St. Albert Business Diversity Study
Quantifying Business Environment Diversity
Prepared on: January 2016
Prepared by: Rhys Chouinard, MSc, Senior Corporate Analyst
CONTENTS
1 INTRODUCTION3
2 BUSINESS COMMUNITY DIVERSITY TRENDS
4
2015 St. Albert Business License NAICS Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Business License Diversity Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Diversity Change Visualization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Downtown Businesses Sub-Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Non-Resident Business License Sub-Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3 HISTORICAL TRENDS BY INDUSTRY
21
Fifteen Year Industry-Specific NAICS Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Closed Business License Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4 LABOUR FORCE TRENDS BY NAICS
28
Average Wages by Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Alberta Employment Force Diversity Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Alberta Economic Diversity Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5 RECOMMENDATIONS BASED ON ANALYSIS
37
Diversity-Increasing Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Key-Industry Monitoring and Support Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Wage Growth Business Attraction Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6 CONCLUSION41
7 APPENDIX43
Business License Lifetime Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Alberta GDP by NAICS Industry Percentage Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8 REFERENCES47
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St. Albert Business Diversity Study
1.
INTRODUCTION
In an ongoing effort to monitor the heartbeat of the business community in St. Albert, the
Economic Development Division at the City of St. Albert undertook a business diversity
study. This study used data on the North American Industry Classification System (NAICS)
codes for local St. Albert businesses to investigate how the local business landscape has
changed over the last fifteen years. It also examined factors such as average wages and
economic diversity. In general, it is desirable to have an increasing diversity of business
types. This reduces the susceptibility of a community to swings in the economy that
negatively impact individual industries.
St. Albert Business Diversity Study
3
2.
BUSINESS COMMUNITY DIVERSITY TRENDS
2015 St. Albert Business License NAICS Distribution
To get a general sense of the current status of the local business license distribution in
St. Albert, the list of local businesses with an open business license (as of May, 2015)
was obtained. The business licenses were then divided into seventeen NAICS groups.
These NAICS groups have similar industries grouped together. In a few instances, NAICS
groups with a very small number of business licenses (one or two in any given year) were
combined with larger groups of similar industries to avoid analysis of small, negligible
trends. These groups are shown in Table 2.1.
TABLE 2.1: NAICS CODE GROUPINGS USED FOR THE BUSINESS LICENSE DIVERSITY
STUDY.
4
NAICS CODE
SECTOR(S)
11,21,22
Agriculture, resource based, utilities
23
Construction
31-33
Manufacturing
41
Wholesale trade
44-45
Retail trade
48-49
Transportation and warehousing
51
Information and cultural industries
52
Finance and insurance
53
Real estate and rental and leasing
54
Professional, scientific and technical services
55, 56
Management, admin, waste, remediation
61
Educational services
62
Health care and social assistance
71
Arts, entertainment and recreation
72
Accommodation and food services
81
Other services (except public administration)
91
Public administration
St. Albert Business Diversity Study
After putting the industries into their groups, they were ordered from largest to smallest
in terms of the number of local St. Albert business licenses open in 2015. These NAICS
groups exclude non-resident business licenses; they include only local (resident and
home-based) St. Albert business licenses. Non-resident business licenses are obtained
by contractors and businesses located outside of St. Albert that operate within St. Albert’s
limits. Figure 2.1 shows the NAICS code distribution for St. Albert businesses as of May
2015. It gives a snapshot of the current business type breakdown in St. Albert by industry.
The three largest groups are Retail trade, Construction, and Other services (excluding
public administration). For a brief description of each NAICS category and related subcategories, see the Statistics Canada website [1]. It is apparent from Figure 2.1 that
St. Albert’s business license distribution is fairly undiversified. The shape of the
distribution suggests that St. Albert has “many eggs in few baskets”, in the sense that
67.6% of all business licenses fall into one of the top five categories. The “flatter” the
distribution becomes the more diversified the business community, since the categories
have a more equal share on average in a flatter distribution. The task of a creating
a diverse business community would require finding ways to spread out the share of
business licenses as evenly as possible in the business license distribution. Monitoring
this distribution over time can reveal the impacts of policy changes on the business
community.
FIGURE 2.1: 2015 ST. ALBERT LOCAL BUSINESS LICENSE NAICS CODE DISTRIBUTION
Figure 2.1: St. Albert open, local business license distribution in 2015, ordered from
largest NAICS category to smallest. These totals exclude non-resident business
licenses.
St. Albert Business Diversity Study
5
Business License Diversity Index
To quantify the diversity of a business community for a given time period, one needs to
come up with some form of meaningful “diversity index” or measure. For the purpose
of this analysis, a theoretical “perfect” business community (in terms of diversity of the
business license distribution) was assumed to have equal shares of business licenses
in each NAICS category. An example of this “perfect” or maximum diversity NAICS code
distribution is shown in Figure 2.2.
FIGURE 2.2: THEORETICAL PERFECT DIVERSITY BUSINESS LICENSE NAICS CODE
DISTRIBUTION
Figure 2.2: A theoretically “perfect” NAICS code distribution, in terms of diversity of
industry share.
In practice it is highly unlikely that this type of distribution would ever be achieved.
However as the real, measured distribution’s shape moves towards this distribution’s
shape, the impacts to the business community as a whole from changes in any
one particular industry are minimized. This reduces the susceptibility of a business
community to economic hardships caused by fluctuations in individual industries. For the
purpose of this study, the “perfect” distribution will serve as a baseline that will allow the
creation of a business “diversity index” for St. Albert’s business community. This will allow
the Economic Development Division at the City of St. Albert to monitor changing levels of
diversity in the business license distribution.
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St. Albert Business Diversity Study
To create a diversity index, one needs to quantify the difference between a measured
distribution (such as Figure 2.1) and the perfect distribution (Figure 2.2). One way to
do this is to calculate the difference between the theoretical “perfect share” ratio and
the real share (as a ratio) for a given NAICS group. Then, repeat this same step for the
remaining groups, and at the end, sum up the absolute value all of the differences.
Subtracting this value from one, and multiplying by a desired “scale factor” for the
diversity range yields a “business license diversity index”. This index can be interpreted
as a measure of how spread out the industry shares are in the business license
distribution. This diversity index can be tracked over time to see if St. Albert’s business
community is getting more diverse (which will give a higher index) or less diverse (which
will give a lower index). For the ease of interpretation, the scale factor for St. Albert’s
business license diversity index was chosen to be 10. This means the highest possible
diversity index score is 10, and the lowest score possible (least diverse) is zero. The
formula for calculating the diversity index for a given distribution is shown in Equation 1.
Equation 1
Ng
D= S(1 – ∑n=1
| Pa,n – Pp|)
where S is the chosen scale factor, Ng is the number of NAICS groups in the distribution,
n are the individual groups, Pa,n are the individual groups’ shares (NAICS group’s business
licenses divided by total business licenses), and Pp is the “perfect” share given the
number of NAICS groups. The formula for calculating the “perfect” share is given in
Equation 2;
Equation 2
PP= 1
Ng
Calculating this diversity index for a range of years allows one to track the changes in
a business community’s diversity over time. Since a perfect distribution has a diversity
index of 10, an upward trend over time indicates improving diversity.
