Sarnia-Lambton Economic Partnership Findings and Issues Report. Mellor Murray Consulting November 28, 2017 (Updated Jan 23, 2018)

Sarnia-Lambton Economic Partnership Findings and Issues Report Mellor Murray Consulting November 28, 2017 (Updated Jan 23, 2018)

Contents Introduction... 2 The Strategic Planning Process... 2 Document Review... 3 Economic and Demographic Analysis... 5 Provincial Context... 5 Sarnia Lambton: Buffeted by Larger Economic and Demographic Forces... 5 Urban Sarnia and Rural Lambton County... 7 Economic Structure... 7 The Changing Structure of the Sarnia CA Economy... 7 The Sarnia CA Economy Employment by Industry... 11 The Sarnia CA Economy Employment by Occupation... 14 Demographic Shifts... 15 A Structural Drag on Economic Growth... 15 Initial Observations: Assessing Potential Growth Opportunities... 25 SLEP Promoted Sectors: Observations... 25 Other Considerations... 26 Community Consultation... 28 Summary of Interviews... 28 Community Survey... 29 Areas of Focus... 36 Cluster Development... 36 Entrepreneurship... 37 Resident Attraction... 37 Regional Economic Development... 38 Governance... 39 Summary of Key Findings... 40 SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)... 42 Next Steps... 43 Front cover Images: Lou Springer, Tourism Sarnia Lambton, Pixabay

List of Figures Figure 1: Growth Rate in the Number of Persons Earning Employment Income... 6 Figure 2: 10-Year Shift in Total Employment by Major Industry Grouping... 8 Figure 3: 10-Year Shift-Share Analysis, Change in Employment Relative to the National Levels... 9 Figure 4: Location Quotient, Employment Relative to the National Levels... 10 Figure 5: Employment by Industry and Location Quotient... 11 Figure 6: Location Quotient, Employment Relative to the National Levels... 12 Figure 7: Location Quotient for Top 3 Digit NAICS Industries... 13 Figure 8: Top Location Quotients - 3 Digit Occupations... 14 Figure 9: Selected Low Location Quotients - 3 Digit Occupations... 15 Figure 10: Population Growth 2011 to 2016... 15 Figure 11: Average Age of the Population... 16 Figure 12: Population by Age Group... 16 Figure 13: Main Sources of Population Growth (County/District/CMA Level)... 17 Figure 14: Labour Market Profile/Trends... 18 Figure 15: Labour Force Participation Rate... 19 Figure 16: Increase/Decrease in the Number of Employment Income Earners... 20 Figure 17: Average Employment Income and Trend... 20 Figure 18: Individual Income Levels per 1,000 Income Earners... 21 Figure 19: Household Income Levels per 1,000 Households... 21 Figure 20: Percentage Change in Number of Persons Declaring Self-Employment Income... 22 Figure 21: Persons Declaring Social Assistance Income as a Share of Total Income Earners... 22 Figure 22: Persons Declaring CPP Income as a Share of Total Income Earners... 23 Figure 23: Percentage Increase Between 2010 and 2015 in the Number of Persons Under 35 Years of Age Earning $50,000 or More... 23 Figure 24: Percentage Decline Between 2010 and 2015 in the Number of Persons Under 35 Years of Age Earning $35,000 or Less... 24 Figure 25: Post-Secondary LQs... 24 1

Introduction The Sarnia-Lambton Economic Partnership (SLEP) has a long history of collaboration with its fourteen members focused on supporting and growing its regional economy. This strategic planning exercise marks a time of reflection and evaluation for its members and the community they serve. This exercise includes a review of the economic development strategy and action plan (2015-2018) and the establishment of a new five-year plan that reflects the needs and opportunities of Lambton s eleven municipalities and three First Nations communities. This Findings and Issues Report provides the rationale for the strategic planning and prioritization efforts that will follow. It is intended to provide a clear picture of where the Sarnia-Lambton Economic Partnership is now in order to best determine the organization s vision for the future and its plan to achieve that vision. The Strategic Planning Process The strategic planning process consists of four stages; background research, stakeholder consultation, strategy development and plan review and implementation. As part of its outreach and community engagement efforts, SLEP established a website (www.slepstratplan.ca) to provide access to background research and analysis during the strategic planning process. The website also served as the platform for a community survey to seek input from the residents, business and key stakeholders in the Sarnia Lambton region. Detailed community profiles for the eleven municipalities were provided to the individual communities and published on the strategic planning website. This report includes a summary of the background research including the document review and economic and demographic analysis for the region. The report also includes a summary of the stakeholder consultation including the results of a community survey and a summary of interviews with 40 individuals representing business, SLEP board members and staff, business associations and other key stakeholders. This Initial Findings Review culminated with a strategic priorities workshop on October 26, 2017 where SLEP board members reviewed the background research and analysis in this report and determined the strategic priorities for their new strategic plan. 2

Once the strategic priorities have been identified, the research will continue with an evaluation of best practices in economic development efforts in those priority areas. The best practice review will inform the development of the strategic plan; its vision, mission, goals, strategic actions and related performance measures. Document Review A review of previously completed research, strategic plans and other policy documents ensures that the Strategic Plan will build upon the previous work efforts and established strategic directions. This review provides a summary of the planning and development which has shaped Sarnia and Lambton County s thinking and direction. It provides a back drop and foundation upon which to build the new economic development strategy. The Sarnia-Lambton Economic Partnership wishes to further diversify its economic base and attract more immigrants and people from elsewhere in Canada. The petrochemical, agriculture and tourism sectors are expected to be key drivers of the region s economy. Beyond these areas of economic strength, the region is also targeting expanded capacity in advanced manufacturing, retail and specialized services. The region has made great strides in building on the petrochemical cluster with a significant and complimentary cluster in bio energy, bio chemicals and bio products. The Sarnia Lambton area is positioned to lead Ontario s, and perhaps Canada s foray into this emerging and important sector. 3

Workforce development and talent recruitment and retention will be key to further developing both the area s traditional sectors and emerging sectors. The area has tremendous capacity in the highly skilled trades both in engineering and technicians in the petrochemical sector. These skill sets will be critical to the success of building this complimentary regional cluster. The reports emphasize the economic development imperative to focus on people and talent retention and recruitment. Finding the right mix that supports growth and prosperity throughout Lambton County will be an important task for the Sarnia-Lambton Economic Partnership and its partners. The literature includes a recognition that there may be different economic development needs in the urban, small urban and rural communities. A philosophy of support and intentionality for each other s priorities will be critical. Waterfront development, downtown development and commercial and industrial land developments are important to the City of Sarnia; as is an overarching goal to be a great place to live and work. The communities within Lambton County each have unique characteristics but similar priorities. They want enhanced retail and commercial development, an increased tax base, more employment opportunities for their residents, and in many cases, more residential development and better community amenities. The rural areas of the County are dominated by agriculture, a mature industry dominated by cash crop production. There are opportunities for the agricultural community to become actively involved in the development of the bio energy and bio products sectors. There is also interest in researching intensifying crop development methods and greenhouse development to explore new crop production. There is a common need to retain people, particularly the younger generation, and attract residents and workers. There is broad and general support throughout the County to build upon the petrochemical cluster and develop a strong bioenergy and bio products cluster. The Sarnia-Lambton Economic Partnership favours less capital-intensive projects that create a greater number of jobs. Finding the proper mix in terms of human resources and resource allocation for the partnership will be key. There is strong support for the work and research being done by Lambton College and its strong support to the efforts of SLEP. There is potential to capitalize on the college s expertise and that of the business community to develop innovative approaches and greater automation in the areas of metal printing, material sciences and process control technologies. There is general consensus that Lambton County needs to create a more entrepreneurial friendly environment and support climate if it is to retain and attract people. There are several support agencies and programs in place throughout the County and finding ways to work in a coordinated and streamlined way would be viewed as positive development. Telling the Lambton County story in a compelling manner is considered by many to be a priority. There are some ingrained perceptions that will take a concerted effort to overcome. Tag lines like Chemical Valley and stories on environmental concerns must be addressed and offset with the importance of the petrochemical sector to the provincial economy and information about the controls and expertise that is in place. Also, there needs to be better and consistent messaging around emerging sectors and the strengths of sectors such as tourism and agriculture. The adoption of Discoveries that Matter branding is part of the strategy to address the negative perceptions, however, there is a recognition that this tag line is one component of a larger effort to position the County as a progressive and exciting area. This Economic Development Strategy will attempt to integrate the thinking, the strategies and the resources associated with this body of work along with a vision for enhancing the overall economy of Lambton County to enable the Sarnia-Lambton Economic Partnership, the action plan and resource allocation to achieve the desired results. 4

