Beyond building and maintaining roads, heavy construction has a huge economic impact in Saskatchewan
By Martin-Charlton Communications
How does Saskatchewan benefit from having a heavy construction industry as a part of its economy?
Much more than paved roads are gained by this province and its people. The benefits Saskatchewan experienced last year are described in a new economic impact study done by Praxis for the Saskatchewan Heavy Construction Association (SHCA). Praxis explains that “a comprehensive economic impact study is a critical (way) to gain an understanding of how the industry benefits the provincial economy in terms of job opportunities, other economic activity and government revenues.”
The money this industry generates for Saskatchewan is in the billions of dollars. The industry supports tens of thousands of jobs and adds significantly to government revenues. It is not just the province as a whole that benefits. The industry also benefits the communities where crews complete projects – an impact that is quantified in this study.
Defining the heavy construction industry was part of the process of determining its economic impact on the province’s economy. Praxis listed the work that falls within the scope of the sector, and it includes much more than just highways, roads and parking lots. Work done to excavate and prepare sites for commercial and industrial sites is included. So, too, is work around water infrastructure, such as dams, irrigation structures, hydro-electric and water diversion tunnels, water and sewer lines, water drainage and irrigation ditches and minor bridges.
Saskatchewan benefits directly and indirectly from the heavy construction industry. The direct, indirect and induced impacts take into account what the industry itself contributes as well as the industries that are suppliers to it and even how that activity trickles down to spending by households in the province.
All that spending on local goods and services as well as payments to labour and business profits was determined to be over $14 billion last year. A breakdown of that figure shows that more than half – $8.4 billion – was spending by the heavy construction industry. That is up from 2012, when it was at $6.9 billion, according to an earlier economic impact analysis done for SHCA by McNair.
Then, there was spending of more than $3 billion by the industries that supply heavy construction. The industries highlighted include manufacturing, wholesale trade, retail trade, transportation and warehousing, finance (including insurance and real estate) as well as professional, scientific and technical services.
Finally, there is the change in household spending in the province as industries add labour because of growing demand for outputs due to the heavy construction industry’s activity. In Saskatchewan, that was at $2.7 billion.
The spending that was done strictly within Saskatchewan because of the heavy construction industry is quantified as well in the study. Heavy construction added $6.2 billion to Saskatchewan’s GDP.
Saskatchewan communities benefit when heavy construction crews show up to work on projects. The Praxis study found that the money spent at local hotels or campgrounds as well as meals at restaurants and bars plus purchases of fuel all support local communities’ economies. Each year, these crews spend about $400 million in these communities, which supports more than 1,000 local jobs.
What all this economic activity by the industry means for jobs and labour income in the province is also included in the Praxis study. It quantifies the number of jobs in the heavy construction industry as well as those industries that supply it plus those that benefit from all that economic activity.
A total of 47,816 jobs were created and maintained in Saskatchewan by the heavy construction industry last year. There were more than 22,000 jobs in the heavy construction industry last year and the people filling those positions were paid $1.5 billion in income. That includes wages, salaries and employer contributions to pensions and benefit packages. These employees spend $1.1 billion as consumers.
Other industries that supply heavy construction were able to employ 11,235 people and pay them $672 million last year. These would be jobs in manufacturing, wholesale trade, retail trade, transportation and warehousing, finance (including insurance and real estate) as well as professional, scientific and technical services and other industries.
On top of that were the 14,377 jobs created and maintained largely in the retail and service industries because of that economic activity. Those jobs paid $615 million in income.
That earlier economic impact analysis by McNair also included a forecast on job numbers. It forecast that the number of jobs in the heavy construction industry would grow, and it expected there would be 26,890 jobs in the industry in 2021. Instead, what the recent Praxis study shows is the number of jobs has dropped. There were 22,203 jobs in the heavy construction industry last year, which is about 1,000 fewer than there were in 2012.
Employment numbers could potentially drop further because of how much input costs have increased for the industry. Inflation is impacting input costs and gas prices are climbing. What adds to the crunch is that most contracts for heavy construction work to be done in 2021 were signed a year before prices started to rise.
Some of the increases creating the most pressure come from fuel, fabricated metal products, professional services and computer/electronic products. Because of these rising costs, the heavy construction industry is expected to face an additional $426.7 million in new expenses. The study says the industry’s profits are at $670 million a year, meaning that this increase in costs reduces those profits to $243.4 million. Some businesses won’t survive seeing their profits cut in half. That drop in profits could also mean that job numbers in the industry are cut by half.
It is important information for governments to know. What is also important is that politicians and bureaucrats be reminded how much the heavy construction industry adds to government revenues. The Praxis study states that the provincial and federal governments have $1.7 billion added to their revenues by the industry. The federal government gets the larger share of that at $982 million with the provincial government receiving $767 million. This revenue is generated through income tax, corporate and business taxes as well as sales and excise taxes.
The benefits Saskatchewan receives because of the heavy construction industry are plentiful. It goes far beyond benefitting from the projects completed by those in industry. Roads and highways are built and maintained by some while others excavate and prepare sites for commercial and industrial sites and still others work on water infrastructure.
The work done to see these projects completed is undertaken by tens of thousands of people employed by the heavy construction industry, who earn more than a billion dollars that they spend as consumers. Tens of thousands more people are employed in other industries that supply the heavy construction industry and those who benefit from its spending in communities where projects are completed. Government coffers grow because of this economic activity. Saskatchewan is a much better place to live and work because of this industry.