Counties in southwestern Ontario, including Huron, began as a series of settlements servicing their rural hinterlands. These counties have changed considerably since the mid-1800s. This section will provide a profile of Huron County, focusing on the rise and fall of certain sectors, including agriculture.

Traditionally, the Huron County economy has been based on agriculture and related services. This is changing, however, as the service sector accounts for a greater percentage of county employment. Historically, communities in Huron were established to serve the surrounding rural population. As time passed, however, these communities began to lose their service centre function and become rural residential locations. In recent times the trend has continued, with the establishment of fewer but larger commercial centres alongside mainly residential communities. As tourism has developed, many communities are becoming residential and cottage settlements, especially along the shore of Lake Huron. The economy of Huron County is becoming more service-oriented and less specialized on one sector; thus diversifying. Notably, the service sector seems to be increasingly serving the entire economy, including agriculture. Over the past decade, the agriculture service sector has retained relatively constant employment with slight increases. At the same time, this sector is becoming less focused on certain key sectors and is branching out into new areas.

While manufacturing and services account for most income generation in Ontario, a substantial part of the economy is dependent on the agriculture sector. In 1994, the value of Ontario farm gate sales was just over $6 billion including livestock and crop sales (OMAFRA, 1995, p. 3). Ontario agriculture is also important on a national level, providing valued produce for both the export and home-use markets. The value of Ontario agriculture production as a percentage of the total agricultural production of the nation (24 per cent) indicates this point (OMAFRA, 1995, p.7).

The value of agriculture is even more important to the regional economy. In Huron County, the value of farm gate sales was $436 million in 1991, more than any other county in the province. This grew to $512 million in 1996, a 17 per cent increase. To illustrate the relative importance of this, we have constructed a comparison of Huron County to the ten provinces.

Source: OMAFRA, 1995.

When the value of Huron County farm gate sales in 1991 is compared to the provincial values Huron County ranks seventh behind British Columbia and ahead of the four Atlantic Provinces in value of gate sales produced (see Chart 2). This clearly shows the magnitude of Huron’s agriculture production.

In 1991, Huron County had 3,260 census farms, more than in any other county in Ontario. In 1996, this decreased to 3,150 farms. The approximate area under production in 1991 was 621,878 acres (OMAFRA, 1995, p. 28). This area, which accounts for 5.6 per cent of the area cultivated in Ontario, produces 7.2 per cent of the gross farm gate sales for the province. The comparison in Table 2 identifies the importance of the county's agricultural production relative to the rest of the province.

Source: OMAFRA, 1995.

As stated, agriculture production in Huron County has significant value. It is also notably diverse. Table 3 illustrates the division between farmland uses in Huron County. Crop production is by far the most frequent use, followed by pasture use. The land accounted for by crop production in Huron County accounts for approximately 75 percent of county land with further portions used for pasture. Other areas account for non-agriculture uses involving industry and urban settlement.

Source: OMAFRA, 1995, p. 28.

In 1991, the most common farm types in Huron County produced small grains and livestock. Overall, 60 per cent of farms were classified as livestock producers while the rest (40 per cent) produce crops. Small grains accounted for the largest proportion of Huron County farms where crop production was the major activity. Very few crop operations focused on wheat production. This is reiterated by Van Hoeve’s cluster analysis using 1991 agricultural census data. Van Hoeve carried out an analysis of all farms in Ontario and classified them by county. Huron County was classified as primarily grains and livestock (Van Hoeve, 1995, p. 121). Charts 3 and 4 outline these details explicitly, identifying Huron County and Ontario farms with sales greater than $2,500 by major farming activity.

Chart 3: Huron County Farms Classified by Major Product, 1991 (farms with sales greater than $2,500)

Source: OMAFRA, 1995, p. 31.

Source: OMAFRA, 1995, p. 31.

Overall, agriculture contributes significantly to the Huron economy, generating substantial income for the county population. The Huron County agriculture sector is one of the most productive in the province, with consistently higher production compared with other counties.

While agriculture is the traditional mainstay of the county, it is only a part of the entire economy. This section will provide background on the county's economic structure as a whole. Note that this section refers only to direct jobs, and thus underestimates agriculture's entire impact. Agriculture's spin-off impacts on other sectors are estimated in later sections.

