Economic Contribution of the Canadian Magazine Industry
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1 Economic Contribution of the Canadian Magazine Industry December 26 Abeer Reza Charles Saunders Reviewed by: Nancy Cebryk Mike McCracken
2 Table of Contents 1 Introduction Direct Contribution Indirect Contribution Induced Contribution Conceptual Overview of Induced Effects Total Contribution to the National Economy Macro Overview Total Contribution in the National Economy Industry Overview Total Contribution in the National Economy Multiplier Effects Provincial Contributions Ontario Appendix I: Data Tables List of Figures Figure 1: Newspaper, periodicals, books and database publishers GDP, $97 million... 5 Figure 2: Conceptual overview of direct, indirect and induced contributions Figure 3: Total contribution of magazine industry national macroeconomic indicators Figure 4: Total contribution of magazine industry price formation Figure 5: Total contribution of magazine industry personal income Figure 6: Total contribution of magazine industry domestic demand drivers Figure 7: Total contribution of magazine industry government balances Figure 8: Total contribution of magazine industry sectoral GDP and employment List of Tables Table 1: Direct contribution of periodicals industry (levels)...4 Table 2: Input-Output Tables, selected portions, Use Matrix...6 Table 3: Indirect GDP contribution for selected industries, $97 million...7 Table 4: Direct and indirect GDP contribution for selected industries, per cent...8 Table 5: Total direct and indirect GDP contributions of the periodicals industry, $97 million...8 Table 6: Employment contribution of periodicals industry through direct and indirect effects...9 Table 7: Employment contributions through direct and indirect impacts of the periodicals industry...9 Table 8: Government revenue contribution through direct, indirect and induced effects of the magazine industry, nominal $ millions...15 Table 9: Total GDP contribution for selected industries, $97 million...16 Table 1: Total employment contribution for selected industries...17 Table 11: Total direct, indirect and induced GDP contributions of the periodicals industry, $97 million.17 Table 12: Total direct, indirect and induced employment contributions of the periodicals industry...17 Table 13: Direct and indirect GDP contribution for selected industries in Ontario, $97 million...19 Table 14: Direct and indirect GDP contribution for Ontario, $97 million...19 Table 15: Direct and indirect employment contributions for Ontario...2 Table 16: Total GDP contributions for selected industries in Ontario, $97 million...2 Table 17: Total GDP contributions for Ontario, $97 million...2 Table 18: Total employment contributions for selected industries in Ontario...21 Table 19: Per cent GDP impact in Ontario vis à vis per cent GDP impact in rest of Canada...21 Table 2: Direct impact, levels...24 Table 21: Reference case employment, number of jobs...24
3 Table 22: Direct and indirect employment impact, number of jobs...25 Table 23: Direct, indirect and induced employment impact, number of jobs...25 Table 24: Direct and indirect employment impact, per cent...26 Table 25: Direct, indirect and induced employment impact, per cent...26 Table 26: Reference case GDP, $97 millions...27 Table 27: Direct and indirect GDP impact, $97 millions...27 Table 28: Direct, indirect and induced GDP impact, $97 millions...28 Table 29: Direct and indirect GDP impact, per cent...28 Table 3: Direct, indirect and induced GDP impact, per cent...29 Table 31: Direct and indirect GDP impact for Ontario, $97 million...29 Table 32: Direct and indirect GDP impact for Ontario, per cent...3 Table 33: Direct and indirect employment impact for Ontario, number of jobs...3 Table 34: Direct and indirect employment impact for Ontario, per cent...31 Table 35: Direct, indirect and induced GDP impact for Ontario, $97 millions...31 Table 36: Direct, indirect and induced GDP impact for Ontario, per cent...32 Table 37: Direct, indirect and induced employment effects for Ontario, number of jobs...32 Table 38: Direct, indirect and induced employment effects for Ontario, per cent...33
4 Partners The Economic Contribution of the Canadian Magazine Industry is a research initiative of Magazines Canada, in partnership with the Ontario Media Development Corporation. 1
5 Economic Contribution of the Canadian Magazine Industry 1 Introduction The Canadian magazine industry is an important media between the generators of Canadian information, ideas and views and the Canadian public. The industry is classified under North American Industry Classification System (NAICS) code This industry is in turn a part of the broader classification Newspaper, Periodical, Book, and Database Publishers (NAICS 5111). Statistics Canada s survey on the periodical industry 1 reveals that in the year 23/4, a total of 2,383 periodicals were published in Canada, with a total circulation of 758 million copies. 2 Of these periodicals, 324 were for general consumers, 761 were for special interest consumers, 637 were trade magazines, 12 focused on farming, 174 were based on religious topics, and 385 were scholarly periodicals. Furthermore, of the 2,383 titles published, 1,447 periodicals were published in English (6.7 per cent), 452 in French (19.6 per cent), 342 were bilingual (14.47 per cent), and 142 publications appeared in other languages (6 per cent). For the same year, the periodicals industry provided 6,462 full-time and 3,18 part-time jobs. Another 4,956 volunteer and unpaid jobs also contributed to the industry. In 23/4, the industry earned $1.5 billion in revenue, and spent $1.4 billion in expenses. This report aims to determine the total economic contribution of the magazine industry to the Canadian economy. The periodicals industry not only creates jobs and outputs itself, but also influences