The Real Crisis Facing Canada

May 31, 2009

We’ve got a big problem in this country.  I’m not talking about the hundreds of thousands of jobs being lost in our manufacturing sector.  I’m not talking about a $50 billion federal deficit this year.  I’m not even talking about the fact that as of Monday, you’ll need a passport to go cross-border shopping.

Those are all problems.  They are real, and they have serious consequences.  But I am more worried about what happens next; about what happens after this recession ends; about how we will keep our economy growing and our standard of living rising when we have only two people in the labour force for every three jobs that need doing.

For now, of course, governments are back to focusing on the standard three priorities in any recession: jobs, jobs, jobs.  There’s nothing wrong with that in the short term.  People are hurting, and governments should be there to help.

But the inescapable reality is that recession — no matter how nasty — does not stop any of us from aging.  (If anything, its challenges often seem to make us age faster!)  But every 24 hours, we each get a day older.

So as the economy turns up again — and it will — we will move very quickly from an economy without enough jobs for our people to one in which we will not have enough people for the work that needs doing. 

I want to suggest to you today that Canada’s community colleges will play a critical role in determining whether our country can handle that shift, from an economy that is cyclically short of jobs to one that is structurally short of skilled labour.

To set the stage for what I think colleges need to be doing, let me offer a private-sector perspective on what we are up against.  Before we plunged so abruptly into a global downturn, companies across a wide range of industries already were having difficulty finding people with the skills they needed.  Shortages were worst in sectors like the oil patch, where the surging price of oil and constant improvements in technology were driving a boom in the oil sands that sucked up skilled tradespeople from coast to coast. 

Small and medium-sized businesses also were feeling the squeeze.  The Canadian Federation of Independent Business estimated that in 2007, 309,000 jobs at small businesses remained vacant for at least four months.  Finding employees is not the only challenge: a CFIB survey found that two thirds of owners in 2006 were hoping to find a successor to take over their business by 2016. 

Even today, in the midst of the worst global downturn since the Second World War, there are jobs going begging.  In the Kitchener-Waterloo region, the four largest technologies companies alone need to fill 2,000 positions in the next 12 months.  Amid the carnage of the global financial crisis, Canada’s financial services sector has gained a reputation as perhaps the best managed and best regulated in the world — which means that our banks and insurance companies are hiring. 

What this means is that the late-1990s phrase “war for talent” will be back with a vengeance as the economy emerges from the current downturn.  This has fundamental implications for both corporate strategy and public policy.

Just under a year ago, the Competition Policy Review Panel unveiled a comprehensive strategy for boosting the competitiveness of the Canadian economy.  Our Council worked closely with the Panel during its research and consultation, and we agree strongly with the need for a broad strategic approach. 

Indeed, the Panel called for action across a range of priorities that we and many others had been discussing for years, from taxation, education and regulation to the free movement of goods, services, people and investment across borders within Canada and around the world. 

We already have seen action on some of recommendations made by the Panel, but we need to move further.

Today, I want to focus on one of those issues, that of skills development.  Canada today has one of the most highly skilled labour forces in the world.  Our rate of participation in post-secondary education is second to none.  This provides a huge competitive advantage.  But we will not maintain or strengthen this advantage without serious additional effort.

As the shortage of skilled labour grows more acute in the years ahead, companies will be increasing their investments in employee training.  But that is unlikely to be enough to meet their needs.  As a result, companies increasingly will be looking around the world for talent — and investment dollars will flow to wherever they can find the people they need.

This brings up another aspect of the competitiveness challenge for Canada.  The relentless advance of technology means that a growing share of the work that needs doing can be done almost anywhere. 

In manufacturing and services alike, supply chains are global — and unlike deposits of minerals or oil, people can move.  To attract business investment in highly paid work, Canadian communities need to offer a good supply of highly skilled people — and be places in which such people want to continue to live and work. 

In my view, the downturn notwithstanding, the central focus of public policy needs to shift from worrying about the quantity of jobs being created to the quality and value of the work that Canadians are able to do.

Learning has always been linked to earning.  This is as true for nations as it is for individuals.  People who know more and can do more, can make more.  Communities full of people who know more and can do more will be far more successful in attracting investment and fostering well-paid jobs — the kind of economic activity needed to support robust public services and a high quality of life for all.

A decade ago, we accepted as a society that some people might never get jobs and we settled for doing our best to look after those left out and left behind.  Today, we simply cannot afford to leave anyone behind.  What was once a moral imperative is now an economic necessity.  If we are to continue prospering as a country, we must make it our national mission to ensure that every Canadian can achieve his or her full potential.

