926 to 1976

Source: same as series F1-13.

The items of series F14-30 are components of total gross expenditure by Canadian residents on final goods and services and on inventories. In this 'sum of expenditures' approach, the measurement of economic production is arrived at by tracing the disposition of final output through the various channels in which it is used. Series F29, exports of goods and services, is the value of goods and services sold to residents of other countries. Because of the fact that sales to final purchasers, both domestic and foreign, ordinarily include elements of imports of goods and services, foreign production, as well as of national production, and because it is not feasible to eliminate imports separately from each of the individual expenditure categories, the deduction to eliminate imports of goods and services is made in total as a single adjustment in series F30. Gross national expenditure at market prices is the total of gross expenditure on goods and services measured at the prices that are actually paid in the market.

F14. Personal expenditure on consumer goods and services is the largest single component of gross national expenditure. Around 60 per cent of the nation's total production is purchased in final markets for consumer use. Such outlays include personal expenditure for durable goods, such as automobiles, and household appliances and furniture; expenditure for semi-durable goods, such as clothing and footwear; expenditure for non-durable goods, such as food, alcoholic beverages and tobacco; expenditure for a wide variety of services, covering such outlays as gross rents, including the rental value of owner-occupied housing, recreation, railway, air and urban transportation costs, laundry, cleaning and personal care service costs.

Free board and lodging and other income in kind for which an imputation is made are also included in personal expenditure, as if persons received income equal to the value of such goods and services and then purchased these items. Purchases of houses are regarded as business gross fixed capital formation but an imputed space rent on owner-occupied houses is included in both rental income of persons and in personal expenditure. The operating costs of private non-commercial institutions which provide their services to the community collectively, and which are treated as 'associations of individuals' in these accounts, are also included in personal expenditure. In addition, the operating costs and profits, premiums less claims, of life insurance companies are included to reflect the value of the services rendered by such companies. The estimates also cover expenditures of Canadian residents temporarily abroad, that is, tourists and members of the Canadian forces; these expenditures are offset by a negative entry under imports of goods and services, so that gross national expenditure as a whole is not affected, as no Canadian production is involved. To avoid double counting, an adjustment is made to the total estimate of personal expenditure to deduct expenditures of foreign residents temporarily in Canada, since this expenditure is already included as a positive entry in exports of goods and services. The value of used goods sold to persons is excluded from these estimates but the dealer's commission and other factor incomes generated by the transaction are included as current production, to maintain balance with the income side.

F15. Government current expenditure on goods and services consists of the current, non-capital outlays for goods and services of the federal, provincial and local governments, including locally administered elementary and secondary school systems and government administered hospital care services. It does not include government purchases on capital account, gross fixed capital formation, or inventories, or any of the activities of government business enterprises. The outlays cover all current purchases of goods and services for general operating expenses of government departments and agencies, including wages and salaries of government employees, office supplies, and maintenance and repair costs. The estimates also include defence expenditures. An imputation for the capital consumption or depreciation of government fixed assets is included here.

It needs to be emphasized that these expenditures relate to government current purchases of goods and services only. They do not include such current expenditures of government as transfer payments to persons, interest on the public debt, subsidies to producers, capital assistance to producers, or transfers to non-residents. These latter items, together with government gross fixed capital formation, must be added to government current expenditure on goods and services to arrive at figures of total government spending for all purposes.

F16. This series is the sum of series F17-24, gross fixed capital formation by government and gross fixed capital formation by business. Gross fixed capital formation is defined to include outlays on durable tangible assets with a lifetime use of one year or more. Only new construction, both residential and non-residential, and new machinery and equipment are included. Outlays on used buildings and second-hand machinery and equipment are excluded, since such goods do not represent a part of the nation's current production. They have been counted in gross national expenditure in the period in which they were produced. An exception relates to imports of used machinery and equipment which are included in gross fixed capital formation and are deducted as an import of goods and services, leaving gross national expenditure unaffected.

Outlays for land, mineral deposits and timber tracts are also excluded from gross fixed capital formation since such assets do not represent current production of goods and services. However, capital costs involved in the preparation of sites, land improvements, mining development and exploration costs, involving the acquisition of tangible assets, and construction and drilling costs are included in gross fixed capital formation. Such costs represent stages in the process through which natural resources are discovered, developed and brought into use. The value of the resources themselves is not capitalized in these accounts.

Replacements and major alterations of capital installations are included as part of gross fixed capital formation but ordinary repairs and maintenance expenses are not. Also included are various associated expenses which are capitalized along with the cost of the fixed assets acquired, such as architectural, legal and engineering fees. Outlays on construction works which are to be used primarily for military purposes, and purchases of military equipment are not included in the estimates of gross fixed capital formation.

The estimates of fixed capital formation in these accounts are on a 'gross' basis, before any deduction to allow for the depreciation or capital consumption of existing assets. The calculation of 'net' fixed capital formation is not possible on the basis of the estimates of depreciation as presently prepared, since the bulk of the depreciation figures are calculated on an original cost rather than a replacement cost basis of valuation.

F17-20. Government gross fixed capital formation consists mainly of construction-type expenditures, series F19: for schools, hospitals, waterworks, sewerage systems, roads, harbours, airports and various other capital installations. It also includes outlays for machinery and equipment, series F20, and a small amount of housing, series F18. Federal, provincial and local levels of government are included but the investment spending of government business enterprises is not covered here. The decision to capitalize government investment spending in this revised set of accounts was made on the basis that such assets add to the country's stock of capital and yield a flow of economic services over a period of years into the future. The gradual 'using up' of government fixed capital is reflected in the imputation which is made for depreciation on government assets in the accounts.

F21-24. Business gross fixed capital formation consists of outlays for residential construction, series F22, outlays for non-residential construction, series F23, and outlays for new machinery and equipment, series F24. Outlays for residential construction cover all expenditures for new housing except a small amount shown with government capital formation. The estimates include single units, multiple units and apartment dwellings, as well as garages and major improvements and alterations. The term 'business' is defined here to include individual home-owners who are treated in the accounts as businessmen renting to themselves. All personal purchases of housing for owner use are therefore included in these estimates, as well as commercial-type construction undertaken for rent.

Business gross fixed capital outlays for non-residential construction and machinery and equipment cover investment in all forms of productive assets by business which are used to produce a future flow of goods and services. Included here are all plant and equipment expenditures of corporations, unincorporated business enterprises, including farm operators, and government business enterprises, for example, buildings of all kinds, engineering construction such as railway road beds, dams, power transmission lines, oil pipelines, industrial machinery, generating turbines, transportation equipment, office and store equipment, furniture, small tools and like items. The capital outlays of non-commercial institutions include universities, churches, and charitable and welfare agencies.

F25-28. The value of the physical change in inventories held by businesses and governments must be included in the gross national expenditure in order to allow for that portion of current production which has not yet been sold (a positive change in inventories) or to eliminate that portion of previous years' production which is included in sales of the current year (a negative change in inventories). The change in the value of inventories relevant to gross national expenditure should reflect the change in physical volume valued at the average market prices of the period. This change is referred to as the value of the physical change in inventories. Because the value of inventories reported by businessmen reflects 'book values' based on accounting procedures which are not consistent with national accounts requirements, an inventory valuation adjustment must be made to produce an appropriate figure. This inventory valuation adjustment is described in the earlier discussion of national income and gross national product.

There are three main types of inventories for which estimates of the value of physical change are computed: government inventories, series F26; business non-farm inventories, series F27; and farm inventories and grain in commercial channels, series F28. The latter are also a part of total business inventories. Government inventory holdings are a relatively small and insignificant part of total inventory holdings and exercise little leverage in the total change in inventory stocks. They include inventories held by government commodity agencies such as the Agricultural Commodities Stabilization Board, the Canadian Dairy Commission and some uranium stocks.

Business non-farm inventory stocks represent by far the largest part of total inventory holdings in the economy. They include all inventories of raw materials, goods-in-process and finished products held by corporations, non-farm unincorporated businesses, and government business enterprises. By industry, the major part of non-farm business inventory stocks is held in manufacturing and in wholesale and retail trade.

Farm inventories and grain in commercial channels consists mainly of grain and livestock held on farms and grain in the hands of the Canadian Wheat Board. This category also includes some grain inventories held privately by commercial dealers. It may be noted that in the case of grain and livestock inventories held on farms, and grain held by the Canadian Wheat Board, the value of the physical change in inventories, and the corresponding estimates of net income on the income side, is computed directly, and no inventory valuation adjustment is necessary.