Charts 5 and 6 illustrate the relative importance of the agriculture sector for Ontario and Huron County by comparing data from 1981 to 1991 in the components of agriculture, agriculture-related, agriculture food processing, as well as non-agriculture components of the economy.

Source: Cloutier, 1997.

Source: Cloutier, 1997.

Chart 6 identifies a decline in direct agricultural employment in Huron County from 5,395 employees in 1981 to 4,845 employees in 1991 (a 10 per cent rate of decline). This includes employment associated with agriculture production and services related to agriculture. The number of employees in agriculture services is increasing relative to direct agriculture, rising from 70 (1.3%) employees in 1981 to 200 (4.1%) in 1991.

Discrepancies in totals are due to rounding by Statistics Canada.

Source: Cloutier, 1997.

Table 4 examines several industries closely related to agriculture, including the food transformation industry, the input supply industry, the agriculture food trade industry and the grain elevator industry. These industries together combine to form the "closely-related-to-agriculture" sector which has remained relatively constant in terms of employment in the county since 1981 (with the exception of a dip in 1986). This consistency is very important when other sectors that are declining outright are considered.

In total, the agriculture sector accounts for 7,230 employees in the Huron County economy. Identified in Table 5, this includes employment in agriculture (4,845 jobs) and industries closely related to agriculture (2,385 jobs) identified in Chart 6 and Table 4. Total agricultural employment in 1991 accounted for approximately 23.8 per cent of the total county employment. This level declined, largely due to decreases in direct agriculture, from approximately 29.2 per cent of total employment in 1981 (Cloutier, 1997).

Source: Cloutier, 1997

Discrepancies in totals are due to rounding by Statistics Canada.

It should be noted that this "closely-related-to-agriculture" category is not equivalent to the term "agriculture-related employment" used elsewhere in this study. Agriculture-related businesses are defined in the methodology and results of this report as industries that sell to and/or buy from agriculture producers. This encompasses a wide range of industries, and involves a large proportion of employment in Huron County. This sector transcends the entire economy by including manufacturing, professional service, retail and wholesale, as well as specific agriculture services.

In 1991, the Huron County labour force consisted of 30,255 people over the age of 15. Overall, this is an increase of 8.6 per cent from 1986 (Statistics Canada, 1986, Statistics Canada, 1991). Accompanying this growth in the labour force are structural changes in the county economy, including a decrease in the number of agricultural jobs. In 1986 there were 5,305 people working in the agricultural sector. This decreased by 8.6 per cent to 4,845 jobs in 1991. If this trend continues, we estimate that there will be an estimated 4,428 direct employees in the agriculture sector in 1996. This is demonstrated in Table 6.

Source: Statistics Canada, 1996b, Statistics Canada 1991b

The major employment sectors in Huron County in 1991 were the service sector; agriculture and its diverse related services; manufacturing; retail services; health services and construction. Recall from Table 1 that major trends since 1971 include a declining primary sector and a rising service sector. The increase in service sector employment is important as it represents a resurgence of government and other service sector industries over 1981 when finance, government, and other services sector employment numbers were down drastically from 1971. Between 1981 and 1991 there was a 37.7 per cent increase in service industries, including accommodation and food service industries, education, health and social service institutions and professional service industries. Government services increased by 82 per cent in the same period. The construction, trade and finance sectors have all commanded consistent employment growth since 1971. The manufacturing sector in the county leveled off in 1991 from substantial employment growth (38 per cent) between 1971 and 1981. In the primary sectors, the decline between 1971 and 1981 was very slight; however, by 1991, the decline over 1981 was significant at five per cent (Statistics Canada, 1975; Statistics Canada, 1984; and Statistics Canada, 1991b).

A more in-depth analysis is afforded by looking at the employment numbers for the three censuses of 1981, 1986 and 1991. This information is contained in Table 7. By looking at the inter-censal period it can be seen that, although the overall trend from 1971 to 1991 illustrated in Table 1 was for declining primary employment, this sector actually grew between 1981 and 1986. However, by 1991, the sector had again declined. It can also be seen that the manufacturing sector peaked in 1986 at 5,220 employees and fell to 4,790 by 1991. This could potentially be the start of a long-term trend for the manufacturing sector. All other sectors grew consistently between 1981 and 1991 (Statistics Canada, 1984; Statistics Canada, 1986b; and, Statistics Canada, 1991b).