Economic and Demographic Analysis The purpose of this economic and demographic review is to support the development of the Sarnia- Lambton Economic Partnership (SLEP) Strategic Plan. The SLEP Strategic Plan will provide a clear vision, goals, and tactics in support of the Board s mission. The economic and demographic review is based primarily on Statistics Canada data. Where appropriate, it references other sources as well as primary research. This report uses a variety of tools to analyze the community s economic and demographic situation in context including historical analysis, location quotient (LQ) and shift-share analysis. It includes a comparison to benchmark communities: Saint John, New Brunswick; Windsor and St. Catharines, Ontario and Lethbridge, Alberta. These communities were selected because of similar characteristics with Sarnia and Lambton County such as proximity to a U.S. border, a strong petrochemical sector, location outside a major urban area such as Toronto, a port location and similar population size. Unless otherwise noted, the data for the Census Agglomeration (CA) 1 or Census Metropolitan Areas (CMA) are used in the analysis. A summary of the definitions and measurements is included in the appendix of this report. This report is based on the Sarnia CA to allow for a meaningful comparison to other small and mid-sized urban centres across Canada. A second demographic and economic analysis profile for each municipality in Lambton County was also provided to SLEP. This report is broken into four main sections: 1. Provincial Context: The larger economic context of Ontario, forces and influences impacting Sarnia Lambton s economic trajectory that are out of the community s direct control or influence. 2. Economic Structure: The changing structure of the Sarnia Lambton economy. 3. Demographic Shifts: Population changes that impact economic growth and potential. 4. Initial Observations: A data-driven assessment of Sarnia Lambton s potential growth sectors for consideration and further study during the strategic planning process. Sarnia Lambton is facing economic and demographic headwinds. The industries that fueled the community s growth 20 to 30 years ago are not necessarily those that will drive the economy over the next decade. The sources of talent that fed the Sarnia Lambton workforce are also in flux. Historically, the area has benefitted from a strong natural population growth rate (births minus deaths) and intraprovincial migration (people moving to Sarnia Lambton from elsewhere in Ontario). Both these sources are not providing the talent feedstock they once did. Future workforce growth in Sarnia Lambton will require the attraction and retention of people from outside the region and around the world. The ability to attract business investment, foster new entrepreneurs and local business expansion will depend on the community s ability to attract and retain people. The quality of life in Sarnia Lambton will be even more important in the area s efforts to attract residents to support its economic growth. Provincial Context Sarnia Lambton: Buffeted by Larger Economic and Demographic Forces When evaluating the economic trajectory of a community and assessing its potential for future growth, it is important to assess the specific urban, rural, provincial, national and international forces impacting its economic potential. What are the economic and demographic drivers we can influence and what are completely out of our control? 1 The Sarnia CA includes: Plympton-Wyoming (Town), Point Edward (Village), Sarnia (City), Aamjiwnaang First Nation and St. Clair (Township). 5

Figure 1 shows the five-year growth rate in the number of persons reporting employment income on their annual tax forms. Between 2010 and 2015, Ontario as a whole saw a nearly six percent increase (401,000 persons in total) in the number of employment income earners. However, on a net basis nearly 80 percent of that employment growth occurred in Toronto and a few surrounding urban centres in its orbit. The large urban centres across Ontario (Toronto, Ottawa, Hamilton, etc.) witnessed an average growth rate of 5.8 percent during the period. Small to mid-sized urban centres in Ontario increased the number of workers by only 1.8 percent and those outside the Toronto orbit (i.e. more than a 1½ hour drive by car) featured an average growth rate of less than one percent. The Sarnia Census Agglomeration area witnessed a 2.2 percent decline in the number of persons earning employment income over the period. Figure 1: Growth Rate in the Number of Persons Earning Employment Income (2010 to 2015), Ontario Urban Centres Non-weighted average growth rate. Source: Statistics Canada CANSIM Table 111-0007. Forces impacting the Sarnia CA are also impacting other similarly sized urban centres across Ontario. In fact, this trend is impacting small and medium-sized cities across Canada. Employment growth in small and mid-sized cities has been tepid in recent years, with the exception of those cities where new growth is driven by natural resource industries and those in the direct orbit of the largest urban centres. For many mid-sized urban centres, these broader forces include a shifting industrial base away from manufacturing and natural resources development, a generalized aging trend, declining natural population growth rates (births minus deaths), declining net inward intraprovincial mobility and increasing outward interprovincial mobility. Many areas are also experiencing a decline in the rate of entrepreneurship. Combine these forces with broader economic influences such as increased global competition for investment, talent and ideas and the data suggests a dampening of the economic potential of small and mid-sized urban centres across Canada. Government, business and local community leaders can influence many of the drivers that are hindering the growth potential of Ontario s small and mid-sized urban centres such as Sarnia Lambton. Governments control the flow of international migrants. Government, community and business leaders can take steps to improve the value proposition in sectors where there is already a strong case for investment. Local government and community stakeholders can make their communities more attractive to help attract and retain new residents, particularly young families that will provide the talent for the future workforce. Local leaders can improve the attractiveness of the community as a place to invest and they can foster more and stronger entrepreneurship by providing start-up support, mentorship, early stage 6

capital, and other services. Local leaders can work to boost post-secondary education enrolment to strengthen the local talent pipeline. While the broader national and international forces are mostly out of the control and influence of local leaders, efforts to strengthen the value proposition for business investment, people attraction and new entrepreneurship should help the community better compete in the global marketplace. Urban Sarnia and Rural Lambton County The urban and rural economies in Sarnia Lambton are tightly linked and strategies to foster sustained economic growth need to reflect opportunities in both the urban and rural economies. However, it is important to differentiate between the challenges and opportunities facing the urban centre and the rural areas. Rural Ontario has experienced more growth of persons earning employment income than small urban Ontario. Population trends for Sarnia Lambton confirm a similar trend. The population of Sarnia CA, the urban centre of Sarnia Lambton, declined between 2011 and 2016. The rest of Lambton County had a combined population growth rate of 4.9 percent, similar to the growth rates across Ontario and the country as a whole. Some of this growth was due to above average population expansion in First Nations communities. Economic Structure The Changing Structure of the Sarnia CA Economy The Sarnia CA economy experienced a significant transformation over the past 10 years. This transformation is illustrated by comparing employment by industry in 2006 and 2016. 2 Total employment in the Sarnia CA increased by an estimated one percent over the 10-year period. This modest increase compares to an 8 percent increase across Ontario and 9 percent for the country as a whole. St. Catharines-Niagara and Windsor have fewer employed persons in 2016 than in 2006 using Census data. Lethbridge has witnessed a 20 percent increase in total employment NOTE: The Census labour force data is based on where people live and not where they work. There are over 1,000 people working in agriculture who live in the Sarnia CA. Many of them may be commuting to the rural parts of the county for their work each day. There have been significant shifts in total employment by industry. The Sarnia CA witnessed strong employment growth in mining; wholesale trade; agriculture; as well as health care and social assistance. At the same time, the urban centre experienced declines in employment in information and cultural industries; utilities, manufacturing; as well as real estate and rental and leasing. The number of persons defined as unclassified rose form 850 in 2006 to 1,235 in 2016. 2 The change in GDP contribution by sector is arguably a better measure, but that data is not available at the community level. 7

Figure 2: 10-Year Shift in Total Employment by Major Industry Grouping Sarnia CA and Benchmarks, 2006 to 2016 Sarnia CA Saint John St. Catharines- Niagara Lethbridge Windsor ONT CAN Total labour force 1% 1% -1% -3% 20% 8% 9% Unclassified 45% 28% 44% 12% 119% 50% 42% All industries 0.3% 0.7% -1.3% -3.5% 19.6% 7.7% 8.3% Agriculture, forestry, fishing and hunting 30% -8% -10% 15% 9% -11% -15% Mining and oil and gas extraction 77% 22% 38% 22% 10% 27% 14% Utilities -30% 18% -10% 11% 20% 1% 3% Construction 19% 14% 14% 6% 50% 24% 28% Manufacturing -23% -26% -32% -18% 6% -24% -20% Wholesale trade 47% -20% -10% -10% 8% -12% -10% Retail trade 1% 0% 6% -9% 21% 9% 10% Transportation and warehousing -11% -14% -9% 0% 4% 7% 7% Information and cultural industries -43% -27% -19% -21% -10% 2% 1% Finance and insurance -12% 28% -7% 15% 26% 20% 15% Real estate and rental and leasing -22% 0% 4% -9% 12% 14% 10% Professional, scientific and tech. services 14% 17% 10% 5% 16% 20% 19% Administrative and support* -11% -20% -3% 38% 15% 8% 11% Educational services 8% 8% 16% 6% 26% 22% 17% Health care and social assistance 29% 18% 20% 22% 34% 23% 25% Arts, entertainment and recreation -15% 0% -15% -32% 10% 5% 10% Accommodation and food services -1% 10% 2% -7% 20% 15% 14% Other services (except public admin.) -10% -4% -9% -11% 3% -2% -1% Public administration 6% 15% 19% 3% 23% 19% 15% *Includes waste management and remediation services. Sources: Statistics Canada Census 2006, 2016. Figure 2 above shows the change in total employment by broad industry group. Figure 3 shows the relative change in the structure of the economy by measuring employment by industry compared to the national labour market. For example, employment in manufacturing decreased in both the Sarnia CA and the country as a whole over the decade. However, as a share of total employment, manufacturing dropped faster across Canada than it did in the Sarnia CA. This shift means that the Sarnia CA is now more reliant on manufacturing than it was in 2006 relative to the national economy, even though there are fewer people employed in the sector. The economy in Sarnia is shifting towards wholesale trade; mining; agriculture; health care and social assistance; manufacturing and professional, scientific and technical services. Relative to the national economy, it is shifting away from information and cultural industries; utilities; real estate and rental and leasing; finance and insurance; arts, entertainment and recreation; administrative and support; transportation and warehousing; and accommodation and food services. Windsor is an interesting comparison. The community is shifting away from tourism and retail towards services such as finance, administration and support and health care, as well as manufacturing. Lethbridge has witnessed a significant increase in its reliance on manufacturing and agriculture 8

