The Economic Impact of Culture
in Prince Edward Island
and in the Charlottetown Region
SUMMARY REPORT
January 2006
Prepared for:
City of Charlottetown
PEI Community & Cultural Affairs
PEI Business Development Inc.
Prepared by:
The IRIS Group
Wendy MacDonald & Associates
JP Consulting
Key Findings
• The economic impact on Prince Edward Island of the major arts, heritage, and culture sectors measured in this study was over $100 million in gross output in 2000. Those sectors include publishing, film and motion pictures, broadcasting, the performing arts, heritage, and the applied arts such as architecture and graphic design.
• This economic impact by the culture sector is similar in scale to the lobster harvest, or to tourism spending on accommodations, and only slightly less than the combined value of the livestock industries in PEI.
• The indirect and induced economic impacts (the “spin-offs”) of the culture sector mean that every $10 million increase in its gross output results in a $21.7 million expansion in the total economy.
• The culture sectors examined in the study employ 2,000 Islanders – of whom 1,200 or 60% work in the Charlottetown region. The culture sector accounts for 5% of the jobs in the Charlottetown region, and 3% province-wide.
• Although economic impact data was not available below the provincial level, Charlottetown’s number of jobs, and its relatively higher share of year-round jobs, suggests that at least 60%, or $60 million, of the culture sector’s gross output is in the Charlottetown region.
• When one takes into account additional culture sectors for which separate economic impact data was not available to this study – including government, libraries, crafts, festivals, photography, sound recording, and arts education – the economic impacts increase by tens of millions more dollars.
• The culture sector is extremely important to the tourism industry, with arts, culture, and heritage activities accounting for over half of the top 15 activities named by visitors. Those visitors naming Charlottetown as their main destination rank culture and heritage even more highly than visitors to the rest of the province.
• Volunteers play a major role in the arts and culture sectors, accounting for the equivalent of up to 200 jobs, equivalent to a $6 million payroll.
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Key Findings
• The economic impact on Prince Edward Island of the major arts, heritage, and culture sectors measured in this study was over $100 million in gross output in 2000. Those sectors include publishing, film and motion pictures, broadcasting, the performing arts, heritage, and the applied arts such as architecture and graphic design.
• This economic impact by the culture sector is similar in scale to the lobster harvest, or to tourism spending on accommodations, and only slightly less than the combined value of the livestock industries in PEI.
• The indirect and induced economic impacts (the “spin-offs”) of the culture sector mean that every $10 million increase in its gross output results in a $21.7 million expansion in the total economy.
• The culture sectors examined in the study employ 2,000 Islanders – of whom 1,200 or 60% work in the Charlottetown region. The culture sector accounts for 5% of the jobs in the Charlottetown region, and 3% province-wide.
• Although economic impact data was not available below the provincial level, Charlottetown’s number of jobs, and its relatively higher share of year-round jobs, suggests that at least 60%, or $60 million, of the culture sector’s gross output is in the Charlottetown region.
• When one takes into account additional culture sectors for which separate economic impact data was not available to this study – including government, libraries, crafts, festivals, photography, sound recording, and arts education – the economic impacts increase by tens of millions more dollars.
• The culture sector is extremely important to the tourism industry, with arts, culture, and heritage activities accounting for over half of the top 15 activities named by visitors. Those visitors naming Charlottetown as their main destination rank culture and heritage even more highly than visitors to the rest of the province.
• Volunteers play a major role in the arts and culture sectors, accounting for the equivalent of up to 200 jobs, equivalent to a $6 million payroll.
Introduction
Culture, arts, and heritage have long played vital social roles -- enhancing quality of life, defining national and community identity, building social cohesion and civic pride, and promoting attachment to place. Recognizing these benefits, governments have long supported the culture sector as a social good. In recent years, several trends have converged to create growing awareness that the culture sector also has major economic benefits and that the potential exists to expand these significantly:
• The explosive rate of growth in new media and new communications technologies, coupled with the globalization of markets, is driving strong and continuing growth in demand for authentic, high quality cultural programming, products, and services.
• National demographic trends – including population aging, rising levels of education, and increased income – are creating a culture market of affluent consumers with increased leisure time and an interest in culture, both at home and during their travels. This trend can be expected to intensify as growing numbers of baby boomers enter retirement over the coming decade.