other industries by creating demand. The inputs required by the periodicals industry creates demand and generates jobs in industries that produce those specific inputs. Furthermore, jobs created by the periodicals industry, as well as industries influenced indirectly by the periodicals industry, result in disposable income for employees. Some of this disposable income may be saved, while some part of it would definitely be spent on other domestic goods and services, creating further demand, and further output. Therefore, the total contribution to the economy by the periodicals industry is different from just the amount of magazines it produces or employment it generates in isolation. The focus of the report is to determine the total contribution of the magazine industry. The approach taken in this report is to create a counterfactual economy where there is no domestic magazine industry. In this scenario, all magazines are assumed to be imported into Canada from abroad. If we now compare the real world with this counterfactual economy, we can see the complete effects throughout all industries of having magazines produced domestically. This report describes the impact of creating a domestic periodicals industry in an economy where no magazine industry existed. 1 Statistics Canada publication Survey of Periodical Publishing, 23/4, catalogue no: 87F5XIE, June Throughout this report, the terms periodical and magazine are used interchangeably. There is no technical difference assumed between magazine publishers and periodical publishers. 2
6 The creation of an industry can have three different types of effects on the economy. In the economic impact literature, direct effects are usually expressed through the straightforward jobs and output generated by an industry or a project. Hence, outputs (magazines), jobs and valueadded provided directly by the magazine industry in isolation correspond to the direct effects of having the industry present. But producing magazines requires paper, printing ink, photographic film, office supplies, etc., as well as contributions from freelance writers. Distributing magazines requires postal and courier services. Therefore, industries that provide input toward producing magazines also face higher demand due to the presence of a periodical industry. The employment and value-added provided by industries indirectly affected constitute the indirect effects of having a periodical industry. Furthermore, income earned by people working for the magazine industry, or for industries that sell their output to magazine industries may be saved or spent. The demand created by the earnings that directly or indirectly results from the magazine industry may produce more output, and more jobs. These are effects induced by the presence of the magazine industry. The direct, indirect and induced effects constitute the contribution of the magazine industry to the total economy. The rest of this paper describes these contributions. The exercise resulted in a counterfactual scenario for the years 1997 to 25. The use of recent history will help the reader to scale the contribution on the current size of the industry. 3
7 2 Direct Contribution There are many ways of describing the size of the magazine industry. One measure is the physical number of magazines produced. However, measuring through physical units has its limitations since different magazines have different prices. Gross output numbers represent the total dollar value of all periodicals produced and sold by the industry. Gross output can be measured in current and constant dollars. Constant dollar measures allow for the adding up of physical units with different base year values. If we wanted to compare magazine output in dollars for one year with output of the printing industry in a different year, we need to take into account the different inflation effects in different industries. Constant dollar measures allow us to compare output in different industries and in different years. If all the value of the periodicals output is attributed to the magazine industry, we are crediting the industry with the embodied value of paper, printing ink, distribution services, and other purchased inputs, along with the value-added by the magazine industry through labour and profitability. To avoid double-counting contributions and comparing value-added by different industries towards producing a single good, we can look at Gross Domestic Product. GDP is a measure of total activity for an industry or economy. Gross Domestic Product (GDP) = Gross Output (industry shipments) purchased inputs = valueadded for the (magazine) industry Table 1: Direct contribution of periodicals industry (levels) Real Gross Output ($97 Millions) 1,63 1,133 1,192 1,242 1,266 1,288 1,281 1,323 1,355 1,238 Real GDP ($97 Millions) Industry Employment 7,174 8,278 8,725 9,115 9,321 9,516 9,495 9,475 9,996 9,11 Freelance Employment , Over the period 1997 to 25, the periodicals industry in Canada contributed on average $1,238 million of real gross output, of which $826 million was value-added by the industry itself, and only $412 million was value-added by other industries that provide inputs in the production of periodicals. Since the periodical industry adds almost 2/3 of the value of the gross output itself, the indirect effect of the industry, i.e., the demand created by the industry on other sectors of the economy, is not expected to be huge. In the same period, the industry generated on average 9,11 jobs within the industry itself, and also created 897 equivalent jobs for freelance writers. Although freelance workers are likely to be working for multiple employers at the same time, not all of whom may be periodical publishing companies, the remuneration paid by the periodicals industry and the average wage rate for freelance writers implies that an equivalent of 897 freelance writing jobs on average were generated by the periodical publishers in the period