employment relative to the national economy. The Saint John economy has shifted towards finance and insurance as well as utilities, mining and agriculture. Figure 3: 10-Year Shift-Share Analysis - Sarnia CA and Benchmarks (2006 to 2016), Change in Employment Relative to the National Levels Sarnia CA Saint John St. Catharines- Niagara Lethbridge Windsor ONT Agriculture, forestry, fishing and hunting 66% 16% 17% 52% 16% 6% Mining and oil and gas extraction 68% 15% 34% 20% -12% 13% Utilities -26% 24% -4% 22% 6% -1% Construction 0% -4% -2% -7% 6% -2% Manufacturing 4% 0% -6% 15% 21% -4% Wholesale trade 77% -4% 10% 13% 8% -2% Retail trade -1% -2% 5% -8% -1% -1% Transportation and warehousing -10% -13% -7% 5% -12% 1% Information and cultural industries -39% -22% -12% -12% -19% 2% Finance and insurance -17% 20% -11% 12% 0% 6% Real estate and rental and leasing -24% -2% 4% -7% -8% 5% Professional, scientific and tech. services 3% 5% 2% -1% -11% 2% Administrative and support* -14% -22% -4% 39% -6% -2% Educational services -1% -1% 9% 1% -2% 5% Health care and social assistance 12% 2% 6% 10% -2% 0% Arts, entertainment and recreation -17% -2% -15% -30% -9% -4% Accommodation and food services -6% 4% -2% -8% -5% 2% Other services (except public admin.) -2% 4% 0% 0% -6% -1% Public administration -1% 7% 13% 1% -3% 4% *Includes waste management and remediation services. Sources: Statistics Canada Census 2006, 2016. 9

Figure 4 summarizes the 2016 LQ figures for the top level 2-digit NAICS industry groupings. The Sarnia CA economy is more reliant on utilities, construction and manufacturing compared to the national economy. It also has strong LQ values in tourism related sectors; accommodation and food services as well as arts, entertainment and recreation. Despite losing over 400 business support services jobs (contact centre jobs) between 2006 and 2016, the Sarnia CA is still more reliant on the administrative and support sector than the country as a whole. These strong industries are offset by very low LQ values for finance and insurance, information and cultural industries and public administration. Figure 4: Location Quotient (Canada = 1.00) Sarnia CA and Benchmarks (2016), Employment Relative to the National Levels Sarnia CA Saint John St. Catharines- Niagara Lethbridge Windsor ONT Agriculture, forestry, fishing and hunting 0.93 0.40 1.00 0.47 2.01 0.60 Mining and oil and gas extraction 0.86 0.81 0.16 0.16 1.15 0.31 Utilities 1.47 2.44 0.83 0.69 0.78 0.98 Construction 1.19 1.06 0.95 0.70 1.23 0.92 Manufacturing 1.31 0.72 1.05 2.35 0.91 1.12 Wholesale trade 1.02 1.13 0.90 0.72 0.87 1.07 Retail trade 1.05 1.07 1.08 0.93 1.10 0.97 Transportation and warehousing 0.83 0.86 0.88 0.88 0.79 0.98 Information and cultural industries 0.41 0.95 0.56 0.50 0.51 1.10 Finance and insurance 0.51 0.88 0.67 0.76 0.65 1.26 Real estate and rental and leasing 0.76 0.71 0.82 0.73 0.78 1.13 Professional, scientific and tech. services 0.73 0.90 0.63 0.70 0.62 1.11 Administrative and support* 1.28 1.56 1.26 1.08 0.87 1.11 Educational services 0.86 0.86 0.99 1.05 1.21 1.03 Health care and social assistance 1.12 1.27 1.00 1.09 1.17 0.92 Arts, entertainment and recreation 1.18 0.74 2.10 1.37 0.88 1.02 Accommodation and food services 1.21 0.98 1.69 1.11 1.06 0.98 Other services (except public admin.) 1.17 1.06 1.01 0.91 1.07 0.96 Public administration 0.63 0.97 0.77 0.63 0.87 0.96 *Includes waste management and remediation services. Source: Statistics Canada Census 2016. 10

The Sarnia CA Economy Employment by Industry Using Statistics Canada Census data on employment by industry, Figure 5 shows the changing employment levels in the Sarnia CA over the 10-year period. The table shows employment by industry over the past 10 years and the LQ by 2-Digit NAICS. In absolute terms, the Sarnia CA has considerable employment in manufacturing, utilities, transportation, information and culture, administrative and support, arts & entertainment and other services. On a percentage change basis, the biggest losses were in utilities, manufacturing, information and culture and real estate. The economy has seen strong gains in mining, agriculture, wholesale trade and health care. In terms of total jobs, there were 1,340 more people working in health care and social assistance in 2016 compared to a decade earlier. Figure 5: Employment by Industry and Location Quotient (Canada = 1.00) Sarnia CA (2016) 2016 Employment 10-yr change 10-yr % change 2016 LQ CAN = 1.00 Total labour force 46,840 540 1.2% Unclassified 1,235 385 45.3% All industry categories 45,605 155 0.3% Agriculture, forestry, fishing and hunting 1,030 240 30.4% 0.93 Mining and oil and gas extraction 585 255 77.3% 0.86 Utilities 500-215 -30.1% 1.47 Construction 4,055 635 18.6% 1.19 Manufacturing 5,235-1,585-23.2% 1.31 Wholesale trade 1,700 545 47.2% 1.02 Retail trade 5,545 50 0.9% 1.05 Transportation and warehousing 1,825-235 -11.4% 0.83 Information and cultural industries 430-325 -43.0% 0.41 Finance and insurance 1,015-135 -11.7% 0.51 Real estate and rental and leasing 630-180 -22.2% 0.76 Professional, scientific and tech. services 2,445 300 14.0% 0.73 Administrative and support* 2,565-320 -11.1% 1.28 Educational services 2,905 205 7.6% 0.86 Health care and social assistance 5,970 1,340 28.9% 1.12 Arts, entertainment and recreation 1,115-200 -15.2% 1.18 Accommodation and food services 3,865-35 -0.9% 1.21 Other services (except public admin.) 2,380-255 -9.7% 1.17 Public administration 1,780 100 6.0% 0.63 *Includes waste management services. Sources: Statistics Canada Census 2006, 2016. 11

Figure 6 shows the industries in the Sarnia CA with the highest LQ 3 values. These industries are the most dominant in the Sarnia CA relative to the national economy. While there are only 500 people working in the utilities sector, this represents a high share relative to Canada and Ontario. The LQ value is 1.47 meaning there are nearly 50 percent more people working in utilities in Sarnia, as a share of the total workforce, compared to the country as a whole. The Canadian economy is shifting towards a services economy. In the past 10 years employment in service industries has grown by more than 12 percent while there has been a modest decline in goods producing employment 4. By contrast, the Sarnia economy has seen only a modest growth in services employment of three percent. 5 Sarnia s goods producing sector employment has dropped by six percent. Figure 6: Location Quotient (Canada = 1.00) Sarnia CA (2016), Employment Relative to the National Levels Utilities Manufacturing Administrative and support* Accommodation and food services Construction Arts, entertainment and recreation Other services (except public admin.) Health care and social assistance Retail trade 1.05 1.12 1.18 1.17 1.19 1.21 1.28 1.31 1.47 *Includes waste management services. Sources: Statistics Canada Census 2016. 3 Location Quotient: A measure of the concentration of a particular industry, cluster, occupation, or demographic group is in a region as compared to the nation where the comparator has a value of 1.0 4 Goods producing sectors include: agriculture, forestry, fishing and hunting; mining, quarrying, and oil and gas extraction; utilities; construction; and manufacturing. 5 There were some services sub-sector gains offset by declines elsewhere. 12

Figure 7 shows the top industries, at the three-digit NAICS 6, with at least 300 workers and significantly higher concentrations of employment than the national average. Despite job losses in recent years, the Sarnia CA is still heavily reliant on chemical and petrochemical manufacturing employment. There has been a big expansion in petroleum wholesaling employment over the decade. Several important manufacturing sectors have shed employment over the decade. Nursing and residential care facilities employment has expanded by 350 over the decade. Figure 7: Location Quotient for Top 3 Digit NAICS Industries (Canada = 1.00) Sarnia CA (2016), Minimum 300 Workers 2016 10 yr 10-yr % 2016 LQ NAICS industry: employment change change value 412 Petroleum and petroleum products wholesalers 685 515 303% 17.31 324 Petroleum and coal products manufacturing 740-460 -38% 14.35 325 Chemical manufacturing 1,840-390 -17% 8.38 486 Pipeline transportation 115-10 -8% 5.50 326 Plastics and rubber products manufacturing 570-20 -3% 2.51 562 Waste management and remediation services 295 10 4% 2.39 482 Rail transportation 155-45 -23% 1.95 332 Fabricated metal product manufacturing 720-340 -32% 1.89 713 Amusement, gambling and recreation industries 965-205 -18% 1.68 211 Oil and gas extraction 370 210 131% 1.67 453 Miscellaneous store retailers 500 70 16% 1.63 623 Nursing and residential care facilities 1,395 350 33% 1.49 221 Utilities 500-215 -30% 1.47 Source: Statistics Canada Census 2016. 6 North American Industrial Classification System 13