The inventory valuation adjustment in these accounts applies only to business non-farm inventory stocks and grain in the hands of private dealers, areas where the primary data entering into the accounts on the income side are based on book values.

Due to space limitations, the box heading in the table where series F28 appears, has been condensed to read 'Farm'. The full heading should read 'Farm and grain in commercial channels'.

F29-30. Because a part of Canada's current production of goods and services is sold to non-residents, it is necessary to add the value of exports of goods and services to arrive at a final accounting of current production through final sales, series F29. Conversely, because sales to persons, governments, business and non-residents, as enumerated in series F14-29, include goods and services produced by non-residents, that is, imports of goods and services, series F30, it is necessary to subtract these in order to arrive at a correct summation of the value of Canadian output.

Exports of goods and services, series F29, as defined in the accounts include current receipts from exports of merchandise, freight and shipping credits earned on Canadian account, travel expenditures of non-residents in Canada, interest and dividends received from abroad, gold production available for export, and other current earnings, including receipts from business services rendered to non-residents. Imports of goods and services, series F30, include current payments for imports of merchandise, freight and shipping charges incurred by Canada on foreign account, travel expenditures of Canadians abroad, interest and dividends paid to non-residents, and other current payments, including payments for business services rendered by non-residents. Entries corresponding to the interest and dividend payments to and receipts from non-residents are made on the income side of the accounts in keeping with the concept of 'national' production expressed in the gross national product and expenditure measurements.

The figures of exports and imports of goods and services appearing in the gross national expenditure table are those published by Statistics Canada in The Canadian Balance of International Payments, (Catalogue 67-201), subject to certain modifications and adjustments in the earlier years. The relationship between transactions in goods and services and the current account of the balance of payments is described in Volume 3, pp. 244-249. Basically, current account receipts and current account payments as per the balance of payments reflect, in addition to exports and imports of goods and services, current transfers and transfers of inheritances and migrants' funds. Current transfers such as personal and institutional remittances and pensions paid to or received from abroad are not included with exports and imports of goods and services in gross national expenditure since they are not considered to represent current earnings of Canadian or foreign factors of production. Inheritances and migrants' funds paid to or received from abroad are transfers of a capital nature and for this reason do not appear in the gross national expenditure.

Until fairly recently the links between balance of payments data and the national income and expenditure accounts were not fully articulated in the balance of payments reports. Users of historical balance of payments reports will find it necessary to make a number of adjustments to move to the national accounts basis of presentation shown here. In recent balance of payments publications, however, the figures are fully reconciled.

In some earlier years in the balance of payments reports there appears in both current receipts and current payments an entry for mutual aid to NATO countries. These entries have to be eliminated for use in the national income and expenditure accounts since the amounts represent provision of goods and services which have already been counted as Canadian production in government defence expenditure for goods and services, either in the current period or in some previous period. The adjustments are self-cancelling since they reduce both exports of goods and services and imports of goods and services by identical amounts, and gross national expenditure is not affected.

In earlier years, and particularly in the war and early post-war period, a number of special adjustments have been made to the basic balance of payments data for national income and expenditure accounts purposes. These and other aspects of transactions with non-residents are described more fully in Volume 3, Chapter 8. A complete reconciliation between the national accounts presentation and the balance of payments presentation is given in table 60 of National Income and Expenditure Accounts, 1962-1976.

F31. Residual error of estimate is an adjustment for inaccuracies and imperfections in the basic statistics required to bring the gross national product and gross national expenditure into arithmetical balance. (See note to series F12).

Table F33-55 Gross national expenditure in constant (1971) dollars, by components, 1926 to 1976. Opens a new browser window.

Table F33-55
Gross national expenditure in constant (1971) dollars, by components, 1926 to 1976

Table F33-55 Gross national expenditure in constant (1971) dollars, by components, 1926 to 1976 CONCLUDED. Opens a new browser window.

Table F33-55
Gross national expenditure in constant (1971) dollars, by components, 1926 to 1976 CONCLUDED

Source: same as series F1-13.

The data of series F33-45 differ from those of series F14-32 only in that these expenditures are measured in constant (1971) dollars rather than current dollars and that there are adjusting entries, described below, not present in series F14-32. The content of each of the series given here is the same, therefore, as that given under the same heading in series F14-32.

In principle, the conversion of the current value figures to constant dollar estimates involves the breakdown of changes in current value estimates into the price and quantity constituents. This is accomplished by constructing appropriate price indexes which are then used to 'deflate' the value data and to reveal the underlying change in physical volume.

The estimation of constant dollar expenditure from current dollar expenditure was done in two steps, common to all the main categories given here with the exception of inventories. First, the individual subcomponents of the expenditure categories of series F14-32 were deflated in rather fine detail by, for the most part, Laspeyres-type price indexes. For example, 140 subcomponents of personal expenditure on consumer goods and services were deflated separately; government and business gross capital formation were deflated in considerable but somewhat less detail. Exports and imports were deflated in fine detail, about 35 subcomponents each, using mainly unit value price indexes for the period up to 1961, and specially constructed price deflators based on specific pricing procedures in the more recent period.

Once the deflation of the subcomponent detail was completed, the second step was to add all of this deflated subcomponent detail to derive the constant dollar aggregates given here.

The procedure used for converting the value of the physical change in inventories into constant dollar estimates is somewhat different. For farm inventories and grain in commercial channels, the constant dollar series is derived by valuing, in prices relevant to the base period chosen, the physical quantities of stocks. Data on prices, physical quantities of grain stocks held in inventory, and numbers of poultry and livestock are obtained from the Agriculture Division of Statistics Canada. The procedures in this area are therefore quite straightforward.

The procedure for the conversion of non-farm inventories differs from the above because detail on physical quantities is not available. The information given consists of current dollar book values only, from which it is necessary to remove the effect of price changes relevant to the base period. The first step is to estimate the book values of inventory stocks. This process is carried out in considerable detail for a large number of industry groups. The second step is to construct a weighted price index for deflating industry book values. This step involves knowledge of the commodity composition of inventory book values, the change in the price of these commodities and the time period over which the stocks have been acquired based on the rate of turnover of inventory holdings. The third step involves calculating the constant dollar book values in terms of base-period prices. The final step is to calculate the year-to-year change in the physical volume of inventories expressed as the change in these constant dollar book values.

The grand total of gross national expenditure in constant dollars is the sum of all the components measured in constant dollars plus the adjusting entries.

When constant dollar estimates are put on a new time reference base, such as 1971 in the present series, the entire constant dollar series from 1926 is not reweighted on the basis of 1971 prices. Although 1971 is the current time reference base for the entire span of years, five different sets of price weights are incorporated in the series, covering five different time segments. The results are linked together mechanically at the overlap years. The five weight bases reflect the prices of 1935 to 1939 for the period 1926 to 1947; 1949 for the period 1947-56; 1957 for the period 1956 to 1961; 1961 for the period 1961 to 1971; and 1971 for the period 1971 to 1975. The retention of the early price weights in the rebased constant dollar series is required in order that the price-weight base will best reflect the patterns of relative prices in the period for which it is used.

As a result of the mechanical linking process, constant dollar gross national expenditure and its components retain the same year-to-year volume movements as was shown in each original series. However, the linking process gives rise to adjusting entries, as the individually linked components will not add exactly to the gross national expenditure totals which are independently linked. These adjusting entries are primarily a function of differences in the structure of the price-weight base at the year of overlap.

Implicit price deflators may be obtained for each component, for each subtotal and for gross national expenditure by dividing each series in current dollars by the corresponding series in constant dollars. These implicit price indexes are given in Section K. It should be noted that in effect the implicit deflators are currently weighted Paasche-type indexes at the aggregate level but in corporate fixed weighting of the Laspeyres type of index at the detailed subcomponent level.

A full description of the deflation procedure is given in the basic reference document, Volume 3, Chapter 9.

Table F56-75 Gross domestic product at factor cost, by industry, 1926 to 1976. Opens a new browser window.

Table F56-75
Gross domestic product at factor cost, by industry, 1926 to 1976

Table F56-75 Gross domestic product at factor cost, by industry, 1926 to 1976 CONCLUDED. Opens a new browser window.

Table F56-75
Gross domestic product at factor cost, by industry, 1926 to 1976 CONCLUDED

Source: same as series F1-13.