8 Figure 1: Newspaper, periodicals, books and database publishers GDP, $97 million 7, GDP ($97 Millions) for Target Industry 6, 5, 4, 3, 2, 1, Periodicals Newspaper, Books and Database Publishers In order to provide a point of reference, it is noteworthy that in the same period, average GDP for the newspapers, periodicals, books and database publishers industry (NAICS ) as a whole was $5.7 billion, and the average GDP for the entire national economy stood at $955 billion. From this perspective, periodicals (NAICS 51112) account for 18 per cent of the value added in the larger sector of newspapers, periodicals, books and database publishers (NAICS 5111). 3 NAICS 511 accounts for software publishers (NAICS 5112) as well. 5
9 3 Indirect Contribution As mentioned above, only about one-third of the gross output in a Canadian magazine produced is provided by industries other than the magazine industry. 4 Table 2 provides the major inputs used by periodical publishers, as appears in the Statistics Canada Input-Output framework. 5 Table 2: Input-Output Tables, selected portions, Use Matrix Newspaper, Periodical, Book and Database Publishers Newspaper Periodical Publishers Publishers Book Publishers and Directory and Mailing List Publishers, and Other Publishers Newsprint paper Other paper, woodfree Specialized publishing service Printing & other inks Photographic film & plate Telephone & other telecommunications Postal services AND Courier service Wholesaling margins Management fees of companies and enterprises Non-residential rent Other information services (including news synd., microfilm, record, etc.) Other administrative and support services Spare parts & maintenance supplies Office supplies Transportation margins Travelling and entertainment Advertising & promotion All other commodities not specified Indirect taxes on products Subsidies on products Subsidies on production Indirect taxes on production Wages and salaries Supplementary labour income Mixed income Other operating surplus TOTAL OUTPUT Value-added Value-added as percentage of Total Output 66% 75% 57% 53% 52% The table above describes commodities used by the magazine industry. These commodities can come from different industries. The same commodity may even be produced by multiple 4 Compared to the periodical industry, where almost 57 per cent of the gross output is value-added within the industry, the newspaper industry value-added makes up 75 per cent of its gross output. For book publishers, this ratio is 53 per cent. 5 Statistics Canada only provides data up to 3-digit NAICS code level. The further division of the matrix was done by Informetrica Limited using survey data from Statistics Canada on separate industries. 6 The Use Matrix shows the 1997 input-output table updated using 1998 nominal values for the periodicals industry. 6
10 industries. The top ten industries in order of importance that provide inputs for the NAICS 5111 industry is listed below: 1. Support activity for printing 2. Newsprint mills 3. Information services 4. Printing 5. Management of companies and enterprises 6. Postal services 7. Paper mills 8. Newspaper, periodical, book and database publishers 9. Stationary product manufacturing 1. Grant-making, civic, professional and similar organizations Table 3 shows the indirect contributions to some selected industries arising from the periodicals industry. One of the industries presented is newspaper, books and database publishers the other industries that make up NAICS 5111 along with the periodicals industry. As expected, paper mills, printing, and printing support activities experience a significant effect due to the presence of a periodicals industry. Postal services and wholesale trade industries are also affected. Other chemical products manufacturing industries supply photographic paper, photographic films and plates, and printing and other inks to the magazine industry and hence are also affected indirectly. Table 3: Indirect GDP contribution for selected industries, $97 million $97 Million Impact Newspaper, book and database publishers Printing Printing support activities Performing arts, spectator sports and related industries Postal services Wholesale trade Managment of companies and enterprises Paper mills Telecommunications Banking and other depository credit Other chemical products manufacturing Freelance writers are classified under NAICS code 7115 independent artists, writers and performers. The broader classification for this category is NAICS 711 performing arts, spectator sports and related industries. The $57 million real value-added in the performing arts, spectator sports and related industries in the period corresponds to output provided by freelance writers for magazines. It is also interesting to see that newspaper, book and database publishers also experience higher activity due to the presence of a periodicals publishing industry. Although books and newspapers are not considered as major inputs for periodical publishers, the industries indirectly affected by them create demand for newspaper, book and databases, and hence that industry sees an additional $15 million of value-added. 7
