- Talent is the main driver of Canada’s digital economy, and as such all stakeholders must work to attract and retain talent in Canadian firms.
- Intellectual property and data are the two main drivers of wealth creation today, and as such efficient systems are required to manage them.
- The right government policies, guided by collaboration with industry players, will be key to ensuring that Canada has a successful digital economy.
The Canadian government should create an economic advisory council to work on a prosperity strategy for the country. This strategy should focus on talent and the management of intellectual property and data as its two key priorities, as these are the factors that will create wealth in the 21st century.
I am Benjamin Bergen, the President of the Council of Canadian Innovators. CCI is a business council that works with over 150 companies across Canada on innovation policy.
What are the main forces and trends shaping the digital economy, and what are Canada’s strengths and weaknesses in this area?
When we talk about the digital economy, it often gets wrapped up in a couple of different terms including the intangible economy, innovation and more. This can make the digital economy seem abstract. However, it actually just comes down to the machines and software that ultimately animate and create the digital future that we are in.
There are three things that underpin the digital economy and make it different from the intangible economy: talent, intellectual property (IP) and data. On top of that, there are also systems that enforce regulations around IP and data. This is mostly referring to things like trade agreements, standards and regulations. The main fuel of the digital economy is talent. It is the raw material that is animating and leading this new economy forward.
“he need for high wages for highly skilled workers is being exacerbated by the need for talent in Canada but also globally.”
Canada has a great track record of education and producing top talent. With that said, the forces impacting the talent space now have never been stronger. The need for high wages for highly skilled workers is being exacerbated by the need for talent in Canada but also globally. For example, Amazon doubled its base salary from US$160,000 to US$350,000, and so Canadian firms now have to compete with that for highly skilled workers, and these workers are the ones who drive wealth and prosperity.
Furthermore, there just is not enough talent in the ecosystem. This has been driving up wages and leading to a challenge for Canadian companies to find those folks.
By 2025, 250,000 positions in the ICT space are not going to be filled. Canada needs to figure out how we as a country can help mitigate that issue. It will be critical for us to get this right because talent shortages are one of the major constraints on Canadian economic growth.
The other area where Canadian innovators struggle is around some of the regulations that flow from IP and data. Canada does not have a comprehensive IP or data strategy, which means we lose a lot of our good ideas and data, both of which are the ingredients that drive economic opportunities.
What needs to be done to help Canada attract and retain top talent?
This issue is something that we at the council are tasked with figure out day in and out. The talent crisis in Canada has evolved due to COVID-19. We wrote a piece about Brain Drain 2.0 recently. Canadians are already familiar with the idea of brain drain, which is when our best and brightest leave and go to other jurisdictions. This occurs predominantly in the tech space and our talent normally ends up in Silicon Valley.
However, Brain Drain 2.0 is different. The new brain drain means Canadian workers no longer need to leave the country. They can simply open up their laptops and work remotely. That is putting greater pressure on domestic firms to be able to keep and retain talent here.
“Canada needs a policy response from both federal and provincial governments to keep highly skilled workers here in Canada while also expanding the talent pool.“
Canada needs a policy response from both federal and provincial governments to keep highly skilled workers here in Canada while also expanding the talent pool. The big thing there that the council is pushing for is an immigration system that is robust and able to bring highly skilled workers to the country. In 2018, we worked on the Global Skills Strategy (GSS) program, a visa program that allows highly skilled workers to enter Canada with only a two-week processing time.
Immigration programs like the Global Skills Strategy can do some heavy lifting in terms of bringing talent into the country. Right now, we are seeing highly concerning events happening in the world, such as with what is going on in Russia and Ukraine, or in areas like Hong Kong. These kinds of events have the potential to cause huge changes in the labour market. Canada is extremely desirable for many people to come to, especially for highly skilled workers. We need to make sure that we are providing opportunities so people will come here. These opportunities will help these people have a new life and also potentially help our domestic ecosystem grow. Talent and immigration are linked.
On the more provincial side, we need to make sure that our universities and academic institutions are tooled to respond to what innovators need. We need co-op programs that are at least a year long. Three or four-month-long co-op programs are not enough to get students ingested into companies.
“The structures in place at Canadian universities help funnel talent towards multinational firms rather than domestic companies.”
Canada needs to orientate our academic institutions more with industry. Right now, the structures in place at Canadian universities help funnel talent towards multinational firms rather than domestic companies. We must remember that talent is fuel for the digital economy, and so we must ensure that we are building pathways for the highly skilled workers and students that we are paying for as taxpayers to go work for Canadian companies that are generating IP, data and ultimately wealth.
What can be done to ensure that Canadian companies have access to the capital they need to grow?
That is a great question. Over 80% of the $15 billion raised last year was raised from US capital. This means that the value creation that comes from high-growth companies fueled by US investors ultimately does not end up in Canada. The long-term effects of this are that value and wealth creation from Canada is going south of the border and not staying here.
We need to think about how we can build specific policies and tools that allow domestic firms that create wealth to keep more ownership of their IPs here in Canada. On top of that, Canada needs more large financial institutions or venture capitalists to invest in our own domestic firms.
This is a task for policymakers and the federal government. They must figure out how we can build these tools so that capital comes from within our borders and Canadian companies no longer need to be so heavily reliant on US venture capital and institutions.
“Direct investment from the government will help ensure less dilutive capital, allowing Canadian businesses to keep larger sections of their company.”
We can look at programs like the Scientific Research and Experimental Development (SR&ED) program, Industrial Research Assistance Program (IRAP) and the Innovation Superclusters Initiative. Direct investment from the government will help ensure less dilutive capital, allowing Canadian businesses to keep larger sections of their company. This will be critical in order for us to keep valuation here.
There are also things the government can do about taxation. There are tools and programs like the Venture Capital Catalyst Initiative (VCCI), which can be helpful in terms of helping to corral funds and make it more attractive for Canadians and other institutions to invest locally.
What are the main pillars of a Canadian prosperity strategy and what should the Prime Minister do to implement them?
Thank you for referencing our letter “It’s time for nation-building.” It was a really strong piece that the council put out and it receives a lot of great attention.
From a framing perspective, we need to figure out what a prosperity strategy is. In the Canadian context, we often confuse a prosperity strategy with a jobs strategy. Canada needs to understand that wealth and prosperity come from IPs and the data that is generated. Back in 1985, only 17% of the S&P 500’s valuation came from the intangible economy. Fast forward to today, over 91% of the S&P’s value comes from the intangible economy.
This is where all the wealth and prosperity is being generated in the 21st century. If we are not creating successful technology companies that can generate the IP and data we need, then we are not playing in that space.
We need a Canadian strategy that ties in these two pieces in order for us to be able to pay for the huge amounts of money we spent on COVID-19 and the future of programs in the education, healthcare, housing and transit space.
“The government needs to understand the needs of Canadian innovators in terms of talent.”
This means we must have the right talent. If I had a chance to bump into the Prime Minister, I will tell him that the government needs to understand the needs of Canadian innovators in terms of talent. Talent needs to be a focus of the government. The other area is around building strategies related to IP and data management.
My call to action is that the Canadian government needs to build an economic advisory council to help guide the economy. CCI hopes that this council will be supported by domestic innovators as they are the ones who can provide a clear perspective of the challenges and the issues that they are facing.