St. Albert Business Diversity Study
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FIGURE 2.3: ST. ALBERT LOCAL BUSINESS LICENSE DIVERSITY INDEX (2001 TO 2015)
Figure 2.3: St. Albert’s local business license diversity index over a fifteen year period.
Figure 2.3 shows St. Albert’s local business license diversity index from 2001 until 2015.
The licenses used in each year’s distribution included any license that was opened in that
year, even if it was closed before the year finished. This was done to capture any seasonal
businesses that open and close within the span of a year. On average, St. Albert’s
business license distribution has gotten less diverse over the last fifteen years, with
the diversity index decreasing by around 6%. Although this trend is in the wrong direction,
the change is not that drastic considering the fifteen year time period. Other variables
such as total local business licenses and percentage distribution range were examined
over the same period to add context to the decreasing diversity trend.
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St. Albert Business Diversity Study
FIGURE 2.4: ST. ALBERT LOCAL BUSINESS LICENSES (2001 TO 2015)
Figure 2.4: St. Albert’s total open local business licenses over the last fifteen years.
Figure 2.4 shows the total number of open local business licenses each year (resident
and home-based, excludes non-resident) from 2001 until 2015. During this time period
the local business licenses increased by about 5.7% annually. This is a healthy increase
relative to population growth over the same period, which was around 1.5% annually.
Starting in 2001, the total business licenses grew steadily each year. After reaching a
peak in 2010, local business licenses have dropped slowly (at about 1.1% annually)
over the last five years. It does not appear as though growth in local business licenses is
correlated with changing diversity in business license NAICS types.
St. Albert Business Diversity Study
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FIGURE 2.5: ST. ALBERT NAICS DISTRIBUTION RANGE OVER TIME (MAX – MIN SHARE)
Figure 2.5: The range between the largest distribution share NAICS group and the
smallest group in the distribution, from 2001 to 2015.
Figure 2.5 shows the difference between the largest percentage share NAICS group and
smallest percentage share for each year from 2001 to 2015. For example, in 2001 the
largest NAICS group was Retail trade with 21.37%, and the smallest group was Public
administration with 0.51%. The range for this year was 20.86%, which is the difference in
height between the largest and smallest bar in Figure 2.6.
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St. Albert Business Diversity Study
FIGURE 2.6: ST. ALBERT LOCAL BUSINESS LICENSE NAICS CODE PERCENTAGE
DISTRIBUTION FOR 2001
Figure 2.6: The percentage distribution of St. Albert’s open, local business licenses by
NAICS code for 2001. Each industry group’s color has been kept consistent with the
2015 open business license distribution.
Even though St. Albert’s business license distribution was getting less diverse from
2001 to 2015, at least the range between the largest and the smallest NAICS categories
decreased overall (downward trend in Figure 2.5). The take-home message about the
changing diversity in St. Albert’s business licenses by NAICS over the last fifteen years
can be summarized in an analogy. If the percentage share of each industry is thought of
as how “rich” that industry is (number of business licenses it holds), then over the last
fifteen years, the gap between the single “richest” and single “poorest” NAICS industry
has decreased, but overall the disparity between the individual industries and their ideal
value has increased. This is as if the gap between the very richest and very poorest
person in a society decreased, but as a whole, the collective “rich” group got richer, and
the “poor” group got poorer. The next section will visualize this concept.
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Diversity Change Visualization
To visualize the decrease in diversity from 2001 to 2015, it may be useful to divide the
NAICS distribution into two groups: the top seven and the bottom ten. These two groups
appear naturally in the St. Albert business license distribution (see drop in bar height
between 7th and 8th largest group in Figure 2.7, or clusters gap in Figure 3.2). These
could loosely be thought of as the “share rich” NAICS groups and the “share poor” NAICS
groups, if one were to not worry about generalizations. Now, the average share of the top
seven and the average share of the bottom ten categories can be calculated.
FIGURE 2.7: PERCENTAGE DISTRIBUTION FOR ST. ALBERT BUSINESS LICENSE NAICS
CATEGORIES IN 2015
Figure 2.7: The red line shows the average percentage share of the top seven in 2015,
with the adjacent black line indicating the average percentage share in 2001. Similarly,
the blue line shows the average percentage share of the bottom ten categories in
2015, with the adjacent black line showing the average of the same group in 2001.
Figure 2.7 is the percentage distribution of St. Albert’s business licenses by NAICS
category in 2015. This is the same data as Figure 2.1, except it is shown as a percent
distribution instead of raw number of business licenses. The red line at the top of the
graph is a visualization of the average percentage share of the top seven NAICS groups
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St. Albert Business Diversity Study
in 2015. The adjacent black line shows the average percentage share of the same group,
but in 2001. Similarly, the blue line shows the average percentage share of the bottom
ten groups in 2015. The adjacent black line shows the average percentage share of the
bottom ten groups in 2001. The overall trend of the lines highlights that the top seven
categories increased their average share over the last fifteen years, and the bottom ten
decreased their average share over the same time period. The gap between the black
lines shows the difference between the top and bottom group in 2001; the gap between
the red and blue lines shows the difference between the top and bottom group in 2015.
This emphasizes that St. Albert’s business licenses showed decreasing diversity over the
time period; to turn a phrase, the rich(est seven categories) got richer, and the poor(est
ten categories) got poorer.
Downtown Businesses Sub-Analysis
To determine how the downtown St. Albert business license environment differs from
the overall St. Albert business license distribution, a short analysis was conducted on the
subset of business licenses in downtown St. Albert. Figure 2.8 shows the general area
included in the downtown St. Albert business license analysis.
FIGURE 2.8: ST. ALBERT DOWNTOWN BUSINESSES
Figure 2.8: Most businesses are situated along Perron, St. Anne, and
St. Thomas Streets.
St. Albert Business Diversity Study
13
When filtering the total open St. Albert business licenses to include only downtown
businesses, the list is shortened from 2,308 total business licenses to 212 in the
downtown core, a sample size of about 9.2%. Plotting the percentage distribution by
NAICS code (Figure 2.9) reveals that the largest category type for downtown businesses is
Health care and social assistance. The next four largest categories are Retail trade, Other
services, Professional, scientific and technical services, and Finance and insurance. The
distribution is not very diverse, as indicated by the large percentage share (83%) occupied
by the top six industries. This is perhaps not surprising, given that the downtown area
attracts a certain style of business. The relatively dense commercial buildings are not
conducive to Construction, Manufacturing, or Wholesale trade businesses, which typically
need larger spaces.
FIGURE 2.9: ST. ALBERT DOWNTOWN BUSINESS LICENSE NAICS CODE PERCENTAGE
DISTRIBUTION FOR 2015
Figure 2.9: St. Albert downtown business license percentage distribution by NAICS.