The Sarnia CA Economy Employment by Occupation Another way to evaluate an economy is by looking at employment by occupation to isolate concentrations of talent. As shown in Figure 8, the strength of Sarnia CA s chemical processing sector is reflected in this data. There are multiple related occupational groups with high LQ values. The region s engineering talent also shows clearly in the occupational data with multiple engineering-related occupations in the top LQs. Other than engineering services, the only other services-related occupational group with a high LQ is nursing (LQ=1.33). The role of Lambton College and the tourism sector is also reflected in this data. Figure 8: Top Location Quotients - 3 Digit Occupations (Canada = 1.00) Sarnia CA (2016), Minimum 300 Workers 2016 10 yr % LQ Occupational description: Jobs change Value 923 Central control and process operators in manufacturing 810 24% 13.73 942 Machine operators in chemical, plastic and rubber processing 365-3% 4.09 226 Other technical inspectors and regulatory officers 430 56% 2.76 725 Plumbers, pipefitters and gas fitters 565-3% 2.72 213 Civil, mechanical, electrical and chemical engineers 950 32% 2.21 723 Machining, metal forming, shaping and erecting trades 925 16% 1.92 729 Other construction trades 475-5% 1.75 720 Contractors/supervisors, industrial, electrical & construction trades 360-19% 1.45 671 Food counter attendants, kitchen helpers and related 1,405 11% 1.43 727 Carpenters and cabinetmakers 650 27% 1.40 224 Technical occupations in electronics and electrical engineering 385 8% 1.40 731 Machinery and transportation equipment mechanics 555 11% 1.34 301 Professional occupations in nursing 1,020 11% 1.33 402 College and other vocational instructors 305 0% 1.33 Source: Statistics Canada Census, 2006 and 2016. 14

A review of the occupational groups with low LQs provides insight into areas where there may be opportunity for growth. Figure 9 shows occupations in the Sarnia CA with low LQ values. Figure 9: Selected Low Location Quotients - 3 Digit Occupations (Canada = 1.00) Sarnia CA (2016), Minimum 300 Workers 2016 10 yr % LQ Occupational description: Jobs change Value 111 Auditors, accountants and investment professionals 540 35% 0.56 152 Supply chain logistics, tracking and scheduling co- 460-30% 0.72 623 Insurance, real estate and financial sales occupations 415 46% 0.74 961 Labourers in processing, manufacturing and utilities 355-21% 0.58 112 Human resources and business service professionals 325 0% 0.52 131 Finance, insurance and related business admin. 320-46% 0.66 001 Legislators and senior management 320 12% 0.57 217 Computer and information systems professionals 300-5% 0.33 Source: Statistics Canada Census, 2006 and 2016. Demographic Shifts A Structural Drag on Economic Growth Population Change The Sarnia CA population declined from 97,131 in 2011 to 96,151 in 2016. This represented a one percent decline in total population. Figure 10 shows how this compares to the provincial, national and benchmark population growth/decline rates. The population in Sarnia CA and Saint John declined over the five-year period. At the same time, the population of Lambton County excluding the Sarnia CA, increased by nearly five percent. This population growth is faster than that of the Ontario population and similar to Canada as a whole. Some of this growth is attributed to the region s First Nations communities. Figure 10: Population Growth 2011 to 2016 Sarnia CA and Benchmarks Source: Statistics Canada 2016 Census. 15

The average age of the population in the Sarnia CA was 43.7 years in 2016 which is older than the province and country as a whole. When compared to the benchmark urban centres, the Sarnia CA is older than all the others with the exception of St. Catharines-Niagara. The higher average age is also impacting the natural population growth rate as outlined below. Figure 11: Average Age of the Population (2016) Sarnia CA and Benchmarks Source: Statistics Canada 2016 Census. Figure 12 shows the population breakdown by age cohort. Just over 15 percent of the Sarnia CA s population is under the age of 15. The share of youth in the Sarnia CA is lower than all of the benchmark communities with the exception of St. Catharines-Niagara. There are 15,600 people in the Sarnia CA between the ages of 55 and 64, representing more than 16 percent of the population. This concentration can be expected to result in a higher share of the population transitioning into retirement over the next decade, exacerbating demographic challenges in the area. Figure 12: Population by Age Group (2016) Sarnia CA and Benchmarks 0 to 14 Years 15 to 64 Years 65 Years and Over Sarnia CA 15.3% 63.4% 21.2% Ontario 16.4% 66.8% 16.7% Canada 16.6% 66.5% 16.9% Saint John 16.1% 65.7% 18.2% St. Catharines-Niagara 14.6% 63.7% 21.8% Windsor 16.7% 66.0% 17.2% Lethbridge 19.1% 65.3% 15.6% Lambton (excl. Sarnia CA) 16.0% 61.5% 22.5% Source: Statistics Canada 2016 Census. Sources of Population Change The annual components of population growth data from Statistics Canada is only available at the county/district (Census Division) and Census Metropolitan Area (CMA) levels. This data provides important insight into the sources of population change over time. As shown in Figure 13 below, Lambton County has a negative natural population growth rate (births minus deaths). This gap is slowly increasing. 16

The growth rate data per 10,000 population is provided in the bottom right quadrant for a meaningful comparison. St. Catharines-Niagara is the only other benchmark community to have a negative natural population growth rate. Ontario has maintained a strong natural population growth in recent years by attracting young immigrants, mainly to the larger urban centres. Lethbridge is experiencing a baby boom with a natural population growth of close to three times the national level. Immigrants are the source of almost all net new population and labour force growth across Canada. Lambton County has a very low level of immigration and the rate has been declining in recent years. In the most recent five-year period, the Lambton population has grown through immigration by only eleven immigrants per 10,000 in an average year. Adjusted for population size, Saint John has an immigration rate over four times higher than Lambton County. Windsor has an immigration rate that is six times higher and Lethbridge s rate is over eight times higher. Sarnia is not the only community facing this issue. Most small and mid-sized urban centres do not attract many immigrants. There is an important caveat to this data on immigrant attraction. Immigrants that settle in Toronto and then move to Sarnia Lambton, for example, are identified as intraprovincial migrants, not immigrants. It is likely the actual number of immigrants in Sarnia Lambton is higher when those transiting from the larger urban centres are included. Figure 13: Main Sources of Population Growth (County/District/CMA Level) Source: Statistics Canada CANSIM Tables 051-0057 and 051-0063. Sarnia Lambton has a negative interprovincial migration rate. More people move from the area to other provinces than vice versa. The gap has increased slightly in the most recent five-year period to a loss of 20 per 10,000 population. All of the benchmark communities have a negative interprovincial migration rate with the exception of Lethbridge (Division 2). Saint John s interprovincial migration rate has increased in recent years, likely as a consequence of higher levels of immigration. Sarnia Lambton also has a negative net intraprovincial migration rate (people moving to/from the rest of Ontario). This rate was positive in the early 2000s but is now negative. Saint John and Lethbridge also 17

have negative intraprovincial migration rates. St. Catharines-Niagara has a strong positive net intraprovincial migration rate, likely as a consequence of being within the orbit of the Greater Toronto region. As the rural population ages, there are fewer potential working age intraprovincial migrants. As competition increases to attract interprovincial migrants increases, the wage levels on offer must remain competitive to attract people to live and work in Lambton County. The Changing Labour Market The labour force is made up of those working and those actively seeking work. Economic growth is correlated to the growth in the labour force, although productivity gains can cause economic growth to outpace labour force growth. The Sarnia CA labour force has declined in recent years. This diminishing labour force is a barrier to future economic growth. According to Statistics Canada s annual Labour Force Survey, the size of the Sarnia CA labour force peaked at 51,100 in 2008 and decreased to 45,700 in 2017. The 2017 data shows a rebound from 2016 when the size of the labour market was 41,600. Figure 14 compares the Sarnia CA to the benchmark communities using several key labour market indicators. Sarnia s 2017 unemployment rate (the average monthly unemployment rate) was 6.3 percent, higher than all of the other benchmark communities but down considerably from the 2016 rate of 8.9 percent. The absolute number of persons unemployed in an average month during 2017 was 3,000, down from a recent high of 5,200 in 2009 and the lowest level since 2006. At the same time, the employment rate (the share of the adult population working) in 2017 was 55.7 percent which is up considerably from the 2016 level (49.5 percent) but below the benchmark communities. The number of people working in the Sarnia CA hasn t changed much in the past few years based on the Labour Force Survey. There were 43,600 employed in an average month in 2017 compared to 42,900 in 2012. Figure 14: Labour Market Profile/Trends - Sarnia CA and Benchmarks (2017) Sarnia CA Saint John St. Catharines- Niagara Windsor Lethbridge ONT CAN Labour force 45.7 69.7 211.4 172.6 65.7 7,579.8 19,663.0 5 year % change -3.2% -0.4% -3.6% 1.6% 31.1% 4.2% 4.5% Employment 42.6 65.5 197.6 162.8 61.8 7,128.0 18,416.4 5 year % change -0.7% 2.5% -2.1% 6.2% 31.2% 6.3% 5.6% Participation rate 59.7% 66.1% 60.7% 60.5% 69.7% 64.9% 65.8% Unemployment rate 6.6% 6.0% 6.5% 5.6% 5.9% 6.0% 6.3% 5 year % change in total unemployment -29% -31% -21% -41% 30% -21% -9% Source: Statistics Canada CANSIM Tables 282-0134 and 282-0129. The participation rate is six percentage points below the national participation rate, indicating there may be potential for labour force expansion from the existing population. If the Sarnia CA had the same labour market participation rate as Canada there would be nearly 5,000 more people to the workforce. There are many potential reasons why the participation rate is lower in Sarnia Lambton including more prevalent 18