11 Table 4: Direct and indirect GDP contribution for selected industries, per cent % Impact Newspaper, book and database publishers Printing Printing support activities Performing arts, spectator sports and related industries Postal services Wholesale trade Managment of companies and enterprises Paper mills Telecommunications Banking and other depository credit Other chemical products manufacturing Impacts are often easier understood as a percentage of the total size of the industries in question. Table 4 presents the percentage impact of the magazine industry on the gross output of various supplying industries. Given the usual activities in these industries, only printing support activities industry is significantly indirectly affected by the periodicals industry. Notable affects also appear in the performing arts (due to freelance writers outputs), printing, and paper industries. While the above tables provide indirect GDP contributions for selected detailed industries, the following tables provide a complete picture of total contributions through direct and indirect effects for aggregate sectors in the economy. Further details are available in the data appendix (Appendix I) to this report. Table 5: Total direct and indirect GDP contributions of the periodicals industry, $97 million $97 Million Impact All industries 1,219 1,312 1,381 1,422 1,51 1,5 1,492 1,478 1,531 1,427 Goods industries Service industries 979 1,72 1,139 1,158 1,229 1,228 1,28 1,187 1,234 1,159 In total, through direct and indirect effects, the periodicals industry contributed $1.4 billion on average to the Canadian national economy for the years 1997 through 25. Paper, printing and ink producing industries are the major goods producing industries affected by the periodicals industry and account for $166 million out of the $24 million total impact in the goods sector. The periodicals industry itself is the major contributor for increased services industry activity. Transportation and warehousing, trade, financial services and professional, scientific and technical services account for most of the remaining impact in the services sector. Increased activity for freelance writers also counts towards the impact in the services sector. 8
12 Table 6: Employment contribution of periodicals industry through direct and indirect effects Number of jobs Mining, oil & gas, utilities, construction Paper manufacturing Printing and related support activities 2,15 2,36 2,213 2,22 2,13 2,218 2,576 2,51 2,17 2,216 Trade Transport and warehousing ,15 1,55 1,74 1,77 1,71 1,84 1,15 1,46 Information and cultural industries 7,174 8,278 8,725 9,115 9,321 9,516 9,495 9,475 9,996 9,11 Fin, ins, real estate and management of companies Professional, scientific and technical services Arts, entertainment and recreation , Table 6 shows employment generated by the periodical industry and industries indirectly affected by the presence of the periodical industry. The 9,11 average yearly jobs created in the information and cultural industries are all jobs in the periodicals industry. As expected, printing and paper manufacturing employment is increased by the presence of a periodical industry. Periodical publishers indirectly generate an average of 2,215 jobs per year in the printing and related support activities industry and another 751 yearly jobs in the paper manufacturing industry through the years 1997 to 25. Periodical publishers also accounted for 1,46 postal jobs on average for the period, categorized here under the transportation and warehousing industry. The freelance writers equivalent jobs appear under arts, entertainment and recreation. Periodical publishers also create jobs for retail and wholesale trade and professional, scientific and technical services industries. Table 7: Employment contributions through direct and indirect impacts of the periodicals industry Number of jobs All industries 12,576 13,866 14,384 14,967 15,46 15,558 15,556 15,546 16,229 14,899 Goods Industries 3,28 2,973 2,926 3,44 3,233 3,184 3,131 3,15 3,131 3,89 Service industries 9,549 1,895 11,458 11,923 12,174 12,373 12,426 12,396 13,99 11,81 Table 7 shows total direct and indirect employment created due to the presence of a periodicals industry in the economy. Over the years 1997 through 25, periodical publishers directly and indirectly contributed 14,899 jobs per year on average, of which 3,89 jobs were in the goods sector and 11,81 jobs were in the services sector. Both the freelance writers employment and the periodical publishers direct employment are included in the services industry figure. 9
13 4 Induced Contribution When a new industry is created or a project within an existing industry is realized, output and activity in the directly affected industry itself, as well as in other sectors that provide inputs to the directly affected industry, increase. The higher activity in directly and indirectly affected industries generates income for workers, businesses and governments. Part of this income is saved, and part of it is spent on expenditures on goods and services or on new investments. The effects of this spending are referred to as induced expenditure effects. Each of these induced expenditures may also set up their own set of direct, indirect, and induced changes in valueadded, including imports and exports. In addition, increased income and employment may lead to higher wages and unit labour costs for businesses, ushering in higher domestic prices. Just as higher income increases demand, higher prices provide incentives for lower demand. The net effect of the two offsetting demand signals from induced activity can therefore be either positive or negative depending on the situation. The total effect on the economy includes all three effects - direct, indirect and induced. This section presents the total effects on the economy of having a periodicals industry where previously there was none. The emphasis in this section is on explaining how the induced effects work to change the direct and indirect contributions of the periodicals industry. The first part will go through a conceptual overview of what changes the induced effects bring to our previous scenario. The second part walks through major macroeconomic indicators, demonstrating our story in numbers. The third part provides numbers in an industry space. Finally, the fourth part summarizes the total contributions of the magazine industry to the national economy by introducing a tool to measure the total effect. 