Calculating the diversity index for just downtown business licenses in 2015 returns a
value of 0.5, which is less diverse than the overall business license distribution for all
local St. Albert businesses (around 2.0 in 2015). The less diverse index value for the
downtown business license subset is no cause for alarm. With the unique business
environment offered in downtown St. Albert, a less diverse business mix is expected. To
get a deeper understanding of what fraction of total business licenses for each NAICS
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St. Albert Business Diversity Study
category are held downtown, the percentage of overall local businesses licenses held by
downtown businesses was calculated. The results, shown in Figure 2.10, reveal that a
large fraction of total Public Administration business licenses are located downtown. This
is a result of the large number of government buildings located in the downtown core. To
give some perspective, 6 out of the 9 total Public administration businesses licenses are
held downtown, so even though Public administration makes up a small portion of total
business licenses overall, the percentage held by downtown businesses is high (67%).
Moving onto the next two categories, it is shown that the downtown core has a large
fraction of St. Albert’s overall Finance and insurance businesses (27%), and Health care
and social assistance businesses (20%). It may be useful to keep these general trends in
mind when considering business attraction and retention efforts that are focused on
St. Albert’s downtown core. Another interesting fact is even though Retail trade makes
up the second largest category (15%) of downtown business licenses, it has a relatively
average fraction of total business licenses located downtown (8%) when compared to the
rest of the city.
FIGURE 2.10:2015 ST. ALBERT DOWNTOWN LICENSES AS PERCENTAGE OF TOTAL,
BY NAICS
Figure 2.10: Downtown business licenses as a percentage of total local St. Albert
businesses licenses.
St. Albert Business Diversity Study
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Figure 2.11 shows the cumulative open business license distribution (all licenses opened
in the fifteen year period) plotted alongside the cumulative closed business license
distribution, for the subset of data including only downtown business licenses. Comparing
the size of the green bar (showing the open business license distribution) to the size of
the orange bar (showing the relative number of closures in that industry) for an individual
NAICS sector can give an indication about the health of that industry in the St. Albert
downtown core. For example, Retail trade business licenses show a greater percentage of
closures than opens, indicating that Retail trade businesses may experience both higher
turnovers and lower success rates on average in the downtown. In contrast, the Health
care and social assistance business licenses have a greater percentage opened share as
compared to the percentage closed, indicating that more businesses of this type succeed,
as opposed to closing, on average. Each pair of bars tells a useful story about the status
of that industry in St. Albert’s downtown business environment. This distribution can
be used to construct a specific and efficient business attraction (or business retention)
strategy, depending on the overall goal for the future business environment in downtown
St. Albert.
FIGURE 2.11:CUMULATIVE PERCENTAGE DISTRIBUTION FOR DOWNTOWN ST. ALBERT
OPEN AND CLOSED BUSINESS LICENSES FROM 2001 TO 2005
Figure 2.11: Cumulative (fifteen year total) open business license distribution versus
cumulative closed business license distribution, for the downtown business only subset
of the data.
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St. Albert Business Diversity Study
FIGURE 2.12:PERCENTAGE DISTRIBUTION FOR ST. ALBERT DOWNTOWN BUSINESS
LICENSE NAICS CATEGORIES IN 2015
Figure 2.12: The red line shows the average percentage share of the top six sectors in
2015, with the adjacent black line indicating the average percentage share in 2001.
The blue line shows the average percentage share of the bottom eleven categories in
2015, with the adjacent black line showing the average in 2001.
Figure 2.12 is the percentage distribution of St. Albert’s downtown only business licenses
by NAICS category in 2015. This is the same figure for visualizing diversity change as in
Figure 2.7, except Figure 2.12 shows only the downtown business licenses. Also of note
is that the “share-rich” category includes the top six industries, and the “low share” or
“share-poor” categories includes the bottom eleven industries. As with the total St. Albert
business license diversity visualization, the limit for division into high and low share
were chosen based on the naturally occurring groups in the distribution. The decrease
in diversity in the downtown business license distribution is not as pronounced as the
decrease in diversity of the total business license distribution.
St. Albert Business Diversity Study
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Non-Resident Business License Sub-Analysis
While the phrase “resident” business licenses refers to those businesses that are local
to the community of St. Albert, “non-resident” business licenses are licenses that are
required by businesses that are located outside of St. Albert physically, but wish to
conduct business within St. Albert. For example, a trade worker with a physical business
location in Edmonton who wishes to do work in St. Albert is required to obtain a valid St.
Albert non-resident business license beforehand. In the original analysis, the non-resident
business licenses were excluded. This section will examine the non-residential business
licenses to obtain a general understanding of the types of businesses that are operating
within St. Albert, while being located elsewhere.
FIGURE 2.13:2015 ST. ALBERT NON-RESIDENT BUSINESS LICENSE NAICS CODE
PERCENT DISTRIBUTION
Figure 2.13: Non-resident business licenses issued by Business Licensing to external
businesses, percentage distribution categorized by NAICS code.
As of May of 2015, there were 728 non-resident business licenses issued. This is roughly
32% the size of the local business license total, so the non-resident element is a crucial
component of St. Albert’s business environment. Figure 2.13 shows the non-resident
business license percentage distribution for external businesses operating in St. Albert
in 2015. The overwhelming majority of non-resident business licenses (71%) fall into
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St. Albert Business Diversity Study
the Construction category. This is due to the large number of external construction
contractors that practice in St. Albert, such as home builders and electricians. Recalling
that Construction was the second largest category for local business licenses, this
industry appears to be a key component of St. Albert’s business community. If the nonresident business licenses were added to the local St. Albert business licenses, the
number of Construction business licenses would far exceed the Retail trade licenses.
Table 2.2 shows the geographic location of the businesses holding non-resident business
licenses in St. Albert in 2015. Edmonton businesses hold the vast majority of nonresident licenses, at about 72%. Sherwood Park and Sturgeon County hold the second
and third most non-resident licenses, with 7% and 5% respectively. This is perhaps not
surprising, considering that these are the major population centres nearest to St. Albert.
If one were to make a generalization, it could be said that the majority of non-resident
businesses operating in St. Albert are construction contractors coming in from Edmonton
and a few other satellite communities. This emphasizes the inter-connectedness of the
Edmonton Capital Region, with respect to business operations.
TABLE 2.2: NON-RESIDENT BUSINESS LICENSES IN ST. ALBERT IN 2015 BY SOURCE
REGION
St. Albert Business Diversity Study
LOCATION/REGION
NON-RESIDENT BUSINESS LICENSES
Edmonton
526
Sherwood Park
51
Sturgeon County
35
Spruce Grove
22
AB (Other)
21
Acheson
16
Calgary
13
Morinville
8
Ardrossan
7
St. Albert
6
Stony Plain
6
British Columbia
6
Leduc, AB
5
USA
4
Canada (Other)
3
19
The usefulness of the Downtown Business License Sub-Analysis and the Non-Resident
Business License Sub-Analysis comes from their ability to influence business attraction
and retention strategies. For example, when implementing a downtown business or
tenant attraction strategy, it would be a poor choice to market to Wholesale trade or
Transportation and warehousing companies, as those companies do not seem to exist
in the downtown. It may be beneficial to market to medical clinics and retail businesses,
given the current prevalence and success of those business types in occupying the
downtown core.
