A 2020 University of Waterloo software engineering graduate survey showed 84 per cent headed south, with compensation the leading concern for 89 per cent of graduates.DARRYL DYCK/The Canadian Press
Gerald Roe Patchell is a recently retired professor in the social science division of the Hong Kong University of Science and Technology. His forthcoming book is The Thin Edge of Innovation: Metro Vancouver’s Evolving Economy (with Roger Hayter and Kevin Reese, UBC Press 2024).
Canada seems to do a lot to foster innovation and productivity. Federal and provincial governments support universities, hoping professors and graduates will generate new technologies. They indirectly and directly distribute billions of dollars to firms that are supposedly developing such technologies through the Scientific Research and Experimental Development tax incentives program. Governments also bring firms, academics and government agencies together through programs such as the $1-billion supercluster program.
These efforts are not sufficient. Why? Because our talent has already left the dormitory for Silicon Valley.
The reason for the exodus is simple: money. Canadian graduates get two to three times more money in the United States, housing and living costs are more proportional to incomes and there are greater career opportunities. All this was laid out in a University of Waterloo software engineering graduate survey (2020) that showed 84 per cent headed south, with compensation the leading concern for 89 per cent of graduates. Growth opportunities, company culture and benefits are important, but it’s no use trying to soft pedal the compensation expectations.
What can be done? Pay tech graduates to stay. Just as companies are given tax breaks, grants, training and infrastructure support, give Canada’s tech graduates tax breaks, grants, housing and better health care. Perhaps they will stick around.
What will happen when Canadian firms retain the best talent that Canada produces? Silicon Valley’s fabled 10x engineers are individuals whose creativity produces more value than 10 other engineers. Many of them are Canadian, and our companies and entrepreneurs would be a lot more innovative and productive if that talent stayed put. And it is primarily STEM-trained people who generate productivity.
That relationship has been changed in the software economy of the 21st century because it is not per-capita investments in capital that increase productivity but investments in people who can generate innovations with low costs and high value.
Will paying tech graduates create disparities? Yes, but it will still be a relatively small cohort, and the multiple over average incomes will not be excessive – but hopefully a few times greater. But it would pale in comparison with the disparities generated by the finance and legal professions, especially considering the relative potential to lift the economy. And it would really be unfair when we are subsidizing a few thousand battery jobs at $5-million apiece or subsidizing journalists with tens of thousands of dollars a position? Still, we need not subsidize STEM types forever, nor give them $5-million each – maybe $3-million over five or so years, and only 2,000 to 3,000 people at most.
A radical approach? Silicon Valley’s greatest rival is Shenzhen, a city of migrants and China’s greatest talent magnet, having drawn in hundreds of thousands of high-tech engineers – enticed not just with “creative class” amenities but with cash. Shenzhen subsidizes people with money, housing, schools and health care. The municipal government works with companies and uses the hukou system of resident registration to funnel money from low- to high-skilled migrants. All of China’s major cities fight for talent by allocating funds to secure long-term prosperity. If you’ve wondered how China advanced technologically so quickly, collecting talent in key cities is a major reason.
Canada has always been fatalistic about its brain drain to the U.S. The best engineers from Canada’s leading universities jump on a plane as soon as they graduate. Canada pours billions into them, only to lose them to U.S. firms. How can you stem the flow to such a large market? Has anybody actually tried?
Instead our institutions actively exacerbate the problem. Universities and professors entice students to burnish their outputs and reputation, dangling connections to Amazon.com Inc. and Google Inc., trapped in the knowledge that Canada is subsidizing U.S. behemoths. On the other hand, Canada’s companies cannot or refuse to pay higher salaries. Moreover, U.S. companies take advantage and use Canada for low-cost engineering centres and working hotels for global talent waiting for green cards.
We need more than schools to support STEM or co-op programs or foreign direct investment subsidies and superclusters. Canada must get more creative to stanch the lifeblood from draining from our economic development. If Canadian companies can’t or won’t pay competitive salaries, we need to put money in graduates’ pockets directly so they can drive innovation, either as employees or in their own companies. If we can’t keep most or even many of our brightest in this country in their vigorous years, you can count on us to keep falling behind.