Gross domestic product at factor cost measures the value of production arising within the geographical boundaries of Canada irrespective of whether the factors of production involved are resident or non-resident. It differs from gross national product at market prices in two ways: first, it includes net income earned by and paid to non-residents but originating in Canada (see adjustment series F73); second, it excludes indirect taxes less subsidies (see adjustment series F72). The adjustments required to move from gross domestic product at factor cost to gross national product at market prices are shown in series F72-74.

Gross domestic product at factor cost, by industry, shows the industrial origin of economic production. In effect, it reveals the 'value' added by each industry to the value of the country's total production. For the assembly and analysis of industrial statistics, the domestic product concept is preferable to the national product concept since it deals with production originating within the country's geographical boundaries, and also avoids the statistical problem of having to allocate net interest and dividends paid to non-residents by industrial origin. In addition, the 'factor cost' concept is more appropriate for this purpose than the 'market price' concept, since indirect taxes levied by governments with respect to purchases and sales of goods and services bear much more heavily on some industries than on others. The relative share of an industry's contribution to production in terms of factor use is therefore more clearly depicted if indirect taxes less subsidies are excluded from the calculations.

The contribution to production of each industry, that is, the net value added, is the sum of factor payments originating in the industry. These are wages, salaries, supplementary labour income, profits and other forms of investment income, net rents, net income of unincorporated business enterprises and the capital consumption allowances in the industry.

To produce an industrial classification of gross domestic product according to 'type of activity' involved, the unit of classification should in principle be an operating entity which engages in only one type of economic activity. For statistical purposes, the smallest unit that is a separate operating entity capable of reporting all elements of basic industrial statistics is the 'establishment'. The establishment is usually engaged in only one major kind of activity and since it is the smallest statistical unit capable of collecting all the essential elements of industrial statistics, it is the preferred unit of classification in the industrial distribution. Some establishments, however, are rather complex and engage in a number of activities. In such cases, the establishment is assigned wholly to the industry of its principal activity and its total output is included in the measure of output for that industry.

In the industrial distribution of gross domestic product, the largest single component (wages, salaries and supplementary labour income) is classified industrially on the basis of establishment data. Net income of non-farm unincorporated business is partly on an establishment basis and accrued net income of farm operators from farm production is on an activity basis which is not too far removed from the concept of the establishment. Other major elements of gross domestic product which cannot be obtained by establishment are corporation profits, corporate capital consumption allowances and some elements of investment income. In these cases, the data are not reported by individual establishments, but by the company, which may include one or more establishments. The unit of classification must necessarily be based on this broader statistical entity.

The industrial classification of gross domestic product groups together all operating units, for example, establishments or companies, according to whether they are engaged in the same or a similar kind of economic activity. In effect, it shows the way in which the gross domestic product is produced by principal type of economic activity. In this context, the industrial grouping does not depend upon whether the activity is carried on by a government agency or by a business enterprise, or whether on a profit or non-profit basis. An industry is defined for this purpose simply as a group of establishments or operating units whose activities have sufficient common characteristics that they may be usefully grouped together for analytical purposes.

Thus, in series F56, agriculture includes not only establishments engaged in commercial farming activity, but also experimental farms operated by federal or provincial governments, university farms and institutional farms operated in connection with penitentiaries or religious orders. Forestry, series F57, includes establishments engaged in forestry patrol, fire inspection, fire fighting, forest nurseries, reforestation and other forestry services, whether conducted by government organizations or commercial enterprises. Fishing, series F58, includes establishments engaged in operating fish hatcheries and fishery inspection and protection services, whether operated by government departments or not. Transportation, series F62, includes government services incidental to air transport such as establishments engaged in the operation and maintenance of civil airports; government services incidental to water transport, such as the establishments engaged in the operation and maintenance of piers, docks, wharves and associated facilities; and government establishments providing services associated with the operation and maintenance of highways, bridges and tunnels. The community, business and personal service industry, series F70, includes all government establishments engaged in education and in the delivery of hospital and medical care services. The service industry includes, in addition to the activities noted above, theatres and other entertainment, professional services, domestic services, barber shops, hotels, cleaning and laundering and the like.

Because so much of the economic activity which is related to the operations of 'general government' is reallocated and assigned to its related industrial group in the industrial distribution, the 'public administration and defence' industry, series F69, provides a very much truncated view of the full range of government activity. It includes only those establishments of government which clearly do not belong in any other branch of economic activity but which are essentially concerned with general administration, the internal service agencies of the public service, and defence, for example, the enactment of legislation, law enforcement and administration, the collection of public revenues and controlling the disbursement of public funds. Defence services maintained primarily for the protection of the state are in the same general category. The industrial classification of an establishment is thus not dependent on whether it is owned privately or publicly, or on whether it is organized on a commercial or a non-commercial basis. The classification system is based essentially on the concept of type of activity.

The industrial distribution of wages, salaries and supplementary labour income is given in Section E. Labour income by industry for the period 1919 to 1926 is given in series F166-178. The industrial distribution of investment income and of income of unincorporated business, including farm income, may be found in tables 30 and 31, respectively, in National Income and Expenditure Accounts, 1962-1976.

All imputed income must be allocated to the appropriate industry of origin in the industrial classification of gross domestic product. Thus, imputed net rents, and capital consumption allowances, of owner-occupied housing are classified to the finance, insurance and real estate industry. Farm products consumed directly in farm households are assigned to gross domestic product originating in agriculture. Food and lodging provided to employees in lieu of wages is allocated to the industry in which the particular 'income in kind' originates. Depreciation on government fixed assets is allocated largely to three main industrial groups: public administration and defence (general government assets); community, business and personal service (primarily schools and hospitals); and electric power, gas, and water utilities (municipal water systems). All imputed banking services rendered without charge to persons and governments is shown as originating in finance, insurance and real estate.

A basic question on origin of economic production is raised in the case of leased equipment and rented property. If a real estate operator, for example, rents a building to a group of retail establishments, present practices call for showing the net rents and capital consumption allowances originating in the real estate, or owning industry. A case can be made that since renting is simply an alternative way of obtaining capital equipment for use in the production process, the net rental income from such capital and the associated capital consumption allowances should, in principle, be treated as originating in the using industry. As a practical matter, because it is not ordinarily possible for the using industry to report data on capital consumption allowances and net rents, the production and income associated with leased equipment and rented property are at present assigned to the industry owning the assets.

Table F76-90 Personal income and its disposition, 1926 to 1976. Opens a new browser window.

Table F76-90
Personal income and its disposition, 1926 to 1976

Source: same as series F1-13.

Personal income includes all factor incomes of persons such as wages and salaries and net incomes of unincorporated businesses; interest, dividends and various types of investment income of persons (including investment income accumulated on behalf of persons by life insurance companies, private pension funds and similar institutions); and all transfer payments received by persons from governments (such as old age pensions, mothers' and dependents' allowances, and unemployment insurance benefits) as well as transfers from corporations and non-residents. 'Persons' and the 'personal sector' are defined to include private pension plans and private non-commercial institutions such as universities, labour unions, professional organizations, fraternal societies and charitable institutions.

While the national income includes all earnings of the various factors of production arising from the current production of goods and services, personal income includes only the part of the national income which is paid out to persons. It also includes large amounts of income of a transfer payment nature which is not included in the national income. The relationship between the national income and personal income is shown in series F76-81. All earnings not paid out to persons, series F80, are deducted from the national income to arrive at personal income. Such earnings include the undistributed earnings of corporations and government business enterprises, the direct taxes of corporations and government business enterprises, government investment income and the inventory valuation adjustment. At the same time, income received by persons in the form of current transfer payments from the government and other sectors are added back, series F77 and F78. The resulting figure is the total of personal income, series F81.

F76. National income is described in the general note to series Fl-152 and in the notes to series F1-8.

F77. Transfer payments shown here are mainly transfer payments to persons from government, such as family allowances, old age pensions, pensions to the blind, mothers' allowances, veterans' pensions and gratuities, unemployment insurance benefits, workmen's compensation benefits, pensions to government employees and government grants to the non-profit institutions, such as operating and capital grants to charitable organizations and universities. Also included in this series are current transfers from non-residents, mainly personal and institutional remittances and pensions received from non-residents, and a small amount of capital assistance to persons from government. Current transfers to persons from corporations, in the form of charitable contributions and bad debts, are not included here since they are already incorporated in the national income.