Likewise, when determining a business attraction strategy for all of St. Albert in future
years, an emphasis on attracting local region construction companies may be a fruitful
endeavour. It appears as though St. Albert utilizes a large number of construction
contractors from within the Capital Region, and this may signify that there is an appetite
for that type of work in the community. If the work exists to support construction
contractors, then those business types may be more inclined to move their business
locations to St. Albert, as compared with other industries that have few non-resident
licenses. The information contained within this report should be considered when
formulating business attraction, business retention, and resident attraction strategies for
the City of St. Albert.
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3.
HISTORICAL TRENDS BY INDUSTRY
Fifteen Year Industry-Specific NAICS Trends
Overall, St. Albert’s business license distribution has become less diverse over the last
fifteen years. However, this overall trend is composed of many smaller sub-trends, one
for each industry group. To examine the individual trends of each NAICS category, the
percentage shares of each group were plotted for the time period 2001 to 2015. For
graphical clarity, the seventeen NAICS groups were divided into three groups based on
percentage share in 2015. The first group, shown in Figure 3.1, contains Retail trade,
Construction, Other services, Health care and social assistance, and Professional,
scientific, and technical services. Retail trade’s percentage share shrunk considerably
over the time period, dropping from around 21% down to 16%. Construction’s share of
business licenses increased significantly, going from around 11% in 2001 to about 16% in
2015. The other three industries in this first group, Other services, Health care and social
assistance, and Professional, scientific, and technical services, either held steady with
their shares or increased slightly.
FIGURE 3.1: ST. ALBERT LOCAL BUSINESS LICENSE PERCENTAGE SHARE BY NAICS
(2015 TOP FIVE)
Figure 3.1: The percentage share of total local business licenses for select NAICS
categories from 2001 to 2015. This figure shows the trends of the NAICS categories
with the top five shares in 2015.
St. Albert Business Diversity Study
21
FIGURE 3.2: ST. ALBERT LOCAL BUSINESS LICENSE PERCENTAGE SHARE BY NAICS
(2015 MIDDLE SIX)
Figure 3.2: The percentage share of total local business licenses for select NAICS
categories from 2001 to 2015. This figure shows the trends of the NAICS categories
with the middle six shares in 2015.
Figure 3.2 shows the trends for the second group of NAICS categories over the last fifteen
years. This group contains Management, administrative services, waste management,
and remediation, Accommodation and food services, Finance and insurance, Educational
services, Arts and Entertainment, and Real estate and rental and leasing. Most of
the categories shares improved or remained fairly consistent over the years, with the
exception of Real estate and rental and leasing, which showed a notable decrease.
Management, admin, waste, and remediation posted decent gains, along with Arts
and entertainment. This second grouping of NAICS categories (shown in Figure 3.2) is
interesting because it shows the “split” between the larger industries and the smaller
industries. There is a fairly wide gap between those industries with above 6% share in
2015, and the remaining industries which have around 3% share and below. One could
think of these as the “share-rich” industries and the “share-poor” industries. It is not
known why this gap exists, although it appears to be a prevalent feature of St. Albert’s
business license distribution.
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FIGURE 3.3: ST. ALBERT LOCAL BUSINESS LICENSE PERCENTAGE SHARE BY NAICS
(2015 LOWER SIX)
Figure 3.3: The percentage share of total local business licenses for select NAICS
categories from 2001 to 2015. This figure shows the trends of the NAICS categories
with the lowest six shares in 2015.
Finally, Figure 3.3 shows the percentage share of the NAICS groups with the lowest six
shares in 2015. This group includes Wholesale trade, Manufacturing, Transportation
and warehousing, Information and cultural industries, Agriculture, resource based,
and utilities, and Public administration. Every one of these groups experienced a net
decline in percentage share between 2001 and 2015. The largest relative decline was
in Manufacturing’s percentage share, which dropped from 3.8% to around 2.1% over the
fifteen year period.
St. Albert Business Diversity Study
23
Closed Business License Trends
While collecting the data for St. Albert local business licenses, the closed business
licenses from the last fifteen years were also examined. The total business licenses
(local businesses only) that were closed each year are plotted in Figure 3.4. The average
number of closed business licenses per year in St. Albert is 238 per year over this time
period. This average is indicated by the horizontal black line in Figure 3.4.
FIGURE 3.4: ST. ALBERT LOCAL BUSINESS LICENSES, ANNUAL TOTALS
Figure 3.4: Total closed local business licenses in St. Albert each year over a fifteen
year period.
It is difficult to tell if the trends are reflective of shifts in the local Capital Region
economy, or if the trends reflect patterns of database cleaning by the Business Licensing
department at the City of St. Albert. In certain years, effort may be dedicated to checking
up on older business licenses to see if they are still valid (for example, exempt business
licenses which do not require a fee to be paid every year) and then closing the account
if the business is no longer active. It should also be noted that the 2015 value is only
closed business licenses as of May 2015. After 2010, the total “open” business licenses
began decreasing (Figure 2.4), and this corresponds to some above-average periods of
closed businesses per year. This implies that new local business licenses are not keeping
pace with the closed local business licenses.
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St. Albert Business Diversity Study
FIGURE 3.5: CUMULATIVE CLOSED LOCAL BUSINESS LICENSE NAICS DISTRIBUTION
FOR ST. ALBERT, 2001 TO 2005
Figure 3.5: Total closed local business licenses in St. Albert by year over a fifteen year
period.
Figure 3.5 shows the cumulative distribution of all closed business licenses between
2001 and 2015, sorted from largest NAICS category to smallest. Perhaps not surprisingly,
the distribution follows closely the percentage distribution of open business licenses in
St. Albert. This is a positive trend, as it indicates that the relative rate of closures per
industry is consistent. If the relative rate of closures to total open licenses increases
drastically for an individual industry, it could indicate that the industry is suffering
economically.
St. Albert Business Diversity Study
25
FIGURE 3.6: CUMULATIVE PERCENTAGE DISTRIBUTION FOR ST. ALBERT OPEN
LICENSES VS CLOSED BUSINESS LICENSES FROM 2001 TO 2005
Figure 3.6: Cumulative (fifteen year total) open business license distribution versus
cumulative closed business license distribution.
Figure 3.6 shows the cumulative open business license distribution (all licenses opened
in the fifteen year period) plotted alongside the cumulative closed business license
distribution. The relative similarity in percentage shares for open and closed licenses
in each NAICS category reiterates the impression that no one particular industry has a
disproportionate number of closed licenses to open licenses. If the percentage share of
closed business licenses was much greater than opened business licenses over the time
period, it would imply that a particular industry had received a disproportionately large
amount of license closures relative to its size.
Figure 3.7 shows a histogram of the lifetimes of closed business licenses in St. Albert. For
any business license that was closed between January 2001 and May 2015, the length
of time (in years) that the license was open was calculated. Then, the number of licenses
with lifespans between 0-1 year, 1-2 years, 2-3 years, and so forth were binned in the
histogram. The distribution shows that most closed business licenses have a lifespan
of between 0 and 3 years, with about 60% of all closed license lifetimes falling into that
range. For a more detailed analysis of the distribution shape, the interested reader may
refer to the Appendix section “Business License Lifetime Analysis”.