Canadians have many different needs when it comes to post-secondary education.  They differ in what they want to learn, as well as when, where and how they want to learn.   But in one way or another, I am suggesting that every Canadian needs to move beyond high school in some form at some time.

The central strength of our colleges is flexibility.  Many of your students come straight from high school.  Yours is the most accessible first step into post-secondary education, one that allows choices between a direct path into the labour market with specific job skills and stepping stones to further education.  I passed through the Quebec CEGEP system after high school, and it was pivotal in helping me explore different facets of my talents and choosing to pursue journalism rather than computer science.

Meanwhile, a growing proportion of your students are choosing to attend college after university as a more career-focused supplement to their degree.  Colleges are equally accessible to Canadians in mid-career as they contemplate changes in their interests and in the economy.

With respect to ensuring that no Canadian gets left behind, I want to acknowledge the stellar record of Canada’s colleges in enabling Aboriginal Canadians to succeed in post-secondary studies. 

However, I also want to suggest that there are opportunities for you to do more on two fronts, enabling new immigrants to move quickly into the economic mainstream and meeting the needs of small and medium-sized businesses.

Immigration is a key source of talent for the Canadian labour market.  In fact, immigration will soon provide all of the net growth in our labour force.  As other industrialized countries face the same demographic pressures and Canada’s greatest source countries grow rapidly and expand opportunities for their own people, we will have to work harder to attract the immigrants we need.  This reinforces the importance of enabling new immigrants to put their full knowledge and skills to work with a minimum of delay.

We all have heard the stories about doctors and engineers driving taxis.  Preventing such wasting of talent starts with efforts to assess and recognize credentials that people have earned elsewhere.  This issue is well understood and my sense is that Canada is making progress. 

The bigger challenge in my view lies beyond assessing what is equivalent to Canadian qualifications.   What really matters is how well we help people fill the gaps.  Even if a foreign credential is not 100 percent equivalent to its Canadian counterpart, it may well cover 70, 80 or 90 percent of what immigrants need to know to meet Canadian standards. 

Making people start over from scratch is a waste of time and money, for immigrants, for governments and for our economy.   We desperately need much more flexibility to tailor educational offerings to specific individual gaps in knowledge.  The credential assessment and recognition issue lies primarily with governments and with professional bodies, but colleges should be aggressive in developing solutions that will help our country do a better job of attracting the talented people on whom our future growth depends.

The second major opportunity for colleges lies in serving the needs of smaller employers.  Large companies, such as those represented in our Council, understand the vital role of ongoing education and training, and have invested heavily in employees for many years.  They recognize that providing such learning opportunities pays off in higher productivity, easier recruitment and greater employee loyalty, motivation and retention.  They also have the scale to provide learning opportunities internally that are tailored to their specific needs. 

Small and medium-sized enterprises are just as aware of the value of ongoing education, but have much less capacity to provide what their employees need. 

The CFIB has estimated that the small and medium-sized business sector invests a total of $18 billion a year in employee training, but more than two thirds of this is informal, on-the-job instruction.  Both employers and employees are crying out for more flexible and affordable options, and community colleges have been the leaders on this front, working closely with their local business communities to develop courses that are relevant. 

I want to make one thing very clear.  There is more to enabling Canadians to fulfill their potential than getting them into classrooms and handing them credentials.  We need to make sure that all that knowledge is put to good use in our economy and in our society.  More specifically, we need to see it used to drive an innovative and creative economy that is founded in an adventurous spirit of entrepreneurship.

Here too I see community colleges playing key roles.  On the innovation front, a lot of the attention and money tends to flow to universities.  They are seen as the centres of basic research and of the breakthrough discoveries that have the potential to transform industries.

But innovation is a much broader process.  Our ability to compete globally depends not just on our capacity to come up with new ideas, but also on our ability to put new ideas to use.  Investment in basic research matters, but we cannot ignore the importance of applied research as well. 

I believe that community colleges can be especially helpful in improving Canada’s performance on one measure of innovation, business expenditures on research and development. 

We have seen a host of studies over the years, including a recent one from the Council of Canadian Academies, that have highlighted the relative weakness of private-sector investment in research despite the existence of research tax credits that at least on the surface are among the most generous in the world.