F78. Interest on the public debt includes the entire amount of interest paid by all levels of government. That part which is received by non-residents is offset by the explicit subtraction made in series F5 and described earlier in these notes. The transfer portion of interest on consumer debt paid by persons to corporations is included here to compensate for its omission in the national income as described in series F5. The amount is subtracted in series F89 in arriving at personal saving.

F79. This is the sum of series F76-78.

F80. Earnings not paid out to persons include the undistributed earnings of corporations and government business enterprises, the direct taxes of corporations, government investment income and the inventory valuation adjustment.

F81. Personal income is a mixed concept. It consists essentially of that part of national income paid out to persons plus transfer payments from other sectors. However, it includes some income that is not received by persons in the accounting period in which it is entered. For example, it includes the interest earnings of life insurance companies. (See the general note to series F1-152.)

F82. Personal direct taxes consist of personal income taxes, succession duties and estate taxes, and employer and employee contributions to social insurance and government pension funds. The latter category includes contributions to unemployment insurance, workmen's compensation, non-trusteed public service pensions, industrial vacation claims, and the Canada and Quebec pension plans. Other current transfers from persons to the government consist of hospital and medical care premiums, the personal share of motor vehicle licenses and permits, miscellaneous licences and permits such as hunting and fishing permits and marriage licenses, and various fines and penalties.

F83. Personal disposable income is essentially that income available for discretionary disposal, after payment of direct taxes and other current transfers.

F84. Personal expenditure on consumer goods and services consists of personal expenditures on durable goods, semi-durable goods, non-durable goods, and services. For general note, see series F14.

F85. Personal expenditure on consumer durable goods includes outlays on new and used automobiles, home furnishings and furniture, stoves and ranges, other appliances, radios and television sets, sporting goods, household tools and garden equipment and like items. The values of trade-ins are subtracted.

F86. Personal expenditure on consumer semi-durable goods consists of outlays on men's and boys' clothing, women's and children's clothing, footwear and repairs, household textiles, glassware and tableware, books and magazines, and jewellery, watches and repairs.

F87. Personal expenditure on non-durable consumer goods consists of outlays for food and beverages, tobacco, electricity and gas, non-durable household supplies, drugs and sundries, gasoline, oil and grease, and toilet articles and cosmetics.

F88. Personal expenditure on services consists of such things as laundry and dry-cleaning service; expenditure on food in restaurants and hotels; gross space rent of tenants; imputed net residential rents of owner-occupied dwellings; telephone; domestic service; moving expenses; janitor service; rental of furniture and appliances; bridge, tunnel and ferry tolls; fares for taxis, railway, electric railway and bus, steamship and plane travel; personal health outlay expenses for medical, dental, osteopathic, chiropractic, nursing and hospital care, not covered under government administered insurance schemes; death expenses; expenditures on beauty parlours and barber shops; outlays for recreational, educational, religious and charitable activities; financial and legal services; hotel services; net expenditure abroad and miscellaneous services.

For a more detailed breakdown of consumer expenditures, see National Income and Expenditure Accounts, 1962-1976, table 53.

F89. Current transfers to corporations and non-residents consist of the transfer portion of interest on consumer debt paid to corporations and personal and institutional remittances paid to non-residents. These amounts are subtracted here since they are not available for personal saving.

F90. Personal saving is the residual amount left over after deducting personal expenditure on consumer goods and services, direct personal tax payments and various other current transfers from the total of personal income. Because the personal saving figure is calculated residually, it reflects the net effect of any errors occurring in the component estimates of income, consumer spending, and transfers to the government and other sectors. The error factor in this estimate is therefore likely to be greater than the error factor in any of the component estimates associated with it.

If the personal saving figure were to be disaggregated, it would be seen to consist of many elements of saving by persons and households such as the accumulation of bank balances, purchases of stocks and bonds, the repayment of mortgages, the net retirement of bank and finance company loans, accumulations in life insurance and pension funds, changes in farm inventories and inventories of other unincorporated businesses and many other forms of savings.

Table F91-102 Personal income, by province, 1926 to 1976. Opens a new browser window.

Table F91-102
Personal income, by province, 1926 to 1976

Source: same as series F1-13.

Personal income of each province and 'foreign countries' is that part of total personal income of Canadian residents, given in series F81, received by or accruing to persons in the province. (See the general note to series Fl-152 for the definition of a person.)

The part of personal income assigned to 'foreign countries', series F102, consists of the income of Canadians temporarily abroad, such as those in the diplomatic service and members of the Canadian forces abroad.

Table F103-120 Government revenue, expenditure and surplus or deficit, by component, all governments, 1926 to 1976. Opens a new browser window.

Table F103-120
Government revenue, expenditure and surplus or deficit, by component, all governments, 1926 to 1976

Source: same as series F1-13.

The consolidated government revenues and expenditures presented here cover a very broad range of activities carried out directly by various levels of government or by their agencies. The essential characteristic of these government activities is that they are non-commercial in nature. They represent activities undertaken by the society on a collective basis and financed for the most part out of taxation or government borrowing. The activities of government business enterprises operating for a profit are not included here. Such enterprises are considered to be a part of the business sector since their method of operation and their motivations are similar to those of private business enterprises.

In general, the government sector as defined here covers three main groups of activity for which the public authorities carry the primary responsibility. First, the departmental activities of the three levels of government (federal, provincial and local) ordinarily included in the so-called 'budgetary' transactions of governments. Second, the transactions of many government administered social insurance and trust funds, such as the Unemployment Insurance Fund, the Old Age Security Fund, Workmen's Compensation Funds, the Canada and Quebec pension plans, and various government employee pension funds, ordinarily regarded as 'extra-budgetary' transactions of governments. Third, the transactions of various government agencies, commissions and boards which are financed out of public funds, receiving all or most of their income from government grants. The revenues and expenditures of the Post Office Department are excluded from the departmental activities of government since this agency is treated in the national accounts as a government business enterprise.

The 'extra-budgetary' transactions of the social insurance and trust funds now comprise a substantial part of the total income and outlay of the public sector.

In addition, the activities of government agencies, commissions and boards which operate on an essentially non-commercial basis and which carry out various functions delegated to them by the public authorities are included here. These comprise such federal agencies as Atomic Energy of Canada Limited, the National Research Council, the National Capital Commission, and the National Film Board; such provincial agencies as hospital and health services commissions; and various municipal boards and agencies, including school boards and municipal waterworks authorities.

Certain other activities of government, however, have quite different characteristics in that they involve the production of goods and services for sale on the open market at a price to the consumer which is intended to compensate wholly or largely for their costs or to yield a profit. Such agencies are classified as government business enterprises. The activities of these enterprises are of a commercial or industrial nature. Examples of such agencies are the provincial hydro commissions, provincial telephone companies and federal transportation companies. The distinguishing feature of a government business enterprise in contrast to a general government operation is that its motivation and behaviour essentially parallels that of a private business enterprise. Its revenues are derived mainly from the sale of goods and services, it usually aims to be self-sustaining and it generally maintains control over its transactions in the form of a profit and loss statement. The revenue and expenditure transactions of such entities are not included here but their remitted profits are consolidated with government investment.

Since 1961 the revenue and expenditure transactions of public hospitals, which were treated as part of the personal sector prior to 1961, have been included with the 'non-commercial' government sector. These transactions are consolidated with the revenue and expenditure figures in the table. The transactions of all government administered medical care plans are also included. In addition, all of the activities in the field of education coming under locally administered elementary and secondary school systems, and provincially operated community colleges are included. Municipal waterworks are also regarded as a part of the 'general government' sector and their activities are consolidated with the transactions shown in this table.

Government capital outlays, government gross fixed capital formation and investment in inventories, are capitalized and treated as a part of the economy's gross capital formation in physical assets. They form a part of total government expenditure for all purposes. An imputed depreciation or capital consumption allowance is entered in the accounts of the government sector to record the using up of the fixed capital portion of these assets.

A more complete description of the government sector as presented in this table will be found in Volume 3, Chapter 6.

F103. Personal direct taxes are described in the note to series F82. More detail, by level of government, is given in table 44 of National Income and Expenditure Accounts, 1962-1976.