26
St. Albert Business Diversity Study
FIGURE 3.7: HISTOGRAM OF CLOSED LICENSE LIFETIMES IN ST. ALBERT
Figure 3.7: Histogram of closed business license lifetimes in years, of all closed local
business licenses in St. Albert from 2001 to 2015. The chart shows the most common
closed business license lifetime is between 0 and 3 years.
In summary, no alarming trends are observed in the closed business license data for
St. Albert. The closed licenses by NAICS distribution is relatively consistent with the open
licenses distribution, showing that certain industries are not likely suffering relative
to others. The number of closed licenses per year is fairly consistent, with possible
aberrations occurring due to operational habits of the Business Licensing department.
Finally, the closed business license lifetime distribution shows a curve with an absence
of a high number of older businesses closing. If this curve deviates from its current shape
in future years and the tail grows in size, it would indicate that the more established
businesses were closing, which could signal opportunity to promote new businesses in
the effected sectors.
St. Albert Business Diversity Study
27
4.
LABOUR FORCE TRENDS BY NAICS
While the open, local business license distribution for St. Albert gives an impression about
what types of businesses are operating in the community, the labour force distribution will
give an indication about what types of jobs St. Albertans are working (in terms of NAICS
industries). These include jobs that St. Albert’s residents are working both locally and
in other communities. Data is available on St. Albert’s labour force by NAICS for 2006
and 2011; the years when the federal census was conducted [2], [3]. The distribution
of St. Albert’s labour force by NAICS in 2006 and 2011 are shown in Figure 4.1 and 4.2,
respectively.
FIGURE 4.1: 2006 ST. ALBERT LABOUR FORCE DISTRIBUTION BY NAICS
Figure 4.1: St. Albert labour force distribution by NAICS for 2006. This shows the
distribution of job types worked by employed (or looking for work) St. Albert residents.
28
St. Albert Business Diversity Study
FIGURE 4.2: 2011 ST. ALBERT LABOUR FORCE DISTRIBUTION BY NAICS
Figure 4.2: St. Albert labour force distribution by NAICS for 2011. This shows the
distribution of job types worked by employed (or looking for work) St. Albert residents.
It is interesting to note that the industries with the largest number of business licenses
are not necessarily the same as the largest labour force industries. For example,
Public administration was the largest employment industry in 2011; however in terms
of business licenses, Public administration had the smallest percentage share in that
year. Some industries, such as Retail trade, Construction, and Health care and social
assistance, make up both a large percentage of St. Albert business licenses, and a large
portion of St. Albert’s labour force. These could be called “key industries” supporting
St. Albert’s community, if community were to collectively refer to both residents and
businesses.
St. Albert Business Diversity Study
29
FIGURE 4.3: ST. ALBERT LABOUR FORCE CHANGE FROM 2006 TO 2011, RAW NUMBER
Figure 4.3: St. Albert’s labour force change, by NAICS industry, between 2006 and
2011. Negative values denote losses of labour force workers from that industry.
Figure 4.3 shows the difference in labour force workers, by NAICS industry, for
St. Albert from 2006 to 2011. Construction, Public administration, and Education
services experienced the largest net gain in workers over the time period. The three
industries that saw the largest loss of workers were Accommodation and food services,
Wholesale trade, and Agriculture, resource based, and utilities. When the industries that
are already large (in terms of labour force share) gain workers faster than the smaller
industries, the diversity of the overall labour force distribution decreases.
A brief calculation of the labour force diversity index for 2006 and 2011 yields 5.9 and
4.9, respectively. The same methodology used for the business license diversity index
was applied to the labour force diversity index for each year to calculate these two values.
The labour force trend showed a decreasing diversity index from 2006 to 2011, indicating
that St. Albert’s labour force also became less diverse over that time period, following
the same trend as the business license distribution. The take-home message from
this labour force diversity analysis may be that St. Albert’s labour force diversity follows
the same pattern as the business license diversity (given the limited data available for
analysis). Also, the St. Albert labour force appears to have slightly better diversity when
compared to the business license distribution.
30
St. Albert Business Diversity Study
Average Wages by Industry
When considering the health of the local economy one needs to consider both the
types of jobs in a market, as well as the average wage paid for each industry. If the
local economy is adding jobs with wages that do not suit the nearby labour pool, then a
labour force will be driven into the community from surrounding regions. To maximize the
amount of residents working locally, both labour force industry and wage per industry
need to be considered when developing a business attraction strategy.
FIGURE 4.4: ALBERTA AVERAGE WEEKLY WAGES BY NAICS SECTOR FOR 2001
Figure 4.4: Alberta’s average weekly wages by NAICS industry in 2001. The Agriculture
and resource based industries (including oil and gas) paid the highest wages on
average.
Statistics Canada provides data on average weekly wages by NAICS industry at the
provincial level. Figure 4.4 shows the average weekly wage by NAICS for Alberta in 2001.
The Agriculture and resource based industry sector paid the highest wage on average
(including overtime) at about $1,170 a week, while the Accommodation and food services
paid the lowest on average, at about $260 a week.
St. Albert Business Diversity Study
31
FIGURE 4.5: ALBERTA AVERAGE WEEKLY WAGES BY NAICS SECTOR FOR 2015
Figure 4.5: Alberta’s average weekly wages by NAICS industry in 2015. The Agriculture
and resource based industries (including oil and gas) continues to pay the highest
wage on average.
Figure 4.5 shows the average weekly wage by NAICS sector for Alberta in 2015. The
Agriculture and resource based industry sector continues to pay the highest wage on
average. The top-down ranking in 2001 versus 2015 shows a similar pattern, with most
industries either maintaining their rank position, or moving a few spots up or down.
Notable is the healthy growth in wages in Alberta across the distribution over the fifteen
year period. To understand the growth by industry, the average annual growth in weekly
wages over the fifteen year period was calculated.
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St. Albert Business Diversity Study
FIGURE 4.6: ALBERTA AVERAGE WEEKLY WAGE BY ANNUAL GROWTH BY NAICS SECTOR
BETWEEN 2001 TO 2015
Figure 4.6 shows the average annual growth in wages for each NAICS sector, ranked
from highest to lowest. Other services, Public administration, and Agriculture and
resource based industries (including oil and gas) ranked the highest for average wage
growth. The slowest growing wages were in Arts, entertainment and recreation, and
Retail trade.
If one makes the assumption that working St. Albert residents get paid the same on
average as Alberta residents, then a “St. Albert Average Wage” can be calculated by
combining the labour force distribution by NAICS and the average wage by NAICS. The
same average wage calculation for the Albertan worker can be performed, and the two
values can be compared over time to see if the change in wages and change in labour
force distribution is resulting in the average St. Albertan making more (or less) than the
average working Albertan. In 2006, the St. Albert average income (based on labour force
distribution and average Alberta wage, normalized to annual income) was $42,732.