seasonal employment, higher employment insurance use, a higher number of seniors no longer participating in the workforce and wage rates that do not entice people into the workforce. The higher than average social assistance rate could also be impacting the size of the potential workforce. In 2011 the Sarnia CA labour market participation rate was 64.3 percent. The participation rate in 2017 was 59.7 percent. Figure 15: Labour Force Participation Rate (%) 2017 Sarnia CA and Benchmarks Lethbridge Saint John CAN ONT St. Catharines-Niagara Windsor Sarnia CA 69.7% 66.1% 65.8% 64.9% 60.7% 60.5% 59.7% Source: Statistics Canada CANSIM Table 282-0134. Sarnia Lambton s Changing Income Profile Statistics Canada compiles Canada Revenue Agency tax filer data annually to paint an ongoing portrait of the population based on the source of income. This data is derived from tax data and as a result there is a two-year lag in its publication. Despite the delay, it is the best source of data on income outside the fiveyear Census program and allows for annual updates. EMPLOYMENT INCOME The number of people declaring employment income (wages or self-employment income) in the Sarnia CA has declined by 2.2 percent between 2010 and 2015 (Figure 16). There were 47,230 persons in the Sarnia CA in 2015 with employment income of which 44,460 had wage/salary income and 5,270 reported having self-employment income (a small number of respondents reported both salary and selfemployment income). When compared to the benchmark communities, the other benchmark jurisdictions saw strong growth in the number of employment income earners over the same period with the exception of Lethbridge 7. 7 The large variance between the Lethbridge employment estimates from the Labour Force Survey (Table 15 above) and the number declaring employment income is due to a large expansion of employment in 2015 and 2016 which is not reflected in the employment income statistics which come from CRA tax filings (data through 2015 only). 19

Figure 16: Increase/Decrease in the Number of Employment Income Earners (2010 to 2015) Sarnia CA and Benchmarks Source: Statistics Canada CANSIM Table 111-0007. Figure 17 shows the five-year trend in average employment income for the Sarnia CA, the province, Canada and the benchmark urban centres. The average employment income in the Sarnia CA in 2015 was $46,638 including full-time, part-time and seasonal workers. This average employment income was higher than all the benchmark communities. In the past five years, average employment income has risen by 14 percent in the Sarnia CA; a somewhat slower growth rate when compared to the province, and two of the four benchmark communities. The outlier community is Lethbridge which has witnessed a strong 22 percent growth rate in average employment income in just five years. When compared to the average employment income in Canada, the Sarnia CA is one percent above average (expressed in Figure 17 as an index of 1.01 with the Canadian average employment income equaling 1.00). Figure 17: Average Employment Income and Trend Sarnia CA and Benchmarks Average Employment Income (2015) % Change 2010-2015 Index (Canada = 1.00) Sarnia CA $46,638 14% 1.01 Saint John CMA $43,040 10% 0.93 St. Catharines CMA $38,402 11% 0.83 Windsor CMA $42,512 15% 0.92 Lethbridge CA $45,832 22% 0.99 Ontario $47,545 11% 1.03 Canada $46,200 13% 1.00 Source: Statistics Canada CANSIM Table 111-0007. The 2016 Census provides a more detailed breakdown of individual income. This information is reported by census respondents for the 2015 year. Compared to Ontario, the Sarnia CA has a higher share of persons reporting income of $100,000 or more. This table shows that 105 out of every 1,000 income earners report income of at least $100,000, 22 percent more than Ontario as a whole. 20

Figure 18: Individual Income Levels per 1,000 Income Earners: Sarnia CA vs. Ontario (2016) Sarnia CA Ontario Differential Under $10,000 138 153-9.8% $10,000 to $19,999 162 173-6.3% $20,000 to $29,999 137 134 +2.8% $30,000 to $39,999 111 109 +2.5% $40,000 to $49,999 99 97 +1.8% $50,000 to $59,999 75 77-2.1% $60,000 to $69,999 60 60-0.2% $70,000 to $79,999 45 45-0.3% $80,000 to $89,999 36 36-0.7% $90,000 to $99,999 31 31 +2.3% $100,000 and over 105 86 +22.1% $100,000 to $149,999 67 57 +18.1% $150,000 and over 38 29 +29.9% Source: Statistics Canada 2016 Census. Household income comparison shows a slightly different picture. The share of households earning over $100,000 and $200,000 respectively is slightly lower than the province as a whole. Figure 19: Household Income Levels per 1,000 Households: Sarnia CA vs. Ontario (2016) Sarnia CA Ontario Differential Less than $30,000 177 168 +5% $30,000 to $49,999 168 158 +6% $50,000 to $79,999 216 211 +3% $80,000 to $99,999 113 114-1% $100,000 to $199,999 253 272-7% $200,000+ 73 77-6% Source: Statistics Canada 2016 Census. SELF-EMPLOYMENT INCOME There has been a fairly profound shift in self-employment income in the Sarnia CA. The number of persons declaring self-employment is down by two percent and the total income derived from selfemployment is down by 8.3 percent over five years. Only Lethbridge saw a steeper decline in average self-employment income over the five-year period. Across Ontario, the number of self-employed persons increased by two percent over the five years. The Windsor CMA saw a very strong growth rate. Sarnia s self-employment rate of 11.2 percent of total employment income earners is second lowest among the benchmark communities and below the provincial average of 15.4 percent. 21

Figure 20: Percentage Change in Number of Persons Declaring Self-Employment Income (2010 to 2015) Sarnia CA and Benchmarks Source: Statistics Canada CANSIM Table 111-0007. EMPLOYMENT INSURANCE INCOME The Sarnia CA has a higher share of workers earning employment insurance (EI) income each year than all the benchmark communities except Saint John. In 2015, 13.8 percent of all employment income earners reported collecting EI at some point during the year (including parental leave) compared to ten percent for Ontario as a whole. There has been a fifteen percent decline in the number of people collecting EI over the past five years less of a decline when compared to Ontario (18.3 percent) and other Ontario urban centres (St. Catharines-Niagara down 21.3 percent and Windsor down 21.5 percent). SOCIAL ASSISTANCE INCOME A higher share of the Sarnia CA adult population collects social assistance income compared to Canada and Ontario as a whole. However, St. Catharines-Niagara, Windsor and Lethbridge all have higher rates of social assistance usage. Depending on the training and other needs, this population could indicate a potential workforce for certain services-related industries. Figure 21: Persons Declaring Social Assistance Income as a Share of Total Income Earners (2015) Sarnia CA compared to Canada and Ontario Sarnia CA 7.4% Ontario 6.6% Canada 5.8% Source: Statistics Canada CANSIM Table 111-0007. CANADA/QUEBEC PENSION PLAN INCOME There has been a 13.9 percent increase in the number of persons earning Canada Pension Plan (CPP) income in the Sarnia CA over the past five years. Overall, 34.5 percent of all Sarnia income earners collect CPP the highest rate among the benchmark communities and nearly a full ten percentage points ahead of the province. This cohort could also be an under-utilized source of workers for the Sarnia CA labour market. 22

Figure 22: Persons Declaring CPP Income as a Share of Total Income Earners (2015) Sarnia CA and Benchmarks Source: Statistics Canada CANSIM Table 111-0007. Young People, Income and Migration The data suggests that young people will stay in Sarnia Lambton for good paying jobs. Between 2010 and 2015 the number of young people (under the age of 35) earning more than $50,000 per year increased by 32 percent at a rate only slightly lower than the province as a whole. The share of young people earning $50,000 or more has risen from 15 percent in 2008 to 22 percent in 2015. While the growth rate of higher income earners among the young in the Sarnia CA is similar to the provincial level it is below Lethbridge and St. Catharines-Niagara. Figure 23: Percentage Increase Between 2010 and 2015 in the Number of Persons Under 35 Years of Age Earning $50,000 or More Sarnia Lambton and Benchmarks Source: Statistics Canada CANSIM Table 111-0008. Conversely, there is a steep decline in the number of young people earning less than $35,000 per year in the Sarnia CA. As shown in Figure 24, only Lethbridge had a steeper decline in young people earning under $35,000 per year. The decline was 3.5 times faster compared to the province as a whole. This data suggests that young people are staying in the Sarnia CA for higher paying jobs, but are less inclined to stay for lower paying jobs. 23