F104. Corporation direct taxes are taxes on corporation income (profits) by the federal and provincial governments. They include the non-refundable part of federal excess profits taxes, the special provincial taxes on mining and logging profits and the part of the federal profits tax earmarked for the old age security fund. They exclude, in addition to the refundable part of excess profits taxes, profits taxes later adjusted by re-negotiation of war contracts. Corporation profits taxes are given on an accrual basis here. Table 21, of the source volume mentioned above, gives the amounts actually collected and the adjustment for accruals separately, and table 45 of the same volume gives further detail by level of government.

Due to space limitations, the box heading in series F104 has been condensed by eliminating the word 'enterprise'. The full heading should read 'Corporate and government business enterprise'.

F105. Direct taxes on non-residents, withholding taxes, are federal taxes representing amounts of income withheld from payment and remitted to the federal government on earnings of non-residents. The taxes apply on interest, dividends, rents, royalties and other forms of income payable to non-residents.

F106. Indirect taxes are described in the note to series F10. Detail by type and level of government may be found in table 46 of the above mentioned source volume.

F107. Other current transfers to government from persons are described in the note to series F82. Details by type and level of government may be found in table 47 of the above mentioned source volume.

F108. Government investment income is described in the note to series F5. Details by type and level of government may be found in table 48 of the above mentioned source volume.

F109. Total government revenue is the sum of series F103-108.

F110. Government current expenditure on goods and services is described in the note to series F15. Details by type and level of government may be found in table 49 of the above mentioned source volume.

F111. Government transfer payments to persons do not measure currently produced goods and services, but represent simply a redistribution of income already earned and counted. They are unilateral transactions in which there is no compensation. Included here are such federal government payments to persons as family and youth allowances, unemployment benefits, old age security benefits, veterans' disability pensions, pensions paid to government employees, various scholarships and research grants, grants to private non-commercial institutions and adult occupational training payments. At the provincial and local levels, these transfer payments include such items as social welfare payments, for example, direct relief, old age and blind pensions, and mothers' and disabled persons' allowances; workmen's compensation benefits; grants to post-secondary educational institutions; and grants to other private non-commercial institutions and associations. Pensions paid out under the Canada and Quebec pension plans also form a part of the total of government transfer payments to persons.

A detailed breakdown of government transfers to persons, by level of government and by type of payment, is provided in table 50 of the above mentioned source volume.

F112. Government subsidy payments are described in the note to series F10. Details by type and level of government may be found in table 51 of the above mentioned source volume.

F113. Capital assistance covers grants to industry for plant expansion and improvement or to encourage new construction. Specific examples of such payments are grants under programs of the Department of Regional Economic Expansion, grants toward the construction of fishing vessels, the $500 winter house-building bonus and grants to foster the technical capability of Canadian industry.

F114. Current transfers to non-residents consist of federal pensions and other benefits paid abroad, such as old age security benefits, public service pensions, veterans' pensions, and official payments for international assistance.

F115. Interest on the public debt consists of all interest paid or accruing to Canadian residents and non-residents on the outstanding debt of the various levels of government. The figures are shown on a gross basis and do not reflect any netting out to take account of receipts of interest on government loans and advances to its own or other agencies.

F116. Total government current expenditure is the sum of series F110-115. It may be noted that the grand total of government expenditure for all purposes may be obtained by adding together series F116, total current expenditure, and series F119, total government gross capital formation, that is, capital expenditure. The difference between this grand total of all expenditures and the grand total of revenues, series F109, plus depreciation allowances, series F118, is equal to the government surplus (+) or deficit (—) position, series F120.

F117. Government saving is the difference between government current revenues, series F109, and government current expenditures, series F116.

F118. Government capital consumption allowances are described in the note to series F11.

F119. Government gross capital formation, that is, capital expenditure, is described in the note to series F17-20.

F120. The government surplus (+) or deficit (—) on transactions related to the national accounts is the residual obtained by subtracting total government expenditures, both current and capital, from total government revenues including capital consumption allowances. The figure is a measure of the government sector's net lending to (if positive) or net borrowing from (if negative) other sectors. It shows whether the government sector has been a net contributor to, or a net demander of, funds for the finance of investment.

Table F121-134 Finance of saving and investment, 1926 to 1976. Opens a new browser window.

Table F121-134
Finance of saving and investment, 1926 to 1976

Source: same as series F1-13.

This table is designed to show total gross fixed capital formation in the economy and the sources from which these capital outlays were financed. In effect, the right hand side of the table shows the demand for saving required to finance investment; and the left hand side of the table shows the sources from which this saving was provided, in the form of national saving by persons, business and governments, and in the form of saving provided by non-residents, that is, net borrowing by Canada from abroad.

F121. This total is the sum of series F122-127.

F122. Personal saving is described in the note to series F90.

F123. The adjustment on grain transactions is essentially an allocation of earnings arising out of the operations of the Canadian Wheat Board and, in earlier years, the Canadian Cooperative Wheat Producers, to place the earnings of farmers arising out of these operations on an accrual basis.

F124. Government saving is described in the note to series F117.

F125. Undistributed profits of corporations and government business enterprises consist of the amount of earnings retained after payment of taxes, distribution of dividends to Canadian residents and to abroad, payment of various transfer payments and, in the case of government business enterprises, after profits remitted to governments.

F126. The inventory valuation adjustment is described in the note to series F8.

F127. Capital assistance is described in the note to series F113.

F128. Capital consumption allowances are described in the note to series F11.

F129. The surplus (­) or deficit (+) of Canada on current transactions with non-residents is simply a measure of the degree to which Canada has been required to draw upon foreign resources from abroad to help finance its capital investment program. In this table, a positive sign ( + ) means that Canada has drawn upon foreign resources or foreign savings, that is, has incurred a deficit on transactions in goods and services with non-residents. A negative sign (­) means that Canada has run a surplus on transactions in goods and services with non-residents and has thereby contributed to the savings resource requirements of the rest of the world. The net figures shown here are equal to the difference between exports of goods and services and imports of goods and services, series F29 and F30, plus or minus a small amount of net current transfers paid to or received from abroad. The full reconciliation with series F29 and F30 may be obtained from table 60 of National Income and Expenditure Accounts, 1962-1976.

F130. The residual error of estimate is described in the note to series F12 and F31.

F131. This total is the sum of the subtotal series F121 plus series F128-130 inclusive. It is also equal to the sum of series F132-134.

F132. Gross fixed capital formation is described in the notes to series F16 and F17-24.

F133. Value of physical change in inventories is described in the notes to series F25-28.

F134. The residual error of estimate is described in the note to series F12 and F31.

Table F135-152 Gross fixed capital formation, by industry, 1926 to 1976. Opens a new browser window.

Table F135-152
Gross fixed capital formation, by industry, 1926 to 1976

Source: same as series F1-13.

The industrial breakdown of gross fixed capital formation is based on the industrial classification of capital expenditures set out in the regular series of Statistics Canada reports, Private and Public Investment in Canada, Outlook, (Catalogue 61-205), and similar reports for earlier years from Statistics Canada and the Department of Industry, Trade and Commerce. The basis of classification is the Standard Industrial Classification in which the establishment is the key unit of reporting. The classification by industry refers to the industry of ownership.

A number of adjustments are required to move from the private and public investment figures which form the basic source data to the figures given here on the national accounts basis or presentation. Volume 3, provides a summary view of these adjustments, on pages 231 and 233.

F135. Total gross fixed capital formation in current dollars is the sum of series F136, business gross fixed capital formation, and series F148, government gross fixed capital formation.

F136. This series covers business outlays for non-residential construction, machinery and equipment, and housing. It corresponds to series F21 discussed earlier. The reader is referred to the notes to series F21-24 for a more complete description of concepts and coverage.

F137-147. This group of series shows the industrial breakdown of business outlays for plant and equipment and for housing. The housing estimates, except for a small amount of government housing, are included with finance, insurance and real estate.

F137. Excludes investment of government experimental farms. Also excludes government-owned fish hatcheries and fishing inspection and protection services.

F142. Includes air, railway and water transport services; motor transport; urban transit systems; pipelines; grain elevators; toll highways and bridges; and warehousing.

F143. Includes broadcasting, and telephone and telegraph services.

F145. Includes wholesale and retail trade.

F146. Includes capital outlays by banks, insurance, trust and loan companies, real estate establishments primarily engaged in owning and operating real estate, or in developing and improving real estate. Estimates for residential housing are included in this industry, except for residential housing by government.

F147. Includes investment by laundries and dry cleaners, motion picture theatres, hotels and other commercial services. In recent years this last category has reflected an increase in the leasing of machinery and equipment.

