HOW TO STEM EXODUS FROM CANADA’S INNOVATION SECTOR
Time for a conversation on why approach to talent retention failing, Ryan Holmes writes.
A recent study from the University of Toronto confirmed what many Canadian companies already know: We’re losing our best and brightest science, technology, engineering and math (STEM) graduates to the United States, at alarming rates. According to the report, a full two-thirds of software engineering graduates from Canada’s top universities leave after graduation to pursue jobs abroad. One-third of computer science grads leave, as do one quarter of all STEM grads.
This exodus is especially challenging considering that Canadian innovation companies face a severe talent gap when it comes to these same roles. In other words, there’s overwhelming demand for these graduates right here in Canada. Indeed, the continued success of Canada’s tech sector depends on finding ways to attract and retain qualified candidates for these roles so they remain in Canada.
Countering the allure of higher salaries in the U.S., tech leaders here have argued that Canada affords a better quality of life and — at least, after factoring in cost of living — attractive (if not equal) earning potential. Across the country, dozens of regional advocacy groups and accelerators do their best to keep local grads and entrepreneurial talent at home.
All these efforts are important. But the trend lines suggest that, alone, they aren’t enough. To date, the issue has been looked at primarily as a talent and recruiting problem — something for tech companies themselves to fix. But what if we looked at it, instead, through a civic lens, as something that all taxpayers have a stake in.
THE PRICE OF EXPAT GRADS
Canadian grads generally benefit from an education heavily subsidized by Canadian taxpayers. Elite university programs here are a fraction of the cost of their U.S. counterparts. For example, first-year undergraduate tuition (two terms, or eight months of school) for software engineers at the University of Waterloo, consistently ranked as one of the country’s best computer science universities, currently stands at $18,250. South of the border, undergrads at the Massachusetts Institute of Technology pay $64,020 (US$49,892) for nine months tuition and fees. This differential for, say, a Waterloo student, is shouldered at least in part by Canadian taxpayers. In fact, it’s been estimated that each Canadian university student is subsidized to the tune of $20,000 a year by taxpayers.
There are many good reasons why we do this — commitment to higher education, egalitarian spirit, and a deep-rooted social contract, to name a few. But at some level, one hope is that graduates who have benefited from the largesse of Canadian taxpayers will go on to pay it forward and contribute to Canadian society — as taxpayers funding the next generation of students, as employees providing important services, as vital building blocks of the new economy. Yet, when Canadian grads take positions in the U.S., these benefits are to some degree muted. Many spend their prime earning years living, working and paying taxes in another country (though those that maintain ties in Canada, such as homes or businesses, retain tax commitments here).
But shouldn’t we all be able to live and work where we please? And is it fair to single out engineering grads, when lots of people seek opportunities abroad? Moreover, what right do we have to dictate what people do with their education and where they do it? These are all valid points. Interestingly, however, there is precedent for taking a more activist stance when it comes to graduates. And it comes from a different field entirely — health care.
TAKING A CUE FROM HEALTH CARE
Around the world, dozens of countries (including parts of Canada) require doctors, nurses and other health-care professionals ( both domestic and international graduates) to work in rural or underserved regions following graduation, as a way to recoup the significant investment in their education and deploy people where they’re needed most.
This is accomplished through a combination of carrots and sticks. In Australia and Japan, for instance, a rural placement is required after graduation, typically one year for each year that educational financial support was given. In other countries, including Ecuador and South Africa, granting of licences to practice is contingent on a period of compulsory service. Many of these countries also have a “buy out” option, allowing graduates to opt out of these requirements, in exchange for paying a fee or repaying some of the cost of their education.
Could a system like this be adapted to apply to engineering graduates in Canada? On the one hand, the health-care field is a special case — compulsory service makes sense because lives are at stake. On the other hand, it’s hard to overestimate the impact of innovation on Canada’s economic future. Across the country, nearly one million Canadians are employed in the tech sector, which generates more than $100 billion a year in economic output. More important, tech is among the fastest growing sectors of the economy overall. Tech’s future and Canada’s future, in other words, are deeply intertwined.
FOREIGN COMPANIES WOULD SHOULDER THE FEES
So how could this all work? One option would be to borrow some combination of the carrot-and-stick approach from the medical field. For example, engineering students could be offered full or partial tuition forgiveness in exchange for remaining in Canada for a set number of years after graduation. This incentivebased approach has the advantage of being opt-in — relying on persuasion rather than fines and penalties — and would seem to be the preferred route. In the end, however, taxpayers could end up on the hook for these scholarships. Plus, the most capable students might forgo these carrots, instead opting for greater long-term earning potential south of the border.
An alternative, though more contentious, approach would be to have grads stay in Canada for a set period of time or else repay a portion of their subsidized education costs. For reference, one year of study in the University of British Columbia’s undergraduate computer science program costs $5,294 for Canadian citizens and permanent residents, compared with $37,690 for international students. Graduates planning to work in the U.S. might be asked to cover some of this difference.
Admittedly, asking recent grads to shoulder what could amount to substantial fees seems unrealistic, if not outright unfair. In reality — and this is the key — the burden of paying these fees would likely fall on their U.S. employers, not the grads themselves. And this is where things get interesting. Right now, the U.S.’s largest tech companies, from Amazon and Apple to Google and Netflix, rely on Canada’s universities as an important recruiting pipeline. Their presence on campuses and at career events is ubiquitous. They’re drawn to Canadian graduates because the quality of education is high, and the tech giants also have deep-enough pockets to outbid Canadian competitors for talent.
But what if these U.S. giants faced the prospect of footing a hefty “buyout” tab to get Canadian grads south of the border. Suddenly, the economics of raiding Canada’s universities for talent become much less attractive. In turn, more and more grads would naturally opt to live and work in Canada. Companies here would have more access to needed talent. And, those same U.S. giants would be incentivized to set up more branches here to capitalize on Canadian talent inside of Canada — keeping tax dollars and professionals within our ecosystem. On the other hand, however, this could have the effect of disincentivizing students from pursuing STEM educations, as options on graduation might be more limited. That’s a consequence worth considering.
Zooming out, it should be emphasized that the goal here isn’t to shortchange Canada’s engineers. My company wouldn’t be where it is today without their exceptional efforts. That’s why there’s another equally critical piece of this puzzle. As Canadian companies, it’s our obligation to create an environment in which the most talented people truly want to work. Compensation is part of that. We may not be able to control the exchange rate, but we can commit to rewarding our people fairly. At the same time, dedication to innovation and vision is also a major component. The smartest people want to work for the most ambitious companies — the ones looking to effect change on a global scale and have impact over the long term, not make a quick buck and cash out. It’s on us as Canadian entrepreneurs and investors to create more of the former and fewer of the latter.
To be clear, I’m floating a preliminary idea here and inviting input — not suggesting that this is the ultimate or best answer. But my hope is that this initiates a conversation on a critical topic. Considering that two out of three Canadian software grads from top schools promptly leave the country, it’s safe to say our current approach to talent retention isn’t working. It may be worth thinking outside the box.