• The culture sector involves a continuing process of creation, development and delivery of new cultural content – making it highly labour-intensive, and requiring less capital investment to create jobs than most other sectors.
• The human scale of much cultural activity, and its relatively modest environmental impacts, makes it a sector of choice for sustainable development at the community level.
• In addition to these direct benefits, the work of writer Richard Florida has built awareness that culture is a vital asset to jurisdictions and cities -- creating a dynamic milieu and quality of life which attracts and holds skilled, talented workers, investment and development.
The growing importance of culture’s economic role has led to increased efforts at all levels of government to identify and measure the economic impacts of the “cultural industries,” so that more effective development strategies can be designed. These attempts at measurement face numerous challenges, however. Many cultural activities take place in the public, non-profit, and volunteer domains, while those in the private sector are often scattered through many industry categories. In Prince Edward Island, these challenges are compounded by the small scale of many sub-sectors – which can result in imprecision due to rounding, or data suppression to protect confidentiality, or even a complete lack of data. These factors mean that the economic impacts of culture are likely be underestimated in PEI, and under-recognized compared to other provinces.
To provide high quality information to decision-makers, the City of Charlottetown Mayor’s Task Force on Arts and Culture, in partnership with the Government of Prince Edward Island, initiated this study in the summer of 2005, to carry out a comprehensive and thorough analysis of the economic and employment impacts of cultural activity in Prince Edward Island and in the Charlottetown area.
The IRIS Group, in partnership with Wendy MacDonald & Associates and John Palmer of JP Consulting, was engaged to carry out the research. The methodology included a review of the relevant literature; economic analysis using PEI Provincial Treasury’s input-output model; gathering and analysis of secondary data from a wide range of sources; and interviews with selected key informants. The findings of this research are set out in a detailed report and a companion paper on the input-output analysis, and are highlighted in this summary report.
Context
The culture sector is strongly affected by broad trends in its environment. Among the public at large, consumption of culture goods and services is highly sensitive to trends in economic conditions, demographics, and personal income. Within government, meanwhile, culture spending has been affected over time by fiscal trends and constraints. A further consideration in Prince Edward Island is the major role of the tourism sector in the consumption of many culture goods and services -- increasing the magnitude of economic impacts, but also adding an element of seasonality to the sector.
A review of the various factors affecting the culture sector indicates a combination of positive trends and others which may require strategic intervention to address.
• Demographic trends have a major impact on patterns and levels of consumption of culture goods and services, as well as effects on the labour force which provides culture goods and services. As in other jurisdictions, Prince Edward Island’s population is aging and is becoming more highly educated – factors which tend to increase consumption of culture goods and services. Population growth has moderated over the past decade and will slow further in the future, however, and the pace of population shift to the center of the province is also expected to slow. As a result, growth in the culture sector will need to come largely from increased individual consumption of culture goods and services, rather than growth in the number of consumers.
• Trends in economic growth have a significant impact on the demand for and consumption of culture goods and services. PEI’s economy posted substantial rates of growth in the late 1990s, and in recent years has seen moderate, stable growth in the range of 2%. Over the same period, strong growth has taken place in the number of jobs and the share of the population working.
• These trends have contributed to growth in personal incomes over the past decade. In real terms, using constant dollars, average annual family income increased by over $4,000 or almost 8% between 1997 and 2003, going from $54,100 to $58,200. During the same period, real income of unattached individuals (which includes all those over age 15 and thus includes many youth and seniors) increased by $2,800 or almost 15%, going from $18,900 to $21,700.
• Conditions in the tourism sector also have a major impact on the culture sector, since many tourists are drawn to PEI by its culture and heritage attractions. After a surge in tourism upon the opening of the Confederation Bridge, the number of visitors and the level of expenditures stabilized around the turn of the decade, and have trended downward in recent years. A new strategic focus on product development in the tourism sector, including an emphasis on cultural and heritage attractions, should serve to combat these trends.