F148. This series covers government outlays for non-residential construction, machinery and equipment, and a small amount of housing. It corresponds to series F17-20 discussed earlier.

F149. Includes investment by municipal water systems which are treated as a part of general government and are not included with series F144.

F150. Includes investment in residential construction by the federal government.

F151. Communication and community service has been reduced to only community service since the year 1959 with the transfer of the Canadian Broadcasting Corporation from government to the business sector in the national accounts classification system. It now contains only investment by hospitals and provincial and municipal schools.

F152. Includes estimates of gross fixed capital investment by federal, provincial and municipal government departments.

Income Produced and Capital Formation before 1926 (Series F153-182)

General note

Many of the sources of data for national income used for the period from 1926 onward were also available for earlier years. For example, fairly comprehensive data on annual production in agriculture began in 1908. Fisheries production was available annually, in improved form, from 1911. The annual census of manufactures and of electrical stations began in 1917, mineral production was available from 1886, the census of mining from 1920 and collection of employment data began in 1921. Many of the data on banks, insurance and other financial companies; on railways, telegraphs and telephones; and on governments, were available annually as were the data on foreign trade. During this period, improved annual data on wage rates and prices were emerging. A census of manufacturing was taken with each decennial census until 1911 and 'postal' censuses for 1905 and 1915. An incomplete census of trade was taken for 1923.

In addition, some material was available for Ontario from an annual census of manufactures from 1900 to 1914.

These data form much of the basis for the estimates of national income from 1919 to 1926 and the estimates of capital formation from 1901 to 1930 given in this subsection.

Table F153-165 Net domestic income, by industry, 1919 to 1926. Opens a new browser window.

Table F153-165
Net domestic income, by industry, 1919 to 1926

Source: Estimates of Net Domestic Income at Factor Cost and Labour Income by Industry, 1919-1926, (a private, unpublished, mimeographed memorandum prepared by D.H. Jones, of Statistics Canada).

These estimates of net domestic income, 1919 to 1926, correspond to those appearing for gross domestic product, by industry, in series F56-75 for 1926 to 1976, with the exception that the latter measures product at factor costs plus capital consumption allowances and miscellaneous valuation adjustments while the former includes only factor incomes. The difference between the two totals in 1926, the year of overlap, is equal to the capital consumption allowances and adjustments.

The concepts of the two sets of series are identical but methods of measurement are quite different. Estimates of national income and related aggregates, prepared by Statistics Canada before it began publication of the national accounts at the end of World War II had been '...derived for the most part by subtracting estimates of materials and services used and depreciation from the value of gross output, industry by industry, using for this purpose a fairly extensive body of economic statistics collected annually or decennially by the Dominion Bureau of Statistics', see source, p. 2. The worksheets underlying the earlier estimates provided the main basis for the estimates given here. Unpublished revisions of the original data were used and in a few cases the data were traced back to the primary sources. The data were rearranged and adjusted to fit the later concepts and industry classification.

The levels of the estimates were adjusted, industry by industry, by linking them with the official series at 1926. As a check, estimates of net domestic income were extended to 1927, 1928 and 1929, excluding agriculture, public administration and defence. The estimates of the projected series were 99.2 per cent of the sum of the same components of the official series in 1927, 99.2 per cent in 1928 and 99.6 per cent in 1929. Agriculture, public administration and defence were calculated by exactly the same methods for 1919 to 1926 as for the later official series.

The relation of the industry groups given here to those of series F56-75 is apparent from the headings. Two points need attention. No inventory valuation adjustment has been made for wholesale and retail trade; the net imputed rent of government buildings is included with finance, insurance and real estate and not with service.

Table F166-178 Labour income, by industry, 1919 to 1926. Opens a new browser window.

Table F166-178
Labour income, by industry, 1919 to 1926

Source: same as series F153-165.

Wages and salaries were estimated for 1919 to 1925, insofar as possible, by methods identical to those used from 1926 onward, (see the general note to series F1-152). Wages in construction were based on the value of construction and its implied labour content from material in Buckley, Capital Formation in Canada, 1896-1930. The resulting estimates were then adjusted upwards to take account of supplementary labour income, industry by industry, in the proportion that it had to wages and salaries in 1926.

A check made by comparing the change in labour income as derived from earnings of wage earners in the 1921 and 1931 censuses with that obtained from the national income data between the two periods suggested, on the basis of reasonable assumptions, that the estimating techniques were quite good.

Table F179-182 Gross domestic capital formation, by quinquennial periods, 1901 to 1930. Opens a new browser window.

Table F179-182
Gross domestic capital formation, by quinquennial periods, 1901 to 1930

Source: Buckley, Capital Formation in Canada, 1896 to 1930.

Conceptually, Buckley's estimates cover the same items as in the national accounts from 1926 onward and in series F135-152. Government fixed capital formation is included as well as private capital formation. All commercial vehicles and 20 per cent of outlay on passenger automobiles are included as belonging to government or business capital formation. Housing is included but consumer durables are not. The estimate of inventory investment is the value of the physical change in inventories.

Buckley's estimates of fixed capital formation were built up, in the main, from annual flows of construction materials and machinery and equipment. Imports are added to production and exports are subtracted to estimate the flows. The derivation of the construction estimates is described in Section S. The values of flows of machinery and equipment at producers' prices were adjusted for taxes, freight and mark-ups.

The main sources of the machinery and equipment data were annual reports of external trade, the federal censuses of manufactures for 1900, 1905, 1910, 1915 and annually from 1917 to 1930 and the Ontario census of manufactures for 1900 to 1914. In addition, annual direct estimates of outlay on railway rolling stock, for the whole period, were calculated from railway and government accounts; on shipbuilding from shipping reports of the Department of National Revenue; on motor vehicle sales from registration of motor vehicles for 1904 to 1916. Freight costs were estimated by data provided by Statistics Canada as far back as 1913, or before that, from estimates in Viner, Canada's Balance, (see Section G). Sales and excise taxes were calculated by applying rates of tax to the values at producers' prices, including import duties, and mark-up margins from material provided by Statistics Canada. The data for 1926 to 1930 are mainly from estimates in Public Investment and Capital Formation, which were based on the same methods, (see Section S).

Investment in inventories was calculated from various official annual data for livestock on farms from 1907, grain on farms from 1909 and grain in commercial channels from 1910; for earlier years some data were obtained from censuses and some were estimated on the basis of production. Manufacturing inventories were obtained from Statistics Canada for the postal census of 1915 and the annual census of manufactures. For 1900, 1905 and 1910 they were taken as 50 per cent of the working capital, the ratio being based on the 1915 data. Trade inventories were estimated as a constant proportion of the sum of exports and imports, the proportion being based on the same ratios that existed in 1925 to 1930. All trade inventory investment in 1901 to 1925 and manufacturing investment in 1901 to 1915 were estimated by the five-year periods given here. Price indexes used for deflating inventory investment in livestock and grain were mainly based on official sources. For manufacturing and trade, the wholesale price index of Statistics Canada, Prices and Price Indexes, was used, (see Section K).

The years 1926 to 1930 are given to provide an overlap with the official data.

The source also contains annual estimates of the flow of five categories of machinery and equipment at producers' prices and quinquennial estimates of capital formation for the same categories.

Stock of Business and Social Capital at Mid-year, and Inventories at Year-end, (Series F183-224)

General note

The concept of capital used here corresponds very closely to that underlying the estimates of fixed capital formation given in earlier tables of this section. The estimates cover fixed tangible capital stocks with the capacity to produce goods and services into the future and that have themselves been produced by human effort. They do not include gifts of nature such as the value of natural resources, land, forest stands, mineral and oil deposits and the like, or intangible assets such as goodwill and the accumulated training, skills and knowledge of people. Residential housing is included in capital but other consumer durables are not. Inventories in the usual sense of the term are not included.

Gross capital is valued at its monetary cost. Most of the estimates reproduced here are valued at cost expressed in terms of constant (1971) dollars. Thus, they provide a means of measuring the growth or decline in the real gross physical stock of fixed capital assets. In addition, estimates of 'industry' capital are also provided here in terms of their original cost at the time of purchase. In these estimates, each item of capital in the stock is measured in the prices that prevailed at the time it was actually produced.