4.1 Conceptual Overview of Induced Effects Conceptually, the presence of the magazine industry causes a positive shock to the economy. It creates output and value-added directly and generates employment directly. The industries that produce inputs for the magazine industry experience more value-added, more activity and more employment. Hence, both direct and indirect contributions of the magazine industry to the economy are positive. But higher direct and indirect employment results in a lower unemployment rate. As workers become scarcer, wage rates increase, perhaps leading to higher unit labour costs for producers in the entire economy. 7 7 If GDP increases are disproportionately higher than job increases, that would imply that each worker is producing more than before. In other words, productivity would increase. From the employers point of view, if workers are now more productive than before, unit labour costs (the labour cost of producing one unit of good or service) goes down. Therefore, increased productivity can provide an offsetting effect on unit labour costs. If GDP increases are disproportionately lower than job increases, the opposite is true, and the resulting lower productivity would drive up unit labour costs. 1
14 Figure 2: Conceptual overview of direct, indirect and induced contributions Positive Shock More Direct GDP More Indirect GDP Less Imports More Direct Employment More Indirect Employment Lower Unemployment Rate Higher Wage Rate Higher Unit Labour Cost Reduction in Induced GDP Less Exports More Imports Higher Domestic and Export Prices Lower Import Prices Increase in Induced GDP More Production More Consumption and Investment Demand Total GDP Contribution More than combined Direct and Indirect GDP Contribution Higher unit labour costs provide a supply side push on prices, pushing domestic prices up. At the same time, the additional income provided by the direct and indirectly affected industries means more money for people, companies and governments. Part of this extra income will be spent and will create more consumption and investment demand. The increased demand side pressure will also boost up domestic prices. Given higher domestic prices, goods and services produced in Canada would be more expensive for foreigners, while the relative price of imported goods would be less for people within Canada. 8 The effect on prices would lead to higher imports and fewer exports in Canada, pointing to lower domestic economic activity. At the same time, increased income due to the presence of the magazine industry would lead to higher economic activity. Therefore, conceptually, the final effect of these two offsetting pressures on economic activity is ambiguous. 8 This effect of higher export prices and lower import prices follow directly from our assumption of a fixed exchange rate. The focus of this report is to look at structural changes within the current market framework. In this situation, the effects of an exchange rate change may distort, or even overwhelm, the structural analysis. Furthermore, the effect of the exchange rate on prices and output is itself a matter of debate. Therefore, to isolate the results of the structural change we are focusing on in this report, we keep the exchange rate fixed. Nonetheless, our impact results show marginal changes in exchange rates for the current scenario. This implies that even without a fixed exchange rate assumption, results would not vary much from what is presented here. 11
15 In our specific case, it turns out that the net effect is a further increase in contribution. This happens because the effect of higher prices is more than offset by the demand side push from the extra income generated by the magazine industry. 4.2 Total Contribution to the National Economy Macro Overview For the years 1997 through 25, the total contribution of the magazine industry to the national economy was on average a.16 per cent rise in GDP per year, and a further average of.12 per cent rise in employment per year. Introducing a magazine industry into the economy reduces the unemployment rate due to the various direct, indirect and induced employment generated by the industry. Figure 3: Total contribution of magazine industry national macroeconomic indicators Bars: % impact Canada: Macro Overview Lines: Level impact GDP $K Employment Unemployment Rate (%) The lower unemployment level raises the wage rate and unit labour costs. In the time period considered, the economy-wide wage rate rises to a stable.2 per cent higher than otherwise. This brings forth a.15 per cent rise in unit labour costs. In other words, the employment generated directly, indirectly and through induced effects by the magazine industry means that it would cost employers.15 per cent more in labour costs to produce the same amount of output. 9 Higher labour costs result in a higher price level in the economy. The GDP deflator, which is a measure of the domestic price level of an economy, indicates that prices rise by about.75 per cent toward the end of the period of interest. As domestic price goes up, imports seem cheaper for agents in the Canadian economy. Figure 4 shows a decline in import prices relative to the domestic consumer price index. 9 It is important to note that the wages and unit labour costs do not rise immediately. This is due to the sticky wages effect. This assumes that due to union collective agreements and other institutions in the economy, wages do not respond immediately to economic incentives, but rather, take some time in adjusting to a new equilibrium level. Since we introduce the magazine industry into the economy in 1996, it takes a few years before higher wage rates and unit labour costs are established. 12