The same calculation for the average Alberta income yields $42,771. The two average
incomes are very similar, differing by a small fraction of a percent. Performing the same
calculation for 2011 wages yields a St. Albert average income of $53,649, and an Alberta
average income of $53,780. These two values are also very close (differing by about 2%).
Despite the fact that St. Albert has a low proportion of oil and gas industry jobs (which
have the highest average wages), the high proportion of Public administration and
Construction jobs keep the “average” St. Albertan income from falling out of line with
the average “Albertan income”.
St. Albert Business Diversity Study
33
An interesting side note is that using 2011 tax filer data from Statistics Canada, the
average working St. Albertan “employment income” is around $60,658, which is 13%
higher than the calculated “average St. Albertan wage”. This implies working St. Albert
residents get paid slightly above average wages compared to the rest of Alberta.
Alberta Employment Force Diversity Analysis
The technique that was used for measuring St. Albert’s business license diversity can
be applied to Alberta’s employment force, to see if the employment diversity of the
province has increased or decreased over the last fifteen years. Simply put, this answers
the question “are Albertan’s working a greater diversity of jobs as time goes on, or are
certain key industries relied on more heavily for employment?” This is useful information
for planning industry growth strategies at the provincial level, since increased job market
diversity protects an economy against large swings in any one particular market, such as
oil and gas.
FIGURE 4.7: ALBERTA EMPLOYMENT FORCE DIVERSITY INDEX FROM 2001 TO 2015
(INCREASING TREND DESIRED)
Figure 4.7: Alberta employment force diversity index from 2001 to 2015. A “perfect”
employment force distribution would have equal shares in all NAICS categories. An
upwards trend is desired.
34
St. Albert Business Diversity Study
Figure 4.7 shows Alberta’s employment force diversity index from 2001 to 2015. An
increasing trend-line is desired, as it indicates an increasing diversity of jobs. This figure
indicates that Alberta’s employment force has become less diverse over the last fifteen
years, although the trend is moving downwards very slowly. It could also be noted that
comparing St. Albert’s labour force diversity numbers in 2006 (5.9) and 2011 (4.9)
reveals that St. Albert’s labour force is less diverse than Alberta’s overall.
Alberta Economic Diversity Analysis
The calculation that was used for measuring St. Albert’s business diversity can be
applied to Alberta’s Gross Domestic Product (GDP) by industry, to see if the economic
diversity of the province has increased or decreased over the last fourteen years. This
calculation seeks to answer the question “is Alberta’s economy becoming more diverse
as time goes on, or are certain key industries being relied on more heavily for growth?”
This is useful information for creating economic growth strategies aimed at increased
diversification.
FIGURE 4.8: ALBERTA EMPLOYMENT GDP DIVERSITY INDEX FROM 2001 TO 2014
(INCREASING TREND DESIRED)
Figure 4.8: Alberta economic diversity index from 2001 to 2014. The economic diversity
index represents how “spread out” the province’s GDP contributions are among each
NAICS sector. A perfect diversity index of 10 would be achieved if every NAICS group
contributed the same amount to Alberta’s GDP.
St. Albert Business Diversity Study
35
Figure 4.8 shows Alberta’s economic diversity index from 2001 until 2014. Data used
was from Statistics Canada, Provincial GDP by NAICS code [4]. The source data table
used in calculating the economic diversity index (percentage share of Alberta GDP
by industry) is provided in the Appendix. The graph indicates that Alberta’s economy
experienced increasing diversity from 2001 until 2009, at which point it began moving
in the direction of decreasing diversity. To glean some information about the abrupt
inversion in this direction of economic diversity, the two time periods of pre-crash (2001
to 2009) and post-crash (2010 to 2014) were examined separately. During the pre-crash
time period, the Agriculture and resource based industries experienced a decrease in
percentage share of Alberta’s GDP, going from about 36.0% in 2001 to 30.6% in 2009.
The Manufacturing sector also experienced about a 1.4% decrease in share. The three
industries that gained the largest percentage share in the pre-crash period were Retail
trade, Real estate, rental and leasing, and Professional, scientific and technical services
(each gaining roughly 1% share).
After the financial crash in 2009, Alberta’s economic diversity began decreasing. Between
2009 and 2014, only two industries experienced increases in overall percentage share
of Alberta’s GDP; Construction (2.7%) and Wholesale trade (0.5%). All other industries
actually experienced a decrease in percentage share.
To summarize, the increasing diversity from 2001 to 2009 was largely due to the
decreasing percentage share of the Agriculture and resource industries, at the benefit
of Retail trade and a few other “small share” industries. After 2009, the decreasing
economic diversity is mainly due to the increasing share of Construction, and Wholesale
trade. The largest industry (Agriculture and resource based) maintained a fairly constant
percentage share during this time period, and many of the smaller share industries
experienced net losses in percentage share, leading to an overall decrease in economic
diversity. This index can be used to measure the impact of policy changes on economic
diversity.
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St. Albert Business Diversity Study
5.
RECOMMENDATIONS BASED ON ANALYSIS
Using the information contained in this analysis, there are a few general approaches the
City of St. Albert can take to reshape the business community. One approach would be
a proactive, diversity-increasing strategy, the results of which could be measured through
changes in the business license index over time. Another approach could be a reactive,
key-industry-supporting strategy to be enacted during times of potential stress in the
St. Albert business community. Finally, an average wage growth based strategy could be
implemented. These strategies are discussed below.
Diversity-Increasing Strategy
Increasing the diversity of the business license distribution may be desirable, as more
diverse economies afford better protection against downturns in any individual industry.
Changes to the local business license distribution likely have a direct impact on the
labour force diversity as well, since about 60% of St. Albert’s jobs are held by local
residents [5]. It is noted that the business license diversity is only “half the story” in the
sense that a small number of business licenses can employ a large amount of residents,
if the businesses are large. For example, the City of St. Albert may employee over 500
employees, and only has a single business license. If a NAICS category has only a few
licenses, but those businesses are large employers, then the low number of licenses in
that category may not necessarily be a concern. The Public administration category is a
good example of this; it employed the largest group of residents in 2011, yet it made up
a very small fraction of the total business license distribution. However, given that small
businesses typically outnumber large businesses, the diversity of the business license
distribution is still providing useful, actionable information for monitoring the local
business community. Not only that, but one may argue that the smaller business license
categories that employ a large number of St. Albert residents should be watched even
closer for trends, since it implies small changes to the business license numbers can
signal large changes to the employment force.
If the City of St. Albert were to engage in an all-out business license diversity increasing
mission, it could be accomplished through a number of methods. The first method could
involve differential pricing to business licenses based on NAICS. By pricing the business
licenses for smaller NAICS categories lower than the larger NAICS categories, it could
encourage more business types in the smaller NAICS categories to open. This would
increase the percentage share of the lower categories, and potentially increase the
diversity of the business license distribution.