• Average annual expenditures on culture by Island households increased from $978 in 1996 to $1,185 in 2002. In terms of participation, Islanders are much more likely than average to sing in a choir, take part in a dance production, and do crafts; somewhat more likely than average to read newspapers and books and to visit historical sites; and somewhat less likely than average to visit museums and art galleries, to use libraries, or to engage in visual arts, writing, or photography. Rates of participation in remaining activities, including movies, home videos, home music, or live performances, were similar to national averages.
• Culture goods and services tend to be discretionary expenditures, and hence demand in this area is sensitive to cost and financial factors. The cost of home audio and video equipment has been falling, influencing a shift away from consumption of live entertainment toward home-based entertainment. In 2003, just over 80% of total household expenditures on culture were on cable, printed matter, and rental or purchase of videos and CDs. To counter this trend, it is essential that live, locally-created cultural activities be affordable and accessible for Islanders.
• Culture and heritage activities are extremely important to the tourism industry, ranking high in popularity with visitors according to survey data. Over half of the fifteen most popular activities mentioned by visitors involve culture and heritage activities. Visitors to Charlottetown ranked these activities even more highly.
• Volunteerism plays an even more vital role in the arts and culture sector than in most other domains of society. A Statistics Canada study in 2000 found that culture and recreation attracted more volunteers than any other sector, and relied more heavily on volunteers for its labour services than any other sector. Although separate data on volunteerism in the culture sector are not available for PEI, it is estimated that culture organizations in PEI benefited from volunteer contributions of 300,000 to 400,000 hours in 2000 -- equivalent to150-200 full-time jobs. At current PEI average wage rates, the annual value of this contribution is approximately $4.5 - $6 million.
• Governments at all levels invest in support of culture, spending almost $20 million in 2003. Federal spending accounts for just over half of this amount, provincial spending about one-third, and municipal spending the remainder. The municipal portion has been growing rapidly, increasing by 54% between 1999 and 2003. Broadcasting, the performing arts, libraries, museums, and multidisciplinary arts are the main areas of investment.
The Economic Impact of Culture in PEI
This study follows upon several other reports during the past decade which have yielded varying estimates of the economic impact of culture in PEI, due to different definitions of the scope of the culture sector and different approaches. The most detailed study available was carried out by Statistics Canada in 1997 as a prototype for its future work in measuring the economic impacts of culture across Canada. While dated, this study provides a useful baseline. It found that in 1994-95, the culture sub-sectors examined in this report directly accounted for $45 million or 2.5% of PEI’s GDP, and over 1,600 jobs.
In order to identify the direct, indirect, and induced economic impacts of culture in PEI, the present study included an analysis using the input-output model of PEI Provincial Treasury, as described in the main report and in a technical companion paper to the report. Data was only available on some of the sub-sectors included in the overall culture sector, primarily in the private sector.
The analysis found that the gross output of those sectors was just over $100 million in 2000. This translates into GDP or value-added of $50 million, up 11% from the $45 million identified by the 1997 study. Other data sources suggest additional impacts in the tens of millions of dollars from sectors for which input-output data were not available. This includes the $20 million in government expenditures noted above; at least $5 million in smaller culture sub-sectors including photography and arts education; and significant economic impacts from the crafts industry. A series of studies in 2001 found that the crafts industry generated production valued at $10 million wholesale and $20 million retail. Festivals represent another major culture sector, the economic impact of which cannot currently be identified. This gap should soon be addressed, however, through a national initiative now underway, led by the Canadian Tourism Commission, to develop a consistent approach to measuring the economic impact of festivals.
The analysis allowed the multipliers or spin-off effects of cultural activity to be identified. The indirect output multiplier (the additional economic activity caused by the culture sector’s need for goods and services) was 1.41, meaning that a $10 million increase in the gross output of the culture industries causes the gross output of the total economy to increase by $14.1 million. When one takes the induced effects into account, as culture workers spend their wages and salaries, the total impact increases to 2.17, meaning that a $10 million increase in the gross output of the culture sector expands the gross output of the total economy by $21.7 million.