Source, Statistics Canada 1984, 1986b, and 1991b.

1. Includes agriculture, forestry, fishing and trapping, mines, quarries and oil wells.

2. Includes Retail and Wholesale

3. Includes education, health and welfare, personal and accommodation and food services.

4. Discrepancies in totals are due to rounding by Statistics Canada.

From the inter-censal period between 1986 and 1991, several changes occurred which have implications for the 1996 results. Using the percentage changes from 1986 to 1991, the 1996 employment projections were completed. Of importance is the noted decline in both primary and manufacturing employment while the rest of the sectors continued their growth trends. With these projections, the service as well as the trade sector will usurp the primary and manufacturing sectors as leaders of direct employment in the county. Later in this analysis we indicate that spin-off from agriculture helps to maintain the service sector as the employment leader. It is important to note that this is only a projection as the 1996 census data was not yet available at the time of this writing.

Of equal interest is the data not shown in Table 7. Each category represents a collection of industries, which have been classified together due to incompatibility of census data from 1981, 1986 and 1991. The primary sector includes agriculture, fishing and trapping, logging and forestry, mining and quarry industries in the county. These sectors are separated out for the 1981 and 1991 censuses. The transportation sector includes communications, storage and the utility industries. The trade category represents both wholesale and retail trade, which are separated out for the 1991 census only. Finally, the "other services" category represents health and social service industries, educational service industries, accommodation, food and beverage service industries, business service industries and other service industries. This collection of industries represents the largest employment sector of the county. What has been left out of the above discussion is the importance of wholesale and retail trade on the county economy. Throughout the 1970s and 1980s, Dahms (1982, p. 32) identified the growing importance of the wholesale trade function for the county. In Tables 1 and 7 wholesale trade is combined with retail trade. This makes it difficult to verify the trend of growing wholesale trade since the early 1970s (Statistics Canada, 1975; Statistics Canada, 1984; and, Statistics Canada 1991b). It is possible, however, to separate these two industries for 1991. In that year, wholesale employment was 1,335 while retail trade was 3,505 (Statistics Canada, 1991b). Researchers must wait for 1996 data to be made available to track the expected growth of these industries over time.

Huron County, with a rich agricultural past, has faced new realities over the past few years. It experienced the demise of its once numerous small communities to the point where several large communities service the county. At the same time, these new service centres have fortified themselves by gathering new functions and attracting new businesses. Goderich and Exeter are examples of newer, larger rural centres in the county.

Economically, Huron County's traditional mainstay has been agriculture. However, with continued employment growth in the construction, transportation and trade sectors as well as renewed growth in the finance, government and other services sectors, it might appear that agriculture is indeed on the decline. The researchers of this study argue that this is not the case as direct agriculture may be declining, but agriculture-related services and the businesses and services supported by agriculture continue to grow.

Economic impact analysis studies are aimed at identifying "... changes in a local economy resulting from a stimulus (positive or negative) to a particular segment of the economy" (Davis, 1990, p. 5). These studies are often based on one of the several standard methodologies of regional analysis; economic base analysis and input-output analysis (Faas, 1980, p. 4). Economic impact is generally a measure of the importance of a sector or a project on all sectors of the economy. The following is a discussion of the methodology upon which this study is based, namely, an "input-output-like" approach. (An economic base analysis of agriculture in Huron County is also available upon request from the authors.)

Input-Output (IO) analysis is used to measure the inter-relationships between economic activities at the sectoral, national and regional levels. Linkages are expressed by estimating the sales (outputs) from a given sector to all other sectors in the economy, and by estimating the inputs from all other sectors to a specific sector. What makes the I-O model so useful is the comprehensives of the model which desegregates the economy into individual sectors (Josling, 1966, p. 5). Desegregation permits analysis at the sectoral level, providing researchers with a close-up view of the economy. This dissected analysis allows the researcher to assess where each sector purchases its inputs and sells its outputs. Such analysis is invaluable in identifying what investment will provide the greatest impact on an economy (Poole et al., 1994, p. 30).