Figure 24: Percentage Decline Between 2010 and 2015 in the Number of Persons Under 35 Years of Age Earning $35,000 or Less Sarnia Lambton and Benchmarks Source: Statistics Canada CANSIM Table 111-0008. A strong economy is one where the labour market is able to fill demand across the spectrum of industries. According to the 2017 Employer One survey for Sarnia Lambton, a large share of jobs on offer do not require a university degree or specialized trade diploma. The top new hires included occupations such as cashiers, retail salespersons, cleaners, general office workers, agricultural workers, personal service workers, etc. These figures point to a disconnect between the employment and compensation available and many job seekers credentials and salary expectations. A full 47 percent of employers rated the availability of qualified workers as fair to poor in 2017 up from 33 percent in 2016. Educational Services and the Talent Pipeline According to the EMSI projections of employment by industry, the Sarnia CA has 56 percent more workers in the community college sector when compared to the national economy adjusted for population size, but almost no workers in the university sector. The Sarnia CA is also home to private sector, postsecondary educational institutions. Sarnia Lambton has a higher concentration of employment in the community college sector than the other benchmark communities except Lethbridge. Figure 25: Post-Secondary LQs Sarnia CA and Benchmarks (2016) Source: 2016 EMSI estimates of employment by industry. 24

Initial Observations: Assessing Potential Growth Opportunities The Sarnia-Lambton Economic Partnership has identified a variety of areas for potential growth. Based on the data review there are a few observations that can be made that will support the prioritization of economic opportunities. SLEP Promoted Sectors: Observations Promoted Sector: Observations based on the economic and demographic review: Agriculture Automotive Business processing outsourcing Cleantech/Energy Creative industries Engineering and environmental services Food processing Manufacturing The Sarnia Lambton region continues to have a vibrant agriculture sector. Countywide there are nearly 2,500 workers in the sector and the LQ is 2.39. In addition, employment rose over the past decade by a modest ten percent. However, there isn t much value-added activity. The LQ for food manufacturing is 0.30 with 230 workers county-wide. The LQ for beverage manufacturing is 0.09 with an estimated twelve workers county-wide. Agriculture still requires a considerable amount of relatively low paid workers. An inability to supply this need will hold back sector growth. There is no direct employment in automotive manufacturing in the Sarnia CA. According to the EMSI estimates, the Sarnia CA had 1,413 workers in NAICS 5614 Business Support Services in 2006 and only 363 in 2016. The LQ is still 1.47. Interestingly, Windsor has seen a big expansion in NAICS 5614 employment (up by nearly 1,000 over a decade). This may be partly a result of the substantial rise in immigration to the region. Saint John and St. Catharines-Niagara have seen big declines in the sector. The Sarnia CA appears to have an energy cluster beyond that of petrochemical. The Location Quotient values for several sectors are high: Electric power generation, transmission and distribution (LQ=1.96), water, sewage and other systems construction (LQ=2.67) and utility system construction (LQ=1.85). In addition, the high LQ in metal fabrication could be partially related. The Sarnia CA has relatively low LQ values for various creative industries-related sectors including NAICS 711 Performing arts, spectator sports and related industries (LQ=0.47), NAICS 5414 Specialized design services (LQ=0.59); NAICS 5415 Computer systems design and related services (LQ=0.34) and NAICS 5112 Software publishers (LQ=0), and NAICS 5111 publishing (LQ=0.51). The Sarnia CA has a high LQ value for engineering and related services (LQ=1.73) well above all the benchmark communities. There a nearly 1,000 persons working in NOC 213 Civil, mechanical, electrical and chemical engineers (LQ=2.70), 500 working in NOC 223 Technical occupations in civil, mechanical and industrial engineering (LQ=2.02), and 400 working in NOC 224 Technical occupations in electronics and electrical engineering (LQ=1.38). NAICS 5417 Scientific research and development services has a low LQ of 0.38, but this is actually the highest LQ among the five benchmark locations. There is very little employment in food processing. The Sarnia CA has a strong manufacturing sector with a solid LQ of 1.58 and only slight employment losses in the past five years. Sub-sectors that have witnessed employment growth based on the EMSI employment by industry estimates include NAICS 3251 Basic chemical manufacturing, NAICS 3253 Pesticide, fertilizer and other agricultural chemical manufacturing, NAICS 3259 Other chemical product 25

manufacturing, NAICS 3314 Non-ferrous metal (except aluminum) production and processing, NAICS 3323 Architectural and structural metals manufacturing, and NAICS 3339 Other general-purpose machinery manufacturing. Metal fabrication Machine shops Petrochemical and refined petroleum The Sarnia CA has a high concentration of metal fabrication employment at over 800 in 2016 (LQ=2.02). However, employment has declined by 22 percent in the past five years according to the EMSI estimates. The Sarnia CA has an LQ of 1.79 for NAICS 3327 Machine shops, turned product, and screw, nut and bolt manufacturing. This is below the LQs for this sector in St. Catharine-Niagara and Windsor. Most of southern Ontario has strong LQs in this area. The petrochemical and refined petroleum sector is still a main driver of the Sarnia CA economy. Tourism The Sarnia CA has strong LQ values for NAICS 71 Arts, entertainment and recreation (LQ=1.35) and NAICS 72 Accommodation and food services (LQ=1.11) and both sectors have added modest employment in the past five years. However, according to the EMSI estimates, gambling industries employment has been cut in half over the past five years from nearly 700 to 360 in 2016. Other Considerations Sector: General role of the Sarnia CA as a services hub Observations based on the economic and demographic review: The Sarnia CA is not experiencing similar gains in services industries as many other small-medium sized urban centres. The LQs for many services sectors are relatively low, particularly in finance and public administration. These sectors tend to be quite labour intensive and that may be holding back the region s growth potential. Leveraging the aging population Sarnia Lambton is well positioned to benefit from the aging population in a wider catchment area. It could be a hub for services, home care and assisted living facilities and other support. It is important for the community to focus its efforts on opportunities where there is a clear value proposition and market opportunity. The 26

Sarnia CA has an LQ of 1.87 for home health care services (highest among the benchmarks) and 1.44 for nursing homes. Entrepreneurship Finance and insurance The number of self-employed persons is declining in the Sarnia CA and the share of self-employed is below average. Is there a need to put a greater focus on entrepreneurship? A lack of entrepreneurs could have a variety of negative effects including less competition for local markets, economic leakage as services are not provided locally, less exporting if new export-oriented entrepreneurs are not emerging, etc. Many communities are taking steps to encourage more entrepreneurship including efforts to attract entrepreneurs (not just larger firms), the development of incubation and acceleration facilities, setting up local angel capital pools and mentorship networks, etc. Sarnia Lambton has a very low Finance and Insurance at 0.54. Is the region leaving economic opportunity on the table? Should there be more insurancerelated activities based in Sarnia (LQ of 0.34)? 27

Community Consultation Summary of Interviews One on one interviews were scheduled with representatives from business, education, industry associations, the SLEP board, staff and other key stakeholders. A total of forty interviews were held through the months of September and October 2017. These interviews were conducted with the understanding that comments would not be specifically be identifiable to any one person in order to encourage candid input. The following were the major themes arising from the interviews listed in no particular order of priority or frequency. The individual discussions are not presented since the interviews were conducted with the agreement that no comments would be identifiable to any one individual in order to encourage candid input. A more detailed summary of the interviews is included in the appendix of this report. The Petrochemical and Biochemical Cluster(s) The stakeholders spoke about the strength of the petrochemical/biochemical cluster that incorporates a cluster of skilled technical workers, related firms, associations, research and education programs. This cluster also builds on the region s strong agricultural ties. The stakeholders recognized the strength of this cluster as the best potential to attract new investment and expand existing businesses. Diversifying the Economy The stakeholders recognized the risk of dependence on one sector. The respondents encouraged SLEP to consider opportunities in a variety of sectors including agriculture, ICT and entrepreneurship to foster a more diversified economy. Opportunities and Threats in Canada U.S. Trade Sarnia Lambton s proximity to the U.S. border and the U.S. market is a distinct advantage for Sarnia Lambton businesses. The respondents expressed concern about the unpredictable status of NAFTA, U.S. trade and environmental concerns that could limit trade with the U.S. and undermine the strength of the petrochemical industry. Supporting New Entrepreneurs and Local Business The stakeholders recognized the importance of creating an entrepreneurial culture and supporting local entrepreneurs and small businesses. They also spoke of establishing more structure to BR&E and small business consultation efforts across the County, particularly in rural communities. Resident and Workforce Attraction The declining population and aging workforce is a concern for the stakeholders consulted. Filling the vacant staff role, collaborating with the local real estate community and supporting business recruitment efforts were among the suggestions made by the stakeholders. Transportation Hub Sarnia Lambton s waterfront, rail services, links to the 400 series highways and U.S. border crossing are distinct advantages that provide opportunities for expanded trade and tourism activity. Board Governance Several stakeholders expressed concern about the size and make-up of the SLEP board. The stakeholders wanted a more significant role for business on the board. The stakeholders also wanted to ensure that local politics did not overly influence SLEP s operations. 28

Organizational Structure and Mandate The change in leadership and vacant positions provide an opportunity to review the organization s priorities and develop a structure and budgets to support the new vision. Several stakeholders called for investment in marketing the region and increased communication with local residents and businesses. Rural and Urban Opportunities The group saw a need for a balance between the opportunities in the petrochemical and biochemical industries and addressing the economic challenges of the rural agricultural based communities. Tourism Development Sarnia Lambton s waterfront with boating, fishing and swimming and agri-tourism has significant tourism potential. Stakeholders believe tourism is underrepresented and underappreciated. Stakeholders spoke of the opportunities to expand the tourism offering and increase the water based recreation activities and build on the region s park offerings. There were suggestions to provide small business supports and counselling specifically directed to the tourism related businesses. Community Survey The Sarnia-Lambton Economic Partnership issued a resident survey between August 13 and September 15, 2017. The survey was promoted through the Sarnia-Lambton Economic Partnership networks, local media and distribution. This survey was non-random and self-administered. The survey results are not statistically significant nor should they be considered as representing the opinions of all residents in Sarnia Lambton. The survey findings should not be considered in isolation but instead considered within the context of the other input and consultation methods. A total of 90 surveys were completed. The largest share of survey respondents (68 percent or 62 respondents) were from Sarnia. There were thirty respondents from elsewhere in Lambton County. Half the respondents reported they work in Sarnia. Another twenty percent are not working because they were retired or unemployed. Of those respondents that work, half work in firms with over 100 employees. 29