16 Figure 4: Total contribution of magazine industry price formation % impact Canada: Price Formation GDP Deflator Unit Labour Cost Wage Rate Relative Import Prices As mentioned earlier, increases in domestic prices and the reduction of relative import prices provide negative demand side pressure on the Canadian economy. For foreigners, higher prices of Canadian goods and services imply that Canadian exports would drop. And for the domestic market, lower import prices and higher domestic prices mean that Canadians would be more interested in buying cheaper imported goods rather than highly priced domestically produced goods. Both these aspects work towards reducing economic activity. However, the total income generated by the employment contributions of the magazine industry implies higher disposable income for the Canadian consumer. Even after taking into account the price effect, disposable income (Real PDI) increases by around.18 per cent. In other words, the magazine industry creates.18 per cent more real disposable income in the economy. Figure 5: Total contribution of magazine industry personal income.3 Canada: Personal Income.6 Bars: % impact Line: Level impact Nominal PDI Real PDI Saving Rate (%) In comparison, the saving rate goes up by only.5 per cent, implying that a large proportion of the income created by the magazine industry is spent on consumption and investment goods. The net result is an increase in final domestic demand of around.8 per cent, as shown in Figure 6. Although exports increase in the initial years, higher domestic prices lower export figures toward the end of the period. 13
17 Figure 6: Total contribution of magazine industry domestic demand drivers % impact Canada: Demand Final Domestic Demand Exports The higher income and higher final demand generated by the magazine industry mean higher revenues for the government as well. This result assumes that there is no change in government tax and transfer policies. With tax rates held constant, higher income and expenditure in the economy generates revenues for all levels of government, with the federal government gaining the most. Toward the end of the period, government balances increase more than $1.2 billion in nominal terms. Figure 7: Total contribution of magazine industry government balances $Bns Nominal Canada: Government Balances CPP-QPP Prov-Local Federal Table 8 shows detailed sources of government revenue increases due to the direct, indirect and induced effects of the magazine industry. The major source of government revenue is through higher personal and corporate income taxes. The increase in revenue from indirect taxes on production and imports are channelled through increased consumption due to indirect and induced effects of the magazine industry. 14
18 Table 8: Government revenue contribution through direct, indirect and induced effects of the magazine industry, nominal $ millions Government Revenue, $C millions Federal Total Direct, on Persons Direct, on Corporations & GBE Direct, on non-residents Contributions to Social Insurance Plans Indirect Taxes on Production & Imports Goods & Services Tax Provincial Total Direct, on Persons Direct, on Corporations & GBE WCB & Contributions to Social Insurance Indirect Taxes Sales Tax Local and Municipal Total Indirect Taxes Transfers from Persons Transfers from Federal Government Transfers from Provincial Government Total Alongside increased revenues, government expenditure also declines to bring forth the large improvements in government balances. The major element in lowering government expenditure is lower interest expenses. Here, we implicitly assume that increased government revenues are used to pay off existing government debt. Since the debt burden becomes smaller, the amount of interest paid by the government on its debt also declines, further improving the government balance. The increase in GDP, as explained in the direct and indirect effects sections, lies mainly in the market-based services sector, where the magazine industry is classified. Due to the indirect and induced impacts, goods sector output also increases. But, the above-mentioned induced price effects reduce exports, and lower demand. This effect is felt mostly in the goods sector. Therefore, toward the end of the period, the impact in the goods sector decreases, as higher domestic and export prices take their toll. Figure 8 demonstrates this result. 15
19 Figure 8: Total contribution of magazine industry sectoral GDP and employment % impact Canada: GDP by Sector s Canada: Employment by Sector Goods Mkt-Based Svc Social Svc Goods Mkt-Based Svc Social Svc Employment in different sectors also follows the trend in GDP closely. Market-based services employment increases by more than 14,, while goods sector employment rises only by 2, to 3,. 4.3 Total Contribution in the National Economy Industry Overview Table 9 presented below provides the total GDP contribution of the magazine industry for selected sectors of the economy. These figures include all three effects of the magazine industry impact direct, indirect and induced. As expected, the biggest effect is in the newspaper, periodical, book and database publishers industry, which includes the direct effects of introducing a magazine industry into the economy as well as the indirect and induced effects on the other components of the aggregate sector. Significant effects are also realized in wholesale and retail trade industries. The magazine industry contributes an average of $27 million in GDP every year to the banking and other depository credit institutions industry. Table 9: Total GDP contribution for selected industries, $97 million $97 millions Newspaper, periodical, book and database publishers Printing Printing support activities Performing arts, spectator sports and related industries Postal services Wholesale trade Retail Trade Managment of companies and enterprises Paper mills Telecommunications Banking and other depository credit Other chemical products manufacturing Printing and printing support activity GDP increases by a total of $14 million on average every year due to the presence of a magazine industry. The magazine industry also creates an average $52 million worth of real value-added in postal services. Freelance writers activities increase by 16