The I-O model estimates the movement of expenditures through the economy. This is traced through four different levels of expenditure: intermediate and primary suppliers, and intermediate and primary purchasers (Bendavid-Val, 1991, p. 88). Suppliers - intermediate and primary - purchase inputs for processing into outputs. Purchasers - intermediate and primary - buy outputs from suppliers and either use them to manufacture a product, or sell them as a final product (Bendavid-Val, 1991, p. 88).

Input-output analysis has two main approaches. One allows the estimation of only the direct and indirect effects of a sector. The other estimates these, as well as the induced effects of a sector. The open model is used to trace the flow of variables between sectors of the economy (i.e., direct and the indirect expenditures). The open model does not measure induced spending in the economy; meaning expenditures by employees on food, services and other household expenses (Davis, 1990, p. 59). The closed model is used to measure all aspects of the economy; including the direct, indirect and induced effects. Treating the household sector as a producer that sells labour to other purchasing sectors assesses induced effects (Davis, 1990, p. 59).

There are several problems associated the I-O model. The first is that it is time-specific. In other words, it takes a snapshot of the economy in time. This model cannot account for changes in product demand or input costs, or for the introduction of new technology into the industrial sector (Davis, 1990, p. 62). Thus, the I-O model does not adjust for the changing nature of the economy. A second problem of the I-O model is the cost and time needed for the construction of the tables associated with this analysis. For this reason, the analysis for this study has been carried out using a survey-based "input-output-like" approach.

Economic Base theory maintains that economic growth is only possible if the economy’s exports grow (Bradfield, 1988,p.38). The theory is based on the belief that as exporting industries expand their sales, there will be an increasing demand for inputs locally which will consequently drive local economic growth (Bradfield, 1988, p.39). In economic base theory, the economy is classified into two sectors of basic and non-basic. The basic sector includes industries that ultimately export their product out of the region. The non-basic sector is the economic activity with final sales remaining inside the region (Davis, 1990,p.10). These are support industries that provide everything from industrial inputs to houses for basic sector employees (Higgins and Savoie, 1995,p.66). The exporting industries are identified as basic sectors while all other industries are classified as non-basic.

According to economic base theory, exports are the engine of the local economy. It follows, then, that the exports of goods supports all other aspects of the economy (Bendavid-Val, 191, p.77). Economic base theory and its supporters carry the separation of basic and non-basic sectors to the point where they attempt to predict the relative impact of the basic sector on the non-basic sector. The prediction of economic impact is assessed through two economic indicators known as the economic base ratio and economic base multiplier. Economic base theory has been refined to the point where it can be questioned: "[W]hat is the overall gain in employment or income in the region associated with each gain in export sales?" (Bendavid-Val, 1991,p.78).

This question is answered through the economic base ratio indicator and the base multiplier indicator (Bendavid-Val, 1991,p.78). The economic base ratio calculates jobs that are theoretically created from one additional job in the basic sector. The economic base ratio is the ratio between employment in the basic and non-basic sectors and is supported by the idea of basic employment and non-basic employment combined equaling total employment (Bendavid-Val, 1991,p.78). The economic base multiplier is the ratio of total employment to basic employment and indicates how many jobs in the total are provided for each basic job. Thus, the economic base multiplier is the total sum of the jobs created in both sectors from one job in the basic sector (Bendavid-Val, 1991,p.78).

There are a variety of methods to measure the economic base of a region. The main one used in this research is the location quotient. The LQ is a ratio of the regional share of employment in an industry as compared to the provincial employment in the industry. The method is based on the assumption that when an industry accounts for more than its share of the location quotient, theoretically, the portion of the location quotient above the regional average is considered an export industry. Given that, basic sector employment can be calculated as a percentage of the location quotient, with this representing the percentage of industry employment in the region. If the location quotient is less than one, then the basic level of employment will be zero. When the location quotient is greater than one, non-basic employment is calculated by subtracting the basic employment from the total sectoral employment in the region. Personal knowledge of the local economy is also used to estimate basic employment.

Given the previous discussion on input-output analysis, the reader may question where the application of this model leads. One of the best uses is that they allow the analyst to identify the impacts of economic changes or shocks to a system. Essentially, what these models do is measure the multiplier effects that result from a change in an economic system. In basic terms, multiplier effects are the summation of the direct, indirect and induced impacts of economic activity presented in a single number (Lewis et al., 1979, p. 1).