The weaknesses of the Scientific Research and Experimental Development (SR&ED) tax credits are well known.  Except for very small businesses, they are not refundable, and hence of little use to companies that are not yet profitable or, as now, suffering through a downturn.  They also are based on a highly restrictive definition of what constitutes research.  And while the tax credit rate is generous, Canada offers far less support than other countries in terms of direct subsidies for business research.

Our Council has worked with Industry Canada to dig into the issue of why Canadian companies are not investing more on the innovation front, and we have found a variety of other factors that come into play, most notably the rules governing intellectual property and regulatory issues affecting new discoveries.  No one policy tool will suffice to turn this picture around.

However, the microeconomic evidence is crystal clear on one point.  Large companies that are engaged abroad, both foreign subsidiaries and Canadian-based multinationals, are more innovative than smaller firms that operate only within Canada.  Since we cannot expect most small businesses to engage internationally, we need to look for other ways to encourage innovative behaviour and investment within this sector. 

Colleges already act as engines of community economic development, and in my view you need to expand on your role as a conduit for spreading global ideas to your local markets.

There is another suggestion put forward frequently to explain the shortage of innovation in the Canadian private sector, one that boils down to saying that Canadian managers are too cautious and not well-enough educated. 

My own experience talking to business leaders around the world suggests that Canadian managers in fact are very well regarded and successful wherever they move.  If they follow less innovative strategies in Canada, it seems more likely that they are smart people responding intelligently to perverse incentives.

That said, a pervasive entrepreneurial spirit is essential to competitive success.  When I talk about entrepreneurship, I am not talking only about people who start businesses to make money.  There are many entrepreneurial charitable and community organizations.  I know and have great respect for highly entrepreneurial public servants.  Entrepreneurship at its core is not an activity.  It is an attitude, one that can and should infuse every sector of our society.

This is why, even though I work for the leaders of Canada’s largest businesses, I devote a considerable amount of my time encouraging young entrepreneurs through my role as Vice Chair of the Canadian Youth Business Foundation. 

CYBF is a national charity that offers financing, mentors and other support to help young people start businesses, and we have developed a model and record that is being recognized as one of the best in the world.  We make unsecured loans to people who cannot get credit through traditional means, and yet our annual loan losses have been running at just six percent — and our clients, on average, create five jobs within their first two years.

Canada’s young people are not afraid to take risks.  Applications for our loans have gone up even as the economy has gone down.  The fact that people starting new businesses during a recession provide both great stimulus and a wonderful symbol of hope enabled us to win additional support this year from both the federal government and the government of Quebec. 

We also are privileged to work with many of Canada’s community colleges.  Some, such as Centennial College and George Brown College in Ontario, act directly as community partners.  As such, they help potential clients to learn about our program and develop viable business plans, and they recruit the volunteers who screen applications and act as business mentors.

Many others, including Holland Collage here in Prince Edward Island, both help young people acquire the skills they will need and foster entrepreneurial passion.  CYBF’s Director for the Atlantic region, Bill Martin, is based here, has taught at the College and continues to speak to students there on a regular basis.

I see young entrepreneurs as the fuel injectors of our economic engine.  How efficiently they are able to unleash their passion, creativity and determination affects both the power that this engine generates today and how far it takes us over the next generation, and I see community colleges as essential partners in building a more entrepreneurial society.
 
Let me conclude with this theme, because entrepreneurship is about hope.  It is about defying doom and gloom and ignoring the naysayers.  It is about working hard to pursue long-term dreams, and that is what we need to do as a country.

Canada needs you today as we work our way through the current downturn.  Canadians who find themselves out of work need to use this opportunity to prepare themselves for better jobs as the economy recovers. 

You need to be there for them, and governments have to make sure that the financial support they provide to the unemployed makes this kind of learning feasible.  The downturn also has created a justification for accelerated investment in infrastructure, and I am pleased to see some of that money being invested in expanding the capacity and capabilities of our colleges as well as universities.

But you need to be thinking about the medium term now, because you too face the demographic challenge that lies ahead.  By 2012, post-secondary enrolment in Canada is projected to peak, and then to slide steadily downward until 2025. To maintain your employment, infrastructure and momentum in advancing knowledge, you will have to continue reaching out to new markets, creating value for a larger share of our shrinking population.

As a country, we need to ensure that every Canadian is able and motivated to pursue post-secondary education.  We need to put the resulting skills to work within a creative and innovative economy.  And we need to foster the spirit of entrepreneurship that will be essential to enable a shrinking working-age population to provide a rising standard of living for all.  Colleges have vital roles to play in meeting every one of these challenges, and I want to assure you that the business community is committed to working with you in driving Canada’s success.