20 $63 million on average per year (performing arts, spectator sports and related industries GDP) due to the presence of a magazine industry. Table 1: Total employment contribution for selected industries Number of jobs Paper manufacturing Printing and related support activities 2,441 2,361 2,562 2,257 2,313 2,46 2,848 2,755 2,37 2,485 Trade 988 1,62 1,251 1,182 1, ,14 Transport and warehousing 1,588 1,659 1,71 1,597 1,472 1,455 1,446 1,463 1,47 1,539 Information and cultural industries 7,232 8,338 8,781 9,154 9,347 9,538 9,514 9,486 9,995 9,43 Fin, ins, real estate and magament of companies Professional, scientific and technical services Arts, entertainment recreation employment ,14 91 Total Jobs for Selected Industries 14,626 16,289 17,488 17,369 17,139 17,322 17,77 17,548 17,693 17,27 In addition to creating employment in its own industry (shown in Table 1 under information and cultural industries), the magazine sector generates around than 2,485 jobs per year in the printing and related support activities sector, and a further 1,14 jobs in the trade sector. Around 91 jobs are created in arts, entertainment and recreation industries, which includes freelance writers. A further 1,539 transportation and warehousing jobs are generated by the magazine industry, as well as 633 jobs in the professional, scientific and technical services industry on average per year. Table 11: Total direct, indirect and induced GDP contributions of the periodicals industry, $97 million $97 Million Impact All industries 1,697 1,861 1,849 1,725 1,73 1,784 1,761 1,729 1,71 1,76 Goods industries Service industries 1,342 1,498 1,53 1,459 1,487 1,545 1,533 1,518 1,528 1,493 Tables 11 and 12 provide an aggregate picture of the contributions of the magazine industry, which includes all sectors and subsectors of the economy. On average, the magazine industry contributes $1.7 billion in GDP to the Canadian economy, and creates 17,879 jobs per year. Table 12: Total direct, indirect and induced employment contributions of the periodicals industry Number of jobs All industries 17,93 19,419 19,54 18,644 17,427 17,247 17,195 16,845 16,668 17,879 Goods industries 4,559 4,431 4,17 3,585 3,112 2,867 2,719 2,51 2,9 3,337 Service industries 13,37 14,989 15,37 15,6 14,314 14,381 14,478 14,345 14,579 14,543 The contributions are skewed toward the service industries, where the magazine industry itself is categorized. Of the approximately 18, jobs generated directly, indirectly and through induced impacts of the magazine industry, around 3, are located in the goods sector with the remaining 15, in the service industries. 17
21 4.4 Total Contribution in the National Economy Multiplier Effects To gain some understanding of the total effect of a project or an industry, a common measure on the expenditure side is to calculate the ratio of the increase in GDP to the initial expenditure on the project, or the gross output of the industry. This ratio is sometimes called the multiplier, or, more correctly, the expenditure multiplier. The value of the expenditure multiplier can vary between zero and a number greater than one, depending on the amount of domestically produced inputs in the expenditure, the propensity to spend of the income recipients, and the leakages into imports and taxes in the economy. In Canada, a multiplier value of 1.3 to 1.6 is not uncommon. In the case of the magazine industry, the direct gross output contribution of the industry in real terms is $1,238 million per year on average. This is the total value of magazines produced on average per year for the period concerned. The total GDP effect on the national economy due to this initial direct contribution in real terms is $1,587 million per year on average for the years in consideration. This implies an expenditure multiplier of 1.28 for the magazine industry. This implies that for every dollar of expenditure in the magazine industry, there is another 28 cents of expenditure occurring in the rest of the economy. 18
22 5 Provincial Contributions Ontario Statistics Canada s survey of periodical publishing reveals that in the year 23/4, a total of 1,162 periodicals were published in Ontario, generating a total revenue or gross output of $918 million. In total, 3,481 full-time employees, 1,456 part-time employees and another 2,282 volunteer and unpaid staff worked for the periodicals publishing industry in Ontario for that year. Employees in the industry earned $243 million in remuneration, including $46 million in freelance fees. According to these figures, Ontario accounted for almost 6 per cent of national nominal gross output in the magazine sector in the year 23/4. This section briefly outlines the contributions of the magazine industry for the province of Ontario. Tables 13 through 15 present only direct and indirect contributions of the magazine industry in Ontario. In the provincial space, magazine publishers are categorized under other information and culture industries. For the time period 1997 to 25, the magazine sector directly contributes on average $486 million worth of GDP in Ontario per year. The aggregate sector other information and culture in Table 13 represents this number as well as an additional $23 million worth of indirect contribution to other industries within this category. Table 13: Direct and indirect GDP contribution for selected industries in Ontario, $97 million $97 millions Other information and culture Printing and related support activities Arts, entertainment and recreation Transportation and warehousing Wholesale trade Retail trade Managment of companies and enterprises Professional, scientific, technical services Paper manufacturing The magazine industry