The net capital stock is measured by subtraction from the gross stock of an estimate of the service capacity of the gross stock which has been used up in depreciation, obsolescence, fire destruction and other damage. For the estimates of the net capital stock in constant dollars, depreciation and the like are measured in constant dollars, just as the gross stock was. For the estimates of the net capital stock at original cost, the depreciation and like items are valued in prices of the years in which the capital was produced.

Industry capital covers a slightly different part of the economy than that covered in the national accounts by business gross fixed capital formation in non-residential construction and machinery and equipment. The latter includes churches, universities and other non-commercial institutions; in the capital stock figures, these institutions are covered in social capital. Government business enterprises, however, remain in the industry group.

In the calculation of the size of the capital stock, the 'perpetual inventory' method was used. The estimation of capital stock in any one year requires a knowledge of the length of life of capital goods and the amount of gross capital formation in them for each year before the date for which the stock is being measured, as far back as the average length of life of the capital. The gross stock, at the required date, is then estimated as the sum of capital formation in these preceding years. For example, if the length of life of a capital item is 10 years and if the gross stock at the end of 1969 were to be measured, it would be obtained by adding together gross capital formation for the item from 1960 to 1969. The estimation of the gross capital stock at the end of 1970 would be obtained by subtracting from the 1969 year-end stock the gross capital formation in 1960 and adding to it that in 1970.

The net capital stock is obtained by accumulating the annual capital consumption of the capital goods still covered in the gross stock and by subtracting this accumulated amount from the gross stock. This involves calculating depreciation and like costs on a straight-line basis over the life of the capital good. A capital good with a 10-year life would be depreciated at 10 per cent per year.

When the capital formation, on which the stock estimates are based, was first estimated in current dollars, it was calculated in constant dollars by deflation of the current dollar estimates of capital formation by an index of the cost per unit of the capital formed. Similarly, for the constant dollar net capital formation estimates, it was necessary to adjust the depreciation on the capital item to the constant dollar basis.

The above methods of calculating the capital stock require estimates of capital formation of the length of life of capital goods and of the movements of prices (costs) of the capital goods. In some instances, for long-lived capital, it was necessary to go back as far as 1870 to obtain the 1926 stock estimate.

Capital formation was obtained by somewhat different methods for 1926 to 1975 and for the period before 1926. For 1926 to 1945, the capital formation estimates were, with slight modification, taken from Department of Trade and Commerce, Private and Public Investment in Canada, 1926-1951; for 1945 to 1975, they are based on the reports of actual expenditure obtained in the preparation of the annual report, Private and Public Investment in Canada, Outlook. (See Section S for a discussion of the construction component obtained in these two sources.) For the period prior to 1926, the main source for capital formation estimates was Buckley's, Capital Formation in Canada, 1896-1930 (see Section S); and some rough estimates for this earlier period from other data. The capital formation estimates, and their accumulation, were in fairly fine detail for 1926 to 1975; they were in much broader aggregates for the preceding period.

Detail on the length of life of capital goods was obtained, mainly, from studies by engineers and accountants in Canada, the United States and the United Kingdom in the 1930s, to determine appropriate depreciation allowances for income tax purposes. The results were available in bulletins published by internal revenue services. Greatest use was made of Bulletin F prepared in the United States. Few provisions were made for changing the length of life of specific types of capital. An exception was in urban transport systems where the change from streetcars to buses resulted in a shorter life for equipment.

Price indexes came from a variety of sources. Some were based on indexes used for deflating capital expenditure in the national accounts, from 1926 onward; some were from United States indexes, adjusted for duties, transportation and the like; some were constructed from data on material prices and indexes on wages. In some cases before 1926, Buckley's implicit price index of construction costs and wholesale indexes of prices for machinery were used.

The data for earlier years, on which capital formation and price indexes were based, were frequently sketchy. Fortunately, the seriousness of this shortcoming is mitigated by the fact that when capital formation is growing rapidly, the capital stock is largely made up of capital formed in the years immediately preceding its date of measurement.

Table F183-192 Industry gross and net capital stock, in 1971 prices, by structure and machinery and equipment. mid-year, 1926 to 1975. Opens a new browser window.

Table F183-192
Industry gross and net capital stock, in 1971 prices, by structure and machinery and equipment. mid-year, 1926 to 1975

Source: for 1972 to 1975, Statistics Canada, Fixed Capital Flows and Stocks, 1972-1976, (Catalogue 13-211); for 1970 and 1971, same title, 1970-1974; for 1926 to 1969, same title, 1926-1973.

F183-187. See general note for a description of the industry gross stock estimates in constant (1971) dollars. Series F187, capital items charged to operating expenses, consists of certain durable items such as furniture, office equipment, tools and so forth, which are sometimes not capitalized by business but are charged off as a current operating expense. To ensure the inclusion of these items in the capital stock, they are added here.

F188-192. See general note for a description of the industry net stock estimates in constant (1971) dollars. For series F192, see note to series F187.

Table F193-202 Industry gross and net capital stock, at original cost, by structure and machinery and equipment, mid-year, 1926 to 1975. Opens a new browser window.

Table F193-202
Industry gross and net capital stock, at original cost, by structure and machinery and equipment, mid-year, 1926 to 1975

Source: same as series F183-192.

F193-197. See general note for a description of industry gross stock estimates at original cost. For series F197, see note to series F187.

F198-202. See general note for a description of industry net stock estimates at original cost. For series F202, see note to series F187.

Table F203-209 Gross stock of social capital, in 1971 prices, public and private, by type, mid-year, 1926 to 1975. Opens a new browser window.

Table F203-209
Gross stock of social capital, in 1971 prices, public and private, by type, mid-year, 1926 to 1975

Source: for 1972 to 1975, Statistics Canada, Fixed Capital Flows and Stocks, 1972-1976, (Catalogue 13-211); for 1970 and 1971, same title, 1970-1974; for 1926 to 1969, same title, 1926-1973; housing estimates for all years were obtained from the Construction Division, Statistics Canada.

F203-206. Government social capital consists of schools, hospitals, waterworks, sewerage systems, bridges, roads, harbours, airports and various other publicly financed capital installations. See general note for a description of gross stock in constant (1971) dollars.

F207-208. Privately owned social capital consists of housing, universities, churches and various types of privately financed institutional capital of a non-commercial nature. Estimates were not available for the gross stock of housing expressed in constant (1971) dollars, the basic source material being collected on a net basis only.

F209. The sum of gross stock of government and privately owned social capital in constant (1971) dollars is available only for machinery and equipment. The construction component is not available because gross stock of housing cannot be estimated at the present time. For the net stock of housing, see series F215.

Table F210-220 Net stock of social capital, in 1971 prices, public and private, by type, mid-year, 1926 to 1975. Opens a new browser window.

Table F210-220
Net stock of social capital, in 1971 prices, public and private, by type, mid-year, 1926 to 1975

Source: same as series F203-209.

F210-213. See note to series F203-206. The difference between these two groups of series is that the one is on a gross basis, the other on a net basis.

F214-217. See note to series F207-208. The difference between these two groups of series is that one is on a gross basis, the other on a net basis. In addition, estimates of privately owned housing stocks are included here on a net basis.

F218-220. The sum of net stocks of government and privately owned social capital in constant (1971) dollars.

Table F221-224 Non-farm business inventories, year-end book value estimates, 1925 to 1976. Opens a new browser window.

Table F221-224
Non-farm business inventories, year-end book value estimates, 1925 to 1976

Source: National Accounts Branch, Statistics Canada.

Real Domestic Product, by Industry, (Series F225-240)

General note

This system of indexes shows the industrial composition of changes in the physical volume of output. Its principal feature is that it portrays the pattern of industry advances or declines, behind the increases or declines in total real output. This permits the contribution of each industry to be measured against the total change in real output.

The system of real output by industry indexes was originally developed in conjunction with the constant dollar estimates (deflation) of gross national expenditure, to provide an independent check on the results of the deflation procedure. This supplements and extends the measurement of the change in real output with information on its industrial composition. A description of these constant (1971) dollar estimates, derived by deflating the gross national expenditure with price indexes, is provided in the notes to series F33-55.

The indexes of real domestic product by industry are built around the concept of gross domestic product at factor cost. This aggregate provides the principal link from the national income and expenditure accounts to the real output indexes. Thus, gross national product or expenditure at market prices in current value can be converted to gross domestic product by subtracting indirect taxes less subsidies, to convert to a 'factor cost' concept, and adding back net interest and dividends paid abroad, to convert to a 'domestic' concept. The relationship is shown explicitly in the reconciliation between series F71 and F75.

