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April 1999


Demographics for Call Center Site Selection in Canada

BY KATIE S. BURDORF, THE WADLEY-DONOVAN GROUP

Being a veteran of NAFTA warfare, Canada is holding its own, and then some. Competition for job creation and business attraction is fiercer than ever worldwide. In Canada, mighty efforts are being made both on a federal and provincial level to "get the word out" that the Canadian provinces have what it takes to satisfy the operational needs of business. Call centers are one of the "targeted" industries for foreign direct investment.

Although Canadian marketing and sales strategies have historically lagged behind the best practices of U.S. and European economic development groups, high-ranking officials are becoming keenly aware of what is needed to capitalize on their current competitive advantages. Realizing that there is a "window of opportunity" to strike a harmonious chord with businesses seeking favorable operating environments for their office and industrial enterprises, more federal and provincial officials are paying attention to rationalizing and further developing standard economic development information. In addition, they are continuing to build relationships with global leaders who have business investment decision-making powers, while learning how to "position" the many strengths of the Canada story.

Against this backdrop, Canada represents an attractive option for call centers serving both that country and/or the U.S. The most compelling locational advantage is the availability of qualified entry-level labor at comparatively low cost. In many areas, there is also a solid base of experienced clerical workers, supervisors, technicians and programmers.

Typically, labor costs are at least 30 to 40 percent less than those in the U.S. The exchange rate is a contributing factor. Fundamental labor market conditions also play a role. In most areas, supply far exceeds demand for customer service and related positions.

Included in the aforementioned differential is lower fringe benefit costs (by 3 to 5 percent), principally due to health insurance (which costs companies much less in Canada). Additionally, turnover tends to be significantly less (again due to favorable labor supply conditions).

Since deregulation, telecommunications costs are often less in Canada versus the U.S. (for long-distance service). Moreover, telecommunications infrastructure is usually state-of-the-art, even in smaller communities.

Office space tends to average 30 to 40 percent less than in the U.S. Corporate taxation is basically a wash. The business income tax is higher, but there is no property tax on machinery/equipment or software. Similarly, the sales tax on long-distance telephone bills is generally refundable.

While the rate of private-sector unionization is higher in Canada, well-managed call centers that prefer to operate union-free typically encounter little difficulty fulfilling this objective.

Minor disadvantages in Canada may be observed in labor legislation, such as longer family leave time and a minimum level of mandated termination pay for layoffs or closings. Air access and travel time can also represent another drawback for U.S. firms.

Despite impressive advantages, care must be exercised in selecting the right location for a call center in Canada. Some of the major business centers are pricey for entry-level labor. Also, in a few mid-size communities, there may be a number of call centers that have already tapped out the labor market. Also, unless you consider Atlantic Canada, don't expect much in the way of incentives, with the exception of training.

Another real challenge for call center site-selection teams looking at Canada is either the unavailability or incompatibility of data versus what is commonly obtainable in the U.S. This tends to make direct comparisons between Canadian and U.S. areas both complicated and time-consuming.

A good example of data incompatibility is workforce educational attainment. In the U.S., statistics are reported for adults over age 25. By contrast, the age cutoff is 15 in Canada.

The level of data reporting, on a geographic basis, also comprises a challenge. For example, in Canada, there are only 25 metro areas (as defined by the census). Data on these areas are fairly comprehensive. But information on non-metro communities are more limited. Furthermore, the labor draw of non-metro towns can be understated, as only five provinces have formal counties. Relying strictly on city data understates the population and labor force in a community's commute zone.

These data issues can be resolved, but it takes time. In the beginning of a site search, basic information on metro and non-metro areas may be obtained from Statistics Canada and Human Resources Development Canada. Subsequently, provincial and local economic development agencies should be contacted.

While the information problem is real, inclusion of Canada on a "traditional U.S. site search" can pay handsome dividends for call centers. The combination of low operating costs and a surplus of educated workers can be hard to duplicate in the U.S.

To help you frame a call center location search, we have prepared a statistical profile of Canada's 10 provinces. Unemployment rates by province and metro areas (CMAS or census metropolitan areas) are also provided.

[Download Exhibit I and II: Demographics and Unemployment Statistics.]
[Download a site selection checklist.]

Katie S. Burdorf is a managing director of The Wadley-Donovan Group (WDG), headquartered in Morristown, NJ. WDG is a management consulting firm which specializes in corporate location. The firm has substantial experience in locating companies throughout Canada. WDG has recently become part of EPS Solutions - the first national provider of horizontally integrated outsourcing services.







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