indirectly accounts for $67 million of economic value-added in the printing and related support industries of Ontario per year. Freelance writers in Ontario contribute $23 million of value-added on average per year because of the presence of a magazine industry. Magazines also generate work in the transportation and warehousing, trade, paper manufacturing, management of companies and professional and technical services industries. Table 14: Direct and indirect GDP contribution for Ontario, $97 million $97 millions All industries Goods producing industries Service industries The total direct and indirect contribution of the magazine industry in Ontario for the period 1997 to 25 stood at $765 million on average per year. The 4,711 direct jobs per year that the magazine industry generated on average in Ontario created a further 4 jobs in other industries in the information and culture sector per year within the time period considered. Because of the magazine sector, printing and support activities saw more than 1, additional jobs per year. 19
23 The arts and entertainment and transportation and warehousing industries also experienced job increases of 532 and 44 per year. In total, a further 2,68 jobs per year were generated indirectly in Ontario by the magazine publishers. Table 15: Direct and indirect employment contributions for Ontario Number of jobs All industries 6,129 6,813 7,82 7,477 7,792 7,895 7,736 7,69 7,97 7,391 Information and culture 3,75 4,359 4,656 4,865 4,973 5,57 4,952 4,941 5,213 4,752 Printing and related support activities ,15 1,86 1,211 1, ,11 Transportation and warehousing Trade Fin, ins, real estate and mgt of companies Professional, scientific, technical services Arts, entertainment and recreation Paper manufacturing The indirect and direct jobs created and economic activity generated by the magazine sector contributed even more through induced effects. The overall total effects of the magazine industry stood at $974 million worth of GDP per year in Ontario. In other words, another $29 million worth of GDP was created through induced effects of the Ontario magazine industry. Big gainers through the induced effects were other information and cultural industries and the trade sector. In particular, retail trade saw a boost of $34 million worth of GDP on average per year due to induced effects of the magazine sector. Professional, scientific and technical services also gained considerably through induced effects. Table 16: Total GDP contributions for selected industries in Ontario, $97 million $97 millions Other information and culture Printing and related support activities Arts, entertainment and recreation Transportation and warehousing Wholesale trade Retail trade Managment of companies and enterprises Professional, scientific, technical services Paper manufacturing Table 17: Total GDP contributions for Ontario, $97 million $97 millions All industries 97 1,5 1, , Goods producing industries Service industries A similar trend is visible in employment contributions of the magazine industry. Induced effects generate on average 1,997 more jobs in the Ontario economy. The trade sector is the biggest gainer in terms of induced jobs as approximately 446 jobs were generated in this sector due to induced effects of the magazine industry. 2
24 Table 18: Total employment contributions for selected industries in Ontario Number of jobs All industries 9,119 9,894 1,32 9,785 9,492 9,292 9,228 8,963 8,693 9,389 Information and culture 3,989 4,48 4,85 5,161 5,142 5,113 5,221 5,273 5,475 4,967 Printing and related support activities 1,81 1,61 1,131 1,19 1,119 1,24 1,338 1, ,137 Transportation and warehousing Trade Fin, ins, real estate and mgt of companies Professional, scientific, technical services Arts, entertainment and recreation Paper manufacturing Other big gainers include finance, insurance, real estate and management of companies as well as transportation and warehousing industries. The induced effects bring the total jobs generated in the Ontario economy to an average yearly level of 9,389 for the period 1997 to 25. Table 19: Per cent GDP impact in Ontario vis à vis per cent GDP impact in rest of Canada % impact Ontario All industries Other Information and Culture Printing and related support activities Arts, entertainment and recreation Transportation and warehousing Wholesale trade Retail Trade Managment of companies and enterprises Professional, scientific, technical services Paper manufacturing Rest of Canada All industries Other Information and Culture Printing and related support activities Arts, entertainment and recreation Transportation and warehousing Wholesale trade Retail Trade Managment of companies and enterprises Professional, scientific, technical services Paper manufacturing It is important to note that the Ontario economy benefits from the presence of a magazine industry disproportionately more than the economies of the other provinces. The first part of Table 19 shows the impact of the Ontario magazine industry on the rest of the Ontario economy in percentage terms. Overall, the Ontario economy experiences GDP increases of.11 per cent due to the presence of a magazine industry through indirect and induced effects. The second part of the same table highlights the same measure for the rest of Canada. For the rest of Canada, the economy experiences GDP increases of only.8 per cent through indirect and induced effects of the magazine industry. Ontario experiences higher benefits than the rest of the economy because most of the indirect and induced effects work through industries that are more concentrated in Ontario. Looking at individual industry impacts for selected industries, it is clear that almost all industries in Ontario experience a disproportionately higher benefit due to the presence of the magazine industry. On 21
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