When asked to assess the importance of a variety of factors for creating and maintaining a strong economy in Sarnia and Lambton County, the largest share of respondents said that quality of life factors and access to skilled workers was very important. Following closely behind were energy costs, access to quality education and training and efficient development processes. Rounding up the critical factors were local wage rates, transportation costs and availability of economic development services. The availability of buildings and land completed the list with 25 percent of respondents rating building and lands as very important and another 63 percent as somewhat important. When asked to assess their satisfaction with Sarnia and Lambton County s performance on the same factors, respondents were most satisfied with the availability of buildings and land and access to quality education and training. Following closely were local wage rates and access to skilled workers. Respondents were divided on efficient development processes with an equal number expressing satisfaction and dissatisfaction. Most respondents were somewhat dissatisfied or very dissatisfied with energy costs. 30

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The respondents reported that the U.S. Border was the region s greatest economic asset followed by the natural environment. Tourism, the community, and the cost of living were equally important followed very closely by the petrochemical industry, quality of life, diversity and Lambton College. A full list of the respondents comments is included in the detailed findings of the appendix. When asked to assess the greatest economic challenges the respondents identified issues within City Hall and a poor age demographic balance as the most pressing issues. They also reported noted concerns with limited job opportunities, access to high speed internet and a negative image of the region s environment. Rounding up the list of challenges were high energy prices, a lack of employment diversity, limited green space, a small population and limited entrepreneurship. The detailed list of respondents comments is included in the detailed findings section of the appendix. 32

When asked to identify the greatest economic opportunity to stimulate the regions economic growth and business investment, the respondents overwhelming identified the growing biofuel industry. They also identified attracting new industry and investment from outside the region, including foreign direct investment as an opportunity for the region. Other external opportunities identified included tourism, economic diversification, leveraging the growing popularity of entrepreneurship and attracting youth to the area. A detailed list of responses is included in the detailed findings section of the appendix. 33

The respondents were also asked to assess significant external issues that could compromise the Sarnia- Lambton Economic Partnership s ability to stimulate economic growth and business investment. The most common answer was rising energy costs. The respondents also noted the significant competition with the United States. Sarnia s Mayor and Council were noted by several respondents as was the transition from fossil fuels. Rounding up the list was a lack of industry diversification, infrastructure planning and environmental concerns regarding chemical valley. The complete list is included in the detailed findings section of the appendix. External Issues Limiting Sarnia Lambton's Economic Potential Rising Energy Costs 12 Competing with the US 8 The Mayor and City Council 5 Transition away from fossil fuels 4 Aging population Lack of Diversification (Emphasis on Industry) Lack of planning to increase infrastructure Environmental concerns (Chemical Valley) 3 3 3 3 Strong Union Presence 2 The respondents were asked to rank the priority of various economic development activities and their impact on the region s economic development. They rated government relations and policies as the most critical with key sector development and infrastructure investment following very closely behind. The respondents ranked export development, workforce development, small business/entrepreneurship and marketing and communications as key elements with over ninety percent ranking these elements as very important or somewhat important to the region s economic development. The remaining elements were also recognized as important with the lowest ranked factor of industrial land development scored as very important or somewhat important by 48 or 75 percent of the respondents. 34

Importance of Economic Development Activities Government relations and policies Infrastructure investment Key sector development Export development Workforce development Small business/ entrepreneurship Marketing and communications Training Tourism development and marketing Local business connections & sourcing Downtown development Industrial land development Business visitation and support 44 42 42 37 37 36 32 31 31 29 26 23 21 17 22 21 22 27 23 19 27 24 25 30 18 20 1 2 3 0 3 3 5 1 5 2 6 1 5 1 8 2 13 2 7 2 11 4 12 4 9 4 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% very important somewhat important somewhat unimportant not at all important The respondents evaluation of the workforce was less conclusive. The availability of workers was assessed as good by 59 percent of the respondents while equal numbers rated the workforce as excellent (20 percent) and poor (21 percent). The assessment of the ability to attract new employees was more muted. An equal number of respondents said the ability to attract new employees was good (41 percent) and poor (43 percent). Just over half of the respondents said the ability to retain employees, almost thirty percent ranked it as poor. The stability of the workforce was rated as good by 48 percent and poor by 34 percent of respondents. 35

Areas of Focus This section discusses the importance of cluster development, entrepreneurship, resident attraction, broader regional collaboration and governance. These themes have emerged out of the background research and consultations and will be important in the development of the Sarnia-Lambton Economic Partnership Strategic Plan. Cluster Development How can economic development agencies such as SLEP support cluster development? What is an appropriate role for government to support the development of specific industry clusters? In the post- World War II period, there was considerable effort put on the development of national champion firms and strategically important industries by providing substantial subsidies and sheltering the industries from external competition. The aerospace, defense, auto manufacturing and food production sectors are examples. This approach has fallen somewhat out of favour with the idea that global competition actually leads to stronger economies and forces jurisdictions to focus on areas where they have fundamental comparative advantage. The rise of free trade zones the FTA, NAFTA and newer pacts emerged out of this new vision of a world where people, investment and trade flows more freely leading to a stronger global economy. For smaller jurisdictions such as Sarnia Lambton, this new reality means that long-term economic prosperity is even more tied to the region s comparative advantage. What core assets and attributes does Sarnia Lambton have that offer a strong value proposition for specific industries? Sector development involves aligning a broader range of community assets and infrastructure to strengthen the value proposition for the sector. Are our university and college assets aligned? Do our research institutions support the targeted sector? Are our people attraction efforts aligned with the talent needs of the targeted sector? Are there gaps in the sector s supply chain that could be attracted to Sarnia Lambton? Are there specific infrastructure needs that could help strengthen the value proposition? Offering sector-specific incentives is another tool that is used particularly in the United States, but also in parts of Canada. This is more controversial many experts suggest government investment into sector development should focus on what it does best education, infrastructure, people attraction, upstream R&D investment, etc. 36

For Sarnia Lambton, there are a number of sectors that hold potential based on our initial review of the data and stakeholder consultations. As we move into the recommendations stage it will be important to understand the range of public sector and private sector stakeholders that could be leveraged to strengthen the value proposition whether it is biorefining or fostering new ICT startups. To support cluster development, regional economic development agencies such as SLEP evolve more as catalyst and network development organizations than organizations that deliver discrete services. Some organization has to take the lead and mobilize all the different government, education, industry and other resources to foster successful cluster development. In a growing number of cases that organization is the regional economic development agency. Entrepreneurship Entrepreneurship is often misunderstood to mean small business start-ups. While start-ups are part of entrepreneurship, its full meaning is broader to include creating goods and services that generate additional wealth and opportunities for the region. True entrepreneurs do not set-up businesses with the intention of being small, but with the philosophy of growth and an intention to be exceptional. Communities cannot create entrepreneurs. They can however, intentionally create environments in which entrepreneurs can thrive. It involves establishing the structures, the networks, the space, the mentoring, the support, and the access to programming and finances. If done well, it is reasonable to assume that entrepreneurs will be attracted to this environment and over time create jobs and wealth for the community. Sarnia Lambton should explore ways to assist those residents that desire to start and grow businesses and invite others to come into the County to do so. Matching current business start-up support with a more rigorous and concerted approach should be the aim. The County should identify and build out space that is conducive to business start-ups, identify areas that could be turned into creative space that is equipped with technology, information, mentorship opportunities and have the capacity to leverage the organizations and programs designed to support business start-up and expansion. There are several such support organizations and mechanisms currently in place to support entrepreneurship in Sarnia Lambton. Efforts to coordinate the small business and entrepreneurial network with an overarching plan to accelerate support could further enhance these existing programs Organizations such as the Business Development Centre, Sarnia-Lambton Economic Partnership and Lambton College should take the lead in this proactive approach to entrepreneurship support. Resident Attraction The traditional sources that Sarnia Lambton relied on to drive population growth are drying up. The natural population growth rate of births minus deaths is negative across Lambton County. The rate of net intraprovincial migration (people moving in from other parts of Ontario) is also negative. Given the aging population and the shrinking workforce, Sarnia Lambton will need to attract more people to the community over the next 5-10 years if it wants the economy to grow. There may also be potential to encourage more existing residents of Sarnia Lambton into the workforce as the labour market participation rate is well below its high in 2005 when 65.8 percent of the adult population in the Sarnia CA was working or looking for work in 2005 compared to 54.3 percent in 2016. How does Sarnia Lambton attract and retain more immigrants? First, the attraction efforts need to be aligned with workforce needs across the spectrum. If there is a need for homecare workers or high-end engineers those individuals should be targeted. 37