St. Albert Business Diversity Study
37
A second strategy to increase business license diversity might involve business
attraction programs that are targeted at the low-share NAICS categories. By emphasizing
the business attraction strategy on low-share NAICS, over time the business license
distribution should flatten out as more businesses in the low-share categories are drawn
to St. Albert. Other strategies could involve changes to procedural tasks involved with
starting a business. As an example, changes to the process for permits involved with
building light-industrial establishments may increase the fraction of manufacturing
business licenses. Changes to the roadway infrastructure in and around St. Albert may
increase the relative share of Transportation and warehousing licenses. There are a
multitude of strategies that could be implemented to increase the business licenses in
any particular industry.
FIGURE 5.1: EMPLOYMENT LANDS
Figure 5.1: The Employment Lands; 617 acres of land west of Ray Gibbon Drive, set
aside by the City of St. Albert for non-residential development.
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St. Albert Business Diversity Study
As a final note, it should be mentioned that the overall direction taken by the City of
St. Albert with respect to the Employment Lands could have a marked impact on the open
business license distribution. The Employment Lands refer to 617 acres of land set aside
by the City for non-residential development (commercial and light industrial).
If the Employment Lands are developed with certain “themes” in mind, the NAICS code
distribution for business licenses could reflect the end-result of those strategies. As a
hypothetical example, the Employment Lands could be developed with an emphasis on
attracting the knowledge-based sector. This could in turn lead to an increased proportion
of Educational services, and Information and cultural industries business licenses.
With this in mind, it is recommended that the NAICS business license distribution be
monitored in future years to keep track of the changing St. Albert business landscape,
especially as new non-residential growth nodes come online.
Key-Industry Monitoring and Support Strategy
Another approach the City could take in utilizing this data is a reaction-based monitoring
strategy of the community’s key industries. This would involve monitoring the business
license NAICS code diversity over time, to ensure that the key industries are healthy. If
industries that have leading shares in both the business license distribution and the
labour force distribution were shown to drop in overall percentage shares, policies or
programs could be created to help keep those key industries afloat during hard times.
This would mitigate the impact to the community that would result from negative trends
in the key industries. These strategies would not necessarily seek to improve the diversity
of the business license distribution. They would only seek to maintain the status quo and
“accept” the diversity level as given, while ensuring the business community was provided
assistance in the right industries at the right times to help balance out the ebb and flow
cycle of the greater regional economy.
Wage Growth Business Attraction Strategy
Another interesting possible growth scenario would be the situation where the City of
St. Albert wishes to create high wage growth for the average St. Albert working
resident. This could be achieved by focusing business attraction strategies for new and
redeveloping lands on high-wage industries. As with any growth strategies, a careful
selection of high average wage, fast growing, and brand-acceptable industries would
be determined and attracted using a targeted campaign. If successful, the attraction of
businesses to St. Albert with high average wages could lead to an increase in the growth
of the local gross domestic product, if the people earning the higher wages were spending
larger amounts of money locally from the increased income. A “safe”, but diversity
St. Albert Business Diversity Study
39
increasing strategy would involve targeting high wage industries that currently have a low
labour force share in St. Albert. This would (in theory) increase the local economic growth,
as well as diversify the labour force at the same time.
40
St. Albert Business Diversity Study
6.
CONCLUSION
This analysis sought to obtain a deeper level of understanding about St. Albert’s business
community, with respect to the distribution and diversity of business types. Understanding
the types of industries present in St. Albert helps the Economic Development Division
deliver better services, and ultimately create programs and strategies that impact the
business community in a positive way. To this end, a tailor-made diversity index was
created for the purpose of monitoring St. Albert’s business license distribution over time.
Analysis of the temporal data showed that St. Albert’s business license distribution has
become less diverse over time; this is a technical way of saying the larger NAICS groups
are gaining a bigger share, and the smaller NAICS groups are getting a smaller share. The
labour force data appears to follow the same trend, although only a limited number of
data points were available.
A number of interesting trends were observed in the individual NAICS categories over
time. The Construction industry has gained considerable share over the last fifteen years,
while the relative share of Retail trade decreased, despite it still having the largest share
of business licenses in 2015. Some of the smaller groups in terms of business licenses,
such as Public administration, employ a large number of St. Albert residents. This may
speak to the size of those businesses in St. Albert, or the preference of work for St. Albert
residents in other communities.
The analysis of the average wages by industry lead to the discovery that St. Albert’s
“average income” relative to an “average income” for Albertans is growing at the
same rate. Despite the low number of high paying Agriculture and resource based jobs
(including oil and gas), St. Albert’s average wage is kept competitive by the large fraction
of Public administration and Construction jobs. It was also shown that Alberta’s economic
diversity was increasing from 2001 until 2009, after which point the economic diversity
trend reversed directions towards decreasing diversity. The underlying factors in terms of
percentage share of each NAICS group were discussed.
Finally, a number of strategies which may be implemented leveraging the unique insights
gained through this analysis were presented. A hypothetical diversity increasing strategy,
key industry supporting strategy, and wage growth strategy were outlined utilizing the
information presented in this report.
St. Albert Business Diversity Study
41
Understanding the business community at the deepest level possible maximizes the
efficiency and effectiveness of resident and business attraction programs, as well as
business retention strategies. It also affords Economic Development a greater ability to
adapt to the changing needs of the community. The techniques of quantifying diversity
contained in this report can be applied to a wide range of economic variables, enabling
unique insight into the way the local economy changes and grows with time.
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St. Albert Business Diversity Study
APPENDIX
Business License Lifetime Analysis
The closed business lifetime histogram shown in Figure 3.7 gives a distribution of the
length of time a business license was open, prior to its closure. If one is able to accurately
characterize a distribution, it makes it easier to quantify the changes in that distribution
as time passes [6]. Also, accurately characterizing the shape of St. Albert’s closed
business license lifetime distribution could allow prediction of local business churn rates.
Predicting churn rates would be useful in targeting businesses to maximize business
retention strategies. Based on the shape of the distribution, it appears as though it may
be well fit to what is known as a gamma distribution. The gamma distribution is a simple
(two-parameter) continuous probability distribution which makes it an ideal candidate for
characterizing the closed business lifetime histogram. As an added bonus, the gamma
distribution is already known for its applications to lifetime modeling [6]. The gamma
distribution most often used for econometrics applications is given by;
Equation 3
f(x) = (k) –1θ –k x k–1e
where k is the shape factor, θ is the scale factor, and Γ is the gamma function. Using
a parameter estimation technique known as maximum likelihood estimation, the best
estimates for the parameters of the gamma distribution that most closely matches the
closed business lifetime distribution were calculated, and are given in Table A.1.
TABLE A.1: PARAMETERS OF THE GAMMA DISTRIBUTION, ESTIMATED VIA MAXIMUM
LIKELIHOOD
PARAMETER
ESTIMATE
STANDARD ERROR
θ (shape)
1.312
0.028
k (scale)
0.373
0.010
The best-fit gamma distribution curve laid overtop of the closed business lifetime
histogram is shown in Figure A.1 to give a visual impression of the agreement between
theory and measurement.