In the indexes shown here, the data for gross domestic product at factor cost are expressed in terms of constant (1971) base-year prices so that changes in the physical volume of real output, in total and by industry, may be measured. In effect, these indexes of real domestic product are simply an extension of the index of industrial production (which includes only manufacturing, mining, quarrying and oil wells, and electric power, gas and water utilities) to cover the entire Canadian economy.

It may be noted that series F56-71 in this section provide data on the value of gross domestic product at factor cost by industry, that is, net value added by industry, in current dollar terms. However, the industrial classification employed in series F56-71 is not identical to that used in connection with the indexes of real domestic product by industry, for reasons which have to do with the nature of the primary data. In the former case, the classification is based on a mixture of company and establishment information, with profits, investment income, and capital consumption allowances classified on a company basis and most other components classified on an establishment basis. By contrast, the basic unit of classification employed throughout the indexes of real domestic product by industry is the establishment, the primary data being available in this form. Thus, the industry classifications in series F56-71 are not fully compatible with the system of industry classifications underlying the real domestic product by industry. The principal differences in the two sets of industry classifications concern the relationship between manufacturing and forestry, mining, and wholesale trade. For example, a manufacturing company whose profits, investment income and capital consumption allowances would be classified to manufacturing in series F60, might well have establishments producing output in forestry (pulp and paper manufacturing companies with their own forestry operations) or in mining (smelting and refinery companies with their own mining or oil and gas operations), or in wholesale trade (manufacturers' sales branches). In the real domestic product by industry indexes, the output of these manufacturing companies would be classified in four places: manufacturing, forestry, mining and wholesale trade. The user should be aware of this problem if industry information in series F56-71 is used in conjunction with industry information provided by the real domestic product indexes.

The indexes of real domestic product by industry are derived by a process of 'double deflation', deflating each industry's gross output and subtracting from it the deflated value of each industry's material inputs.

Table F225-240 Real domestic product, by industry, 1935 to 1976. Opens a new browser window.

Table F225-240
Real domestic product, by industry, 1935 to 1976

Source: for 1961 to 1976, Statistics Canada publications, Indexes of Real Domestic Product by Industry, (Catalogue 61-005), Indexes of Real Domestic Product by Industry, 1961-1969, (Catalogue 61-510), and Real Domestic Product by Industry, 1971-1976, (Catalogue 61-213); for 1935 to 1960, Statistics Canada, Indexes of Real Domestic Product by Industry of Origin, 1935-61, (Catalogue 61-505), which contain a full description of concepts, sources and methods.

Indexes of Labour Productivity and Unit Labour Cost, (Series F241-294)

General note

The measures of productivity given in these six tables relate output to labour input only, that is, output per person (column five in each table), or output per man-hour (column six in each table). It should be emphasized, however, that changes in output per unit of labour input cannot be attributed directly and solely to labour. The measures reflect not only changes in the skill and effort of the labour force, but also the contribution of other productive resources and the effectiveness with which all are combined and organized for production. In other words, changes in technology, capital investment, capacity utilization, workflow, managerial skills and labour-management relations all have a bearing on movements in the 'labour productivity' series.

The unit labour cost series (column nine in each table) measure the relationship of labour compensation to real output, that is, labour cost per unit of output. This makes explicit the relationship between productivity and 'average wage rates' as expressed broadly in the series 'Compensation per man-hour'.

F242, 251, 260, 269, 278 and 287. Persons employed denote all persons engaged in the production of output, including paid and own-account workers, working employers and unpaid family workers.

F243, 252, 261, 270, 279 and 288. Man-hours worked are the sum of man-hours spent at the place of employment by persons employed and therefore differ from a measure of 'man-hours paid' by excluding time used on vacation, holiday, illness, accident and other authorized leave.

F244, 253, 262, 271, 280 and 289. Labour compensation is a measure of the value of labour services engaged in the production process. It includes all payments in cash or in kind by domestic producers to persons employed as remuneration for work, including wages, salaries and supplementary labour income of paid workers plus an imputed labour income for self-employed workers. Statistics of labour compensation represent the most comprehensive labour cost data available for all industries at the present time since they include both cash payments and supplements, and cover all persons employed for gain.

F245, 254, 263, 272, 281 and 290. Column five, 'Output per person', is calculated by dividing the indexes of column one, 'Output', by the indexes of column two, 'Persons employed'.

F246, 255, 264, 273, 282 and 291. Column six, 'Output per man-hour', is calculated by dividing the indexes of column one, 'Output', by the indexes of column three, 'Man-hours'.

F247, 256, 265, 274, 283 and 292. Column seven, 'Compensation per person', is calculated by dividing the indexes of column four, 'Labour compensation', by the indexes of column two, 'Persons employed'.

F248, 257, 266, 275, 284 and 293. Column eight, 'Compensation per man-hour', is calculated by dividing the indexes of column four, 'Labour compensation', by the indexes of column three, 'Man-hours'.

F249, 258, 267, 276, 285 and 294. Column nine, 'Unit labour cost', is calculated by dividing the indexes of column four, 'Labour compensation', by the indexes of column one, 'Output'. It may also be calculated by dividing the indexes of column eight, 'Compensation per man-hour', by the indexes of column six, 'Output per man-hour'.

Table F241-249 Indexes of labour productivity and unit labour cost, in all commercial industries, 1946 to 1976. Opens a new browser window.

Table F241-249
Indexes of labour productivity and unit labour cost, in all commercial industries, 1946 to 1976

Source: for all years, Statistics Canada, Aggregate Productivity Measures, (Catalogue 14-201); additional information on sources and methods is given in an earlier Statistics Canada report, Indexes of Output per Person Employed and per Man-hour in Canada, Commercial Non-agricultural Industries, 1947-63, (Catalogue 14-501).

All commercial industries consist of agriculture, manufacturing, all other commercial goods-producing industries and all commercial service-producing industries.

Table F250-258 Indexes of labour productivity and unit labour cost, in commercial goods-producing industries, 1946 to 1976. Opens a new browser window.

Table F250-258
Indexes of labour productivity and unit labour cost, in commercial goods-producing industries, 1946 to 1976

Source: same as series F241-249.

Commercial goods-producing industries include agriculture, manufacturing, forestry, fishing and trapping, mines (including milling), quarries and oil wells, construction, and electric power and gas distribution.

Table F259-267 Indexes of labour productivity and unit labour cost, in commercial non-agricultural goods-producing industries, 1946 to 1976. Opens a new browser window.

Table F259-267
Indexes of labour productivity and unit labour cost, in commercial non-agricultural goods-producing industries, 1946 to 1976

Source: same as series F241-249.

Commercial non-agricultural goods-producing industries are the same as that described for series F250-258, with agriculture omitted.

Table F268-276 Indexes of labour productivity and unit labour cost, in agriculture, 1946 to 1976. Opens a new browser window.

Table F268-276
Indexes of labour productivity and unit labour cost, in agriculture, 1946 to 1976

Source: same as series F241-249.

Agricultural indexes are shown separately in these series.

Table F277-285 Indexes of labour productivity and unit labour cost, in commercial service-producing industries, 1946 to 1976. Opens a new browser window.

Table F277-285
Indexes of labour productivity and unit labour cost, in commercial service-producing industries, 1946 to 1976

Source: same as series F241-249.

Commercial service-producing industries include transportation, communication and other utilities (except highway and bridge maintenance and electric power, gas and water utilities); wholesale and retail trade; finance, insurance and real estate; offices of physicians and dentists; other commercial health services; motion picture and recreational services; services to business management; and personal (except private households) and miscellaneous services.

Table F286-294 Indexes of labour productivity and unit labour cost, in commercial service-producing industries, 1946 to 1976. Opens a new browser window.

Table F286-294
Indexes of labour productivity and unit labour cost, in commercial service-producing industries, 1946 to 1976

Source: same as series F241-249.

Manufacturing output, by major groups, is shown in Section R. The concept of output used for each of these industrial groups is constant price gross domestic product at factor cost, by industry (real domestic product by industry), and is the summation of constant price output indexes for individual industries. The weights used to aggregate the industry measures are each industry's share of gross domestic product in the base year. A more complete description of the concepts, sources and methods of the output indexes is found in Indexes of Real Domestic Product by Industry, (Catalogues 61-506 and 61-510).


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