Lambton College can also be used to attract people who are targets to stay in Sarnia Lambton. If we will need health care support workers, we should expand college-level programs and target international students to fill the seats. There is no guarantee these students will get a job upon graduation, but the potential for employment will be greater if they are in programs providing skills that are in demand. Even if the international students leave after graduation, Sarnia Lambton benefited economically from their time in the area. Smaller regions outside major urban centres like Toronto need to focus more on immigrant retention. The large urban centres have well-developed immigrant support ecosystems including ethno-cultural associations, churches, media, restaurants, as well as settlement services. Sarnia Lambton has some of this infrastructure in place, but more should be done to strengthen the ecosystem. It is also vitally important for employers to hire newcomers. Fourth, we shouldn t be obsessed with immigrant retention. The truth is that newcomers mostly have no roots in the local community and therefore are, by definition, more mobile. If we use the lack of retention as an excuse to limit immigration it would be a mistake. We should do what we can to foster higher levels of retention but in the long run accept the fact that some people will leave. Finally, people attraction isn t exclusively about immigration. As larger urban centres get more crowded, costs rise and commute times lengthen, Sarnia Lambton will become more attractive to residents from these centres. One of the most important factors in attracting and retaining people will be to attract people into specific jobs or entrepreneurial ventures. Regional Economic Development The Sarnia-Lambton Economic Partnership includes eleven municipalities and three First Nations communities. The organization was established to coordinate the regional economic development efforts and ultimately achieve more by working collaboratively. The benefits of a regional economic development agency include increased coordination and communication and more efficient use of resources. Regions that work collaboratively report the ability to leverage limited resources to serve the broader region. The collaboration creates an environment where members can address issues collectively and give larger voice to shared issues and maximize their political influence. By working collaboratively, regional economic development agencies benefit from enhanced capacity and specialized skills that would not be possible independently. Research on the factors that contribute to successful economic development collaboration include effective use of communication technology, strong participatory leadership, flexible structure, capitalizing on regional strengths, diverse membership and insufficient financial capital. Some of the barriers to successful economic development collaboration are also elements that are identified as keys to success; communication technology, diverse membership and insufficient financial capital. Additional barriers to successful collaboration include the outlook toward collaboration and insufficient human capital. 8 Organization and structure are key to the successful operation of the regional organization. A strategic plan with clearly identified goals and specific actions and success measures that are clearly 8 Collaboration and Regional Economic Development: A Comparison of North Country, New York and Four Counties, Ontario, Brittany Bruce, 2014, https://uwspace.uwaterloo.ca/handle/10012/8853 accessed Oct 19, 2017. 38

communicated ensure shared understanding of the organization s direction. Regular communication builds public trust and further strengthens the relationship between the members of the regional organization. Regional organizational structures are vulnerable in their ability to effectively collaborate. Without collaboration, a number of issues can arise such as duplicate and uncoordinated programs and services, which can create unnecessary costs and frustration. Lack of long-term planning can lead to reactive use of funds towards a short-term challenge or threat. Collaboration along with long-term strategic planning can ensure that limited resources are allocated towards projects with the greatest potential. Governance Economic development is an evolving process. The systems, approaches and initiatives that got Lambton County to where it is may be very different from those that get it to where it wishes to go. Restructuring, reimagining and refining approaches and processes is important and healthy for communities and for organizations. The Sarnia-Lambton Economic Partnership has the ability to reflect on its past with a vision to the future. That is a good place to be and allows the organization to assess the actions and approaches and successes of the past and to build and perfect them going forward. Throughout 2017, the Board and staff of SLEP have studied the structure, personnel and resources to reimagine the organization. This economic development strategic plan is part of that process. There has been a revamping of the Board of Directors to better align with County-wide priorities, a retirement of the General Manager has allowed for the hiring of a new President and CEO, and a review of functions and responsibilities within the economic development county eco-system. As the strategic plan progresses to the completion stage and moves to the implementation stage it will be extremely important to align governance, structure, personnel resources and strategic partnerships in a way that supports the implementation. Being intentional and strategic around this component with a commitment to measuring results while being agile enough to tweak to respond to current conditions will allow for the greatest level of success going forward. 39

Summary of Key Findings The Sarnia CA is facing the similar challenges to those faced by many small and mid-sized urban centres in Ontario in growing employment income earners in their communities while rural areas have fared better. There may be opportunities to work closely with other small to mid-sized urban centres to find solutions to shared challenges such as the attraction of talent, fostering new entrepreneurship and the shifting to a services-based economy. While Canada and Ontario, on average, are moving towards a more services based economy, the Sarnia CA is not making the same shift. Over the past fifteen years, services sector employment in the Sarnia CA has been stagnant while services sector employment has grown strongly across the province and country. Sarnia is still heavily reliant on the manufacturing sector. Chemical, petrochemical and metal fabrication remain dominant although the chemical and petrochemical subsectors have been shedding employment. Sectors with lower employment concentrations include finance and insurance and information and cultural industries. The Sarnia CA is the least reliant on public administration employment compared to the study s benchmark locations. The Sarnia CA features high concentrations of engineers and related workers as well as specialized machine operators. It features very low concentrations of computer programmers and finance-related professionals. The Sarnia CA population declined slightly between 2011 and 2016 while the population for the rest of Lambton County rose by nearly five percent, above the provincial population growth rate. Sarnia is considerably older than the country as a whole. Lambton County has a negative natural population growth rate (births minus deaths) and this gap is growing while Ontario as a whole has maintained a strong natural population growth. The County s immigration rate is much lower than the study benchmark communities. It also has negative interprovincial and intraprovincial migration rates. The Sarnia labour force peaked at 51,100 people in 2008 and has declined to 41,600 in 2016. The unemployment was eight percent in 2016, higher than the benchmark communities. The employment rate has also declined to less than fifty percent. If the Sarnia CA had the same labour market participation rate as Canada it would add another nearly 9,000 people to the workforce. Looking at income trends, the number of people declaring employment income in the Sarnia CA declined by 2.2 percent between 2010 and 2015, although the average employment income in the Sarnia CA is higher than all benchmark communities. The number of persons declaring self-employment in the Sarnia CA is down by two percent and the total income derived from self-employment is down by 8.3 percent over five years. The Sarnia CA has a higher share of workers earning employment insurance (EI) income each year than all the benchmark communities except Saint John (nearly fourteen percent). Also, a higher share of the Sarnia CA adult population collects social assistance income when compared to Canada and Ontario as a whole. The data suggests that young people will stay in Sarnia Lambton for good paying jobs. Between 2010 and 2015 the number of young people (under the age of 35) in the Sarnia CA earning more than $50,000 per year increased by 32 percent; a rate only slightly lower than the province as a whole. Conversely, 40

there has been a steep decline in the number of young people earning less than $35,000 per year in the Sarnia CA while declining only modestly across the province at the same time. A strong economy is one where the labour market is able to fill demand across the spectrum of industries. Nearly half of employers in the 2017 Employer One survey for Sarnia Lambton rated the availability of qualified workers as fair to poor in 2017, up from 33 percent in 2016. Respondents to a community based survey said that quality of life, and access to skilled workers was very important for creating and maintaining a strong economy in Sarnia and Lambton County followed closely by energy costs, access to quality education and training and efficient development processes. The respondents reported they were very satisfied with the availability of buildings and land and access to quality education and training in the region, followed by local wage rates and access to skilled workers. Most respondents were somewhat dissatisfied or very dissatisfied with energy costs. The respondents said the U.S. border was the regions greatest economic asset. They identified issues within the Sarnia City Hall, and an aging population as the most significant economic barriers followed by limited job opportunities, limited access to high speed internet and the area s environmental stigmas as significant barriers to economic growth. Respondents reported that the growth of the bio-fuel/biochemical industry was the greatest economic opportunity for the region. Rising energy costs and competition with the U.S. were identified as the external issues with the greatest potential to limit the area s economic potential. The respondents said that government relations and policies, infrastructure investment, key sector development, export development and small business and entrepreneurship development were the most important activities to supporting the region s economic development. Workforce was a key issue as an equal number of respondents described the ability to attract new employees was good and poor. One third ranked the ability to retain employees was poor. The availability of workers was rated as good by sixty percent of the respondents and the stability of the workforce was rated good by 48 percent. There were a few themes emerging from stakeholder interviews. The stakeholders praised the strength of the petrochemical sector and spoke of the potential of the complimentary and emerging biochemical cluster. They also spoke about the need to diversify and specifically referenced opportunities in agriculture, ICT and entrepreneurship. The stakeholders spoke of the potential to build upon the region s rich tourism assets and experiences. The proximity of the U.S. border and the vulnerability of businesses dependent on a volatile trading partner were top of mind for respondents as was the aging workforce and challenges in attracting residents and workers to the community. Some stakeholders spoke of the need to balance rural and urban economic development needs and concerns. Other stakeholders expressed concern about the size of the SLEP board and the large numbers of elected officials on the board. 41

SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) The SWOT analysis is a summary of the key strengths, weaknesses, opportunities and threats identified throughout this report. The SWOT analysis highlights those elements that are unique or distinctive to the Sarnia and Lambton County area in its efforts to establish economic prosperity. Opportunities and threats are those factors that are not controlled by the members of the Sarnia-Lambton Economic Partnership, but have the potential to positively or negatively impact the regions ability to achieve its economic development vision. 42