To place these impacts in context, the direct, indirect, and induced economic impacts of the overall culture sector are in the order of 3% of GDP, making it equivalent in scale to the fishing industry, or the professional, scientific, and technical services sector. Looking at gross output rather than GDP, the subset of culture sectors examined in the input-output analysis generated $101 million in 2000 – similar in scale to 2001’s lobster harvest of $104 million, or to all tourist spending on accommodations in 2002, also at $104 million, and only slightly below the combined value of the sale of all hogs, dairy products and cattle in 2001 at $114 million. As noted above, the input-output analysis captured only a portion of the culture sector’s total economic activity, indicating that its true impacts are even more substantial.
Employment Impacts Census data on employment for a number of culture sub-sectors and for culture occupations outside these sectors indicate a labour force of at least 2,600 Island-wide, with 60% of this workforce in the Charlottetown area. This workforce represents 3.5% of employment across PEI, and almost 5% in the Charlottetown area. The indirect or “spin-off” effects of culture economic activity are estimated to result in a further 1,000 jobs across PEI, using the employment multiplier of 1.39 developed in the 1997 Statistics Canada study.
Compared to the overall labour force, culture workers are more likely than average to be young, working seasonally and/or part-year, self-employed, and mobile. Upwards of half report a professional or technical occupation in the arts, while many of the rest report occupations in sales, administration, or management. The sector is skilled: its workers are more likely than average to hold a degree, or to have some post-secondary education without a credential, and somewhat less likely than average to have a trades certificate, a college diploma, a high school diploma only, or less than high school. The youthfulness and mobility of the labour force, and the sector’s diverse and evolving skill needs, are creating a growing need for a labour market study to ensure that the sector will have access to the skilled human resources it needs for continued growth and diversification.
Options to Enhance Economic Impacts of Culture
This study has focused mainly on quantifying the economic and employment impacts of the culture sector, including its regional and sectoral impacts. The study’s terms of reference also call for the report to “provide recommendations for actions which would have significant positive results on increasing the economic impact of culture.” Past work in this area has identified several key themes and directions, many of which were affirmed in the interviews carried out for this study.
Develop a Unified Approach by and for the Culture Sector Maximizing the economic impact of culture requires a unified approach – leading to development of a shared vision and agreement on strategic priorities for the culture sector and roles of the various stakeholders. Such agreement would in turn enable stakeholders to effectively target investments, to refine and integrate structures, programs, and supports, and to identify appropriate indicators of progress.
In this regard, it was clear that the work of the Mayor’s Task Force on Arts and Culture is highly regarded as an example of effective and positive collaboration among stakeholders broadly representing culture sub-sectors, governments, institutions, and the community. There appeared to be general support for this work to continue in the long term, rather than concluding with the submission of this report and a draft municipal policy on culture as is currently planned. As such, it is suggested that the City of Charlottetown build on the work of the Task Force by creating a permanent body in the area of culture to provide vision, leadership, and advice.
Consideration should also be given to establishing a vehicle for joint planning and action at the provincial level. One option in this area is to continue and accelerate current efforts to establish a labour market sector council for the culture industry – providing a mechanism to address labour market needs, and to facilitate access to emerging and expanding opportunities for federal funding of workplace-based and labour market training.
Develop or Influence Strategies in Key Area Through their strengthened partnerships, culture stakeholders should work to develop or contribute to strategies in several key areas, including an overall strategy for the sector, a labour market strategy, a cultural tourism strategy, and a population strategy which uses culture as a strategic asset to attract and retain a diverse population, skilled and creative workforce, and entrepreneurs and investors to the City of Charlottetown and to PEI.
Foster Public Awareness and Appreciation of Culture Although this study has focused on the economic impacts of culture, these represent only a fraction of the broader social and community benefits of culture. The culture sector can only yield its full potential for economic benefit if it is diverse, vibrant, and authentic – and this can only be achieved through strong and widespread participation in cultural activities and consumption of culture goods and services by Islanders. This will, in turn, build a base of public support for public investment in the culture sector. To achieve this, it is essential that governments complement their targeted investments in cultural activities of interest to visitors, to year-round investments in the full range of culture sub-sectors to foster public awareness and appreciation of culture, starting in the childhood years. Key measures include increased emphasis in the education curriculum on Island arts, culture, and heritage; investment in cultural facilities and activities within the school system; ongoing initiatives such as awards and festivals to engage Islanders in cultural activity; and measures to maximize the accessibility and affordability of participation in arts, culture, and heritage activities.
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