St. Albert Business Diversity Study
43
FIGURE A.1: HISTOGRAM OF CLOSED LICENSE LIFETIMES (IN YEARS) IN ST. ALBERT
Figure A.1: St. Albert closed business license lifetime distribution, with a best-fit gamma
distribution overlaid in blue.
The gamma distribution appears to fit the histogram well, although a better measure
of agreement comes from a statistical test known as a Kolmogorov-Smirnov test. The
“K-S” test can be used as a goodness-of-fit test by assuming the curve with the bestfit parameters is the “true” curve, and the distribution was sampled from that true
curve. However, performing a K-S test in the R programming language (comparing
the parametric curve to the histogram) returns a K-S test statistic of 0.0714, which is
above the calculated acceptable threshold of 0.0228 for the industry standard level of
a significance of 0.05. In a one-sample K-S hypothesis test scenario, one might say the
test rejects the null hypothesis (that the distribution matches the curve) [7]. This implies
that the measured distribution cannot be assumed to come from a gamma distribution
with the parameters in Table A.1 with a high degree of confidence. In future studies, if
it is desired to predict business license churn with a high degree of precision, a better
fitting distribution will need to be found for statistically relevant conclusions to be drawn.
There is a possibility that a bias exists in the distribution because of the methodology for
closing licenses. Since St. Albert business licenses are validated in one-year increments,
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St. Albert Business Diversity Study
if a business fails prior to the one-year license renewal deadline, the business often just
lets the license expire after the one year deadline, instead of closing it at the time the
business ceases operations. This explains the large frequency of business lifetimes in the
1 to 2 year bin. If this bias was reduced by encouraging business owners to close their
licenses as soon as a business has terminated its service, then it is possible the business
license lifetime distribution would have a greater level of agreement with a gamma
distribution.
Alberta GDP by NAICS Industry Percentage Shares
The raw percentage shares of Alberta’s Gross Domestic Product for each NAICS group are
provided in Table A.2 (data from Statistics Canada [4]).
St. Albert Business Diversity Study
45
46
St. Albert Business Diversity Study
2001
35.99
7.70
7.73
4.03
3.40
3.96
2.28
3.20
8.68
4.38
2.70
3.47
4.18
0.53
2.04
1.63
4.10
INDUSTRY GROUP
Agriculture and resource
industries
Construction
Manufacturing
Wholesale trade
Retail trade
Transportation and
warehousing
Information and cultural
industries
Finance and insurance
Real estate and rental and
leasing
Professional, scientific and
technical services
Management, admin, waste
services, remediation
Educational services
Health care & social
assistance
Arts, entertainment and
recreation
Accommodation and food
services
Other services (except
public administration)
Public administration
1.70
4.25
4.18
1.99
0.56
4.40
3.56
2.90
4.61
9.09
3.32
2.39
3.94
3.65
4.10
7.06
7.42
35.05
2003
1.65
2.04
0.58
4.30
3.50
2.83
4.53
8.95
3.26
2.30
3.93
3.61
3.99
7.43
7.60
35.31
2002
4.11
1.72
1.95
0.57
4.31
3.49
3.01
4.67
8.89
3.36
2.47
3.91
3.58
4.20
7.45
7.77
34.54
2004
4.04
1.76
1.95
0.50
4.34
3.46
2.90
4.75
8.87
3.36
2.47
4.07
3.64
4.39
7.80
8.61
33.09
2005
3.92
1.82
1.92
0.51
4.21
3.39
2.96
4.90
8.78
3.69
2.51
4.13
3.90
4.54
7.72
8.77
32.33
2006
3.99
1.82
1.94
0.52
4.35
3.40
3.03
5.07
8.87
3.80
2.47
4.16
4.23
4.56
7.38
9.06
31.36
2007
4.08
1.86
1.92
0.53
4.49
3.49
3.11
5.25
9.11
3.82
2.49
3.90
4.32
4.52
7.14
9.58
30.38
2008
4.52
1.89
2.04
0.53
4.86
3.75
3.14
5.36
9.75
4.04
2.61
3.96
4.41
4.23
6.31
8.05
30.56
2009
4.42
1.83
1.90
0.49
4.65
3.65
2.96
5.14
9.63
4.00
2.59
3.91
4.33
4.26
6.36
9.19
30.68
2010
4.25
1.87
1.88
0.45
4.55
3.47
2.98
5.25
4.12
1.86
1.95
0.44
4.51
3.42
3.01
5.28
9.52
3.85
3.88
9.54
2.40
3.87
4.27
4.75
6.50
10.31
29.94
2012
2.46
3.90
4.23
4.78
6.61
9.63
30.26
2011
TABLE A.2: PERCENTAGE SHARES OF ALBERTA’S GDP FOR EACH NAICS GROUP FROM 2001 UNTIL 2014
4.04
1.82
1.97
0.42
4.45
3.34
2.98
5.18
9.51
3.87
2.32
3.85
4.32
4.70
6.37
11.00
29.86
2013
3.93
1.80
1.97
0.42
4.41
3.27
2.97
5.07
9.52
3.79
2.24
3.92
4.37
4.77
6.30
10.75
30.51
2014
REFERENCES
[1] North American Industry Classification System (NAICS) Canada 2012.
http://www23.statcan.gc.ca/imdb/p3VD.pl?Function=getVD&TVD=118464.
[2] Statistics Canada 2006 Community Profiles. Statistics Canada. 2007. St. Albert,
Alberta. 2006 Community Profiles. 2006 Census. Statistics Canada Catalogue
no. 92-591-XWE. Ottawa. Released March 13, 2007. http://www12.statcan.ca/
censusrecensement/2006/dp-pd/prof/92-591/index.cfm?Lang=E (accessed
February 4, 2014).
[3] Statistics Canada 2011 National Household Survey. Statistics Canada. 2013.
St. Albert, CY, Alberta (Code 4811062) (table). National Household Survey (NHS)
Profile. 2011 National Household Survey. Statistics Canada Catalogue no. 99-004XWE. Ottawa. Released September 11, 2013. http://www12.statcan.gc.ca/nhsenm/2011/dp-pd/prof/index.cfm?Lang=E (accessed February 4, 2014).
[4] Statistics Canada. Table 379-0030 – Gross domestic product (GDP) at basic prices,
by North American Industry Classification System (NAICS), provinces and territories,
annual (dollars), CANSIM (database)
[5] St Albert and Surrounding Area Employment Environment Analysis. City of St. Albert
Economic Development Division, August 14, 2014.
[6] Intelligent Data Analysis: Developing New Methodologies Through Pattern Discovery
and Recovery, National Tsing Hua University, ROC, Hsiao-Fan Wang, July 2008.
[7] Kolmogorov-Smirnov Test Statistic Values for Given Significance Levels,
http://dlc.erieri.com/onlinetextbook/index.cfm?fuseaction=textbook.
appendix&FileName=Table7
Rhys Chouinard
Senior Corporate Analyst, Economic Development/Strategic Services, City of St. Albert
29 Sir Winston Churchill Ave, St. Albert, AB | [email protected]
St. Albert Business Diversity Study
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