Therefore, an economic multiplier can be used to estimate the impact of change in one variable (for example, the value of agricultural production) on another variable (for example, the value of non-agriculture production). Direct employment and production in the agriculture sector will affect the rest of the economy by supporting employment in related industries as well as in the retail sector. In this way, "...a multiplication of transactions occurs in the economy by people re-spending money" (Van Hoeve, 1995, p. 66).

The multipliers calculated for this research include an expenditure multiplier and an employment multiplier. These have been used to estimate the induced impact of the agriculture sector on the Huron County economy.

Initial research for the Huron County Study was carried out from April to August 1996. The economic impact of agriculture on the county economy was measured through an accounting of the total sales and employment of agriculture and related businesses in the county. This work involved a review of primary data (Population Census of Canada, 1986 and 1991) to study the direct economic impacts of agriculture on the county economy. A survey-based "input-output-like" approach was used to measure the indirect impacts. The survey was aimed at businesses that sell products to or buy products from the agriculture sector. The induced economic and employment impacts of the agriculture sector were also studied using primary data (Population Census of Canada, 1991).

Further work was carried out from April to August 1997. The purpose of this phase of the study was to verify the data collected during the summer of 1996. Modifications were made to the initial findings based on this work. A more in-depth look at the linkages between agriculture and the rest of the economy was also completed.

A literature review was conducted to identify the direct impacts of agriculture in Huron County. Data was taken from the 1986 and 1991 Population Census of Canada. This provided a great deal of information about the economy of Huron County, including general labour trends and population data. Complete 1996 census data was not yet ready by the time of writing this document, so an extrapolation from the previous two census’ data was done to estimate direct employment impacts. The process involved identifying the particular data for agriculture employment for both 1986 and 1991 data sets. From this, a rate of change in direct employment was projected to produce the 1996 data set. Results of this analysis are found in section 5.2.1.

The research method used to measure the indirect impacts was a survey-based "input-output-like" approach. This was completed through a telephone survey in August 1996. The survey was conducted with the indirect businesses associated with agriculture — that is, businesses that either buy products/services from farmers, or sell products/services to farmers (for the farm business). The sample of businesses was randomly selected from a list of businesses provided by the Huron County Federation of Agriculture. This method enabled the researcher to identify the value of gross sales and the jobs produced by a sample of businesses related to agriculture. In 1997, these results were checked through personal interviews with past respondents in McKillop and Stanley Townships and the Town of Wingham. By using the 1996 survey results, combined with the 1997 interview results, the researcher estimated the economic impact of agriculture-related businesses (indirect employment and sales) for the county as a whole. Appendix 3 provides details on the methodology used for the indirect impact analysis. Results of this analysis are found in section 5.2.2.

A study of the induced effects of agriculture was conducted. Induced employment refers to service sector jobs supported by agriculture and agriculture-related employees. Two primarily agricultural townships were selected (Morris, McKillop) to estimate the number of induced jobs. Then, agriculture employment data from the 1991 census data was compared to service sector jobs in retail, health, education, government and other service sectors. Non-service sector jobs were also factored into the analysis. More detail on this is provided in section 5.2.3.

During the summer of 1997, twelve agriculture-related businesses were randomly selected from the total number of businesses (220) that responded to the survey in the summer of 1996. A letter was sent to each of these businesses, followed by a phone call asking them to participate in a second phase of the study. Of the twelve that were contacted, all agreed to further participate in the study. They were asked to provide a tour of their business operation, and to be involved in a long interview regarding their business. This involved one to two hours of their time.

Interviews began with a tour of the business, with particular emphasis on the products purchased for the business, as well as the products sold by the business. During and after the tour, the researchers and owner(s) discussed the products and services sold by the business, with particular attention paid to those services and products purchased by the agriculture sector (forward linkages). As well, the products and services purchased for the operation of the business, with particular attention to those purchased from the agriculture sector (backward linkages), were discussed. Owners were asked to divulge the total value of sales, as well as the percentage of sales related to agriculture. Information was also solicited on the number and type of employees. Owners were urged to discuss local issues impacting their business, including changes in the agriculture sector. Finally, owners were asked about the changing status of their business, as well as their industry as a whole.