Countering the innovation brain drain

Steady access to skilled talent is an imperative for Canada, as is supporting local entrepreneurs and innovators. Despite inflationary pressures and a looming recession, the Canadian unemployment rate steadied at 5.2 per cent in September 2022. Many sectors continue to face labour shortages, and other factors like growing digital adoption, changing consumer trends, and demographic shifts—including recent “record retirements”—put added pressure on businesses to scale, while sourcing and retaining talent. By 2025, the digital economy alone will see a demand for 250,000 additional workers. Despite persistent and perpetual talent needs, Canada’s immigration backlog hovers over the one million mark, and the pull of high salaries continue to make working for a U.S. company an attractive option for Canadian STEM talent, including from the comfort of their own (Canadian) home. Curbing “brain drain” and attracting skilled international talent inevitably contributes to the innovation ecosystem, including creating Canadian companies that can scale on a global level. Tackling these complementary factors requires focus on three core pillars: sustainability, innovation, and prosperity. Sustainability is priority for Canadians at large. A recent poll by Angus Reid found that most Canadians believe that Canada should prioritize sustainability and environmental well-being, at times, over economic growth. Essential to environmental protection are recent investments made by federal and provincial governments to reduce emissions, boost the production of clean energy, build sustainable infrastructure including for electric vehicles, and support the growth of green jobs. They must be complemented with initiatives that focus on addressing the longer-term by-products of climate change, like food security, sustainable supply chains, and climate migration. Bringing these to forefront can help attract and retain talent, while encouraging Canadian entrepreneurs to develop innovative solutions that address pressing global environmental needs. Innovation and productivity are closely tied. Although Canadian labour productivity lags OECD peers, a renewed policy focus on innovation can help reverse this trend. Introduction to the workplace during study is key to retaining STEM grads; work-integrated learning programs expose students to a range of Canadian employers and work cultures. Government-driven R&D is also crucial to spur job growth, while simultaneously supporting entrepreneurs. However, worsening global economic conditions require more direct and immediately impactful interventions. Essentially an IP regime, a patent box encourages entrepreneurs to develop intellectual property (IP) by offering tax rebates on income earned from that IP. Jurisdictions that have used these structures have been effective at attracting talent and supporting innovators down the commercialization pipeline. In the U.K., the patent box is associated with an increase in the probably of success of patents. In Australia, the patent box spurs innovation and helps businesses attract and retain top talent needed to compete on a global scale. Quebec recently introduced a similar regime for R&D conducted in the province. While patents are not necessarily a predictor of business success, they are an indicator of technology innovation, and can be a core component to product commercialization. Prosperity and equity should not be mutually exclusive concepts. Put otherwise, future “growth” must balance economic goals with real-life societal and consumer needs. Government R&D is key to support early-stage start-ups on their quest to develop and test products that can eventually go to market; these interventions are increasingly complemented with innovative measures aiming to engage everyday investors, like the introduction of green bonds. However, building Canadian businesses that can scale globally and attract and retain skilled talent requires both expanding the pool of entrepreneurs and mobilizing other forms of capital. A recent ISED report finds that tier one investments in Canadian start-ups are largely dominated by U.S.-based investors. At the same time, women entrepreneurs receive just four per cent of venture capital funding. Like greater workforce diversity can lead to greater profitability, actively enabling a more diverse pool of entrepreneurs—including through innovative methods of sourcing capital like flow-through shares and crowdfunding—is essential to create world-class Canadian companies with the pull factors that attract and retain skilled talent. Alexandra Cutean is the chief research officer at the Information and Communications Technology Council (ICTC). The Hill Times