most important and the scarcest resource over the next 20 years.
McKinsey and Company called their report, "The War for Talent". At ITAC, we suspected that this battle was looming a decade ago. We have been working with our member companies and policy makers to find solutions for almost ten years now. We know that Canada faces unique challenges and enjoys exceptional strengths on this global battlefront.
Today, I would like to first give you an overview of the skills shortage issue in Canada and what it means to our country. Second, I will explain how companies and governments in Canada are working together to address our challenges and capitalize on our advantages. Third, I will provide my observations on the future shape of the global war for talent and the implications of that future.
I will explain why I believe that the only viable, enduring way to win the worldwide competition for talent is to revitalize a country's total knowledge assets - from its workforce, to its educational system, to its research and development capabilities.
Canada's Situation
So, first, let's examine the war for talent from Canada's perspective. Where do we stand?
On balance we are doing OK but Ok is not good enough from our perspective. Canada is gaining from abroad about 100,000 skilled workers per year of whom about 10% are destined for the IT sector. A further thousand or so enter via special expedited procedures for temporary IT workers.
Together they help supply the fast growing needs of an IT workforce of about 750,000 about two-thirds of whom work in the IT industry. Extensive labour market studies are now in progress but the best available estimate of the skills shortage in Canada is 35,000 - 50,000. That is to say, an additional 35,000 or more individuals could be put to work in Canada today if they had the right skills and experience.
But as you know, the United States - the centre of the world's information technology boom - lies just south of the 49th parallel. This border - the longest unprotected border in the world - is now virtually transparent.
The North American Free Trade Agreement enables Canadian professionals to explore job options in the United States with relative ease. And it appears that Canadian workers are increasingly taking advantage of these relaxed policies to head south of the border.
According to a September 2000 report from Statistics Canada, the number of Canadian emigrants to the United States has reached a five-year high. For the year ending last July 1st, more than 62,000 Canadians left for the United States, more than double the number five years ago.
All available evidence suggests that our best and brightest are disproportionately involved in the exodus. And of course the skills and talents of those in the US are lost to Canada while they are away - even if they plan on returning.
Naturally, this has Canadian companies worried. According to a 1999 Mercer/Angus Reid poll of 307 Canadian CEOs, attracting and retaining high calibre employees is second only to profitability as their most important priority today. Most of these executives also linked profitability to their concerns about recruiting and keeping employees.
I suspect these concerns will soon be exacerbated by the growing shortage of talent in the U.S. According to an April 2000 study conducted by the Information Technology Association of America or the ITAA, US companies will need roughly 1.6 million new Information Technology or IT workers by next January. However, 850,000 - or more than half - of these jobs will likely go unfulfilled. A comparable figure from Europe is about 1 million.
So stemming the flow of Canadians to the United States will remain a major challenge for Canadian policy makers and the industry for the immediate future. But, this is just one facet in a multi-faceted issue. And although it's important, it's not our only focus at ITAC.
Fundamental questions
I believe that to effectively address the skills shortage, you must answer three fundamental questions:
- How do we get more talent?
- How do we capitalize on our existing talent more effectively?
- How do we keep the talent we have?
Getting More Talent
Let's look at the first question: getting more talent. In Canada, we have been very successful on that front by increasing capacity in our educational system and through several innovative immigration policy initiatives.
On the latter front we have been working closely with Citizenship and Immigration Canada for several years. We believe that we are evolving nothing less that the best program in the world to recruit and keep foreign IT talent.
Our goal is to provide seamless, worker-friendly transitions from temporary work and residence to permanent residence to citizenship. To be sure: Many countries have temporary foreign work programs geared toward IT workers.
But the IT people issue is a long term issue. I believe that no country will ever solve its problem with workers who show up for a few years only to be asked to leave. The best people to solve a labour force over the long haul are your own citizens.
In Canada, our temporary worker program for IT workers streamlines entry for designated positions in high demand so that employers can get people into Canada and working quickly. The employer pays normal wages and payments for all social benefits.
Our "killer application" is that a worker's spouse and family may accompany him during the temporary period and the spouse may work. This is virtually unheard of and is done to keep families together and to encourage permanent residence and eventual citizenship.
We are currently working to ensure that our temporary wokers can complete all paperwork for permanent residence without leaving Canada. We are also advising the government on new selection methods for the permanent peogram that will emphasize education and experience rather that narrow preparation for a specific occupation.
The numbers clearly indicate that these immigration policy initiatives have been extremely successful in attracting more knowledge workers to Canada.
Capitalizing on Existing Talent
Now, let's look at the second question: How do we capitalize on our existing talent more effectively?
To answer that question, you must first assess what resources are needed and second, develop those resources at home. As I said earlier, ITAC has been working on this issue for nearly ten years. Early on, we recognized the need to clearly define the problem, raise awareness of its implications, and to work directly with partners on solutions.
In 1992, ITAC co-founded the Software Human Resource Council or SHRC, a joint industry/government initiative to conduct research and to take direct action on defining and addressing Canada's skills gap.
The SHRC has accomplished a great deal in a few short years, both in defining the problem and in finding solutions to address it. It developed detailed profiles for 24 IT occupations and created a postgraduate program leading to entry-level IT positions. This program is now being delivered across Canada by several universities and colleges.
ITAC is also a founding signatory of the CanConnect program, a series of initiatives designed to encourage elementary and secondary students to gain IT skills while in grades K-12 and to consider careers in IT. This year we will help the federal government to place more than 100 recent graduates from non-IT programs in internships in the IT industry.
We have recently introduced the International Computer Driving License Program to Canada. This program provides a standard syllabus and testing regimen. It is ideally suited to be used with high shool students and existing workers as a way to ensure that they can participate fully in the information economy.
And we continue to encourage and celebrate outstanding initiatives to address the skills issues such as the Ontario Government's Access to Opportunities Program that will result in the creation of several thousand new spaces in college and university IT programs.
In short, we are first making it easier for talent to come to Canada and, as a result, we are enjoying considerable success in attracting new talent to Canada. Second, we know what specific type of talent is needed to fuel Canada's creation of knowledge and we're taking steps to develop that talent at home.
Keeping Talent
Now, for the third question: How do we keep the talent we have? A study undertaken by Industry Canada and Human Resources Development Canada last year concluded that "skilled workers have moved to the U.S. mostly because of higher salaries and better career opportunities offered by the U.S. private sector." It also concluded that higher taxes in Canada have played a role.
Given these findings, the first responsibility of industry is obvious: to provide more competitive compensation and clearer career opportunities for our best people. I am pleased to report that both are happening as we speak.
Further, over the past several years, ITAC and its members have lobbied the federal government in Canada to institute several new tax measures to address this issue. Our recommendations included lowering capital gains taxes, improving the tax treatment of employee share options, eliminating the "high income surtax", and lowering the general corporate income tax rate immediately to 22 per cent. This would bring Canadian income tax rates in line with the international benchmarks now set in Britain, Scandinavia and Australia.
A federal election is now underway in Canada and the tax issue has emerged as a key political issue. Three of the five political parties running for office have promised significant tax cuts, if elected. Indeed many of our recommendations have already been accepted and several others are scheduled to be implemented,
Naturally, we are pleased about this evident recognition of the problem. We believe it will help Canada keep its talent at home. We believe that timely tax reform will help make the difference between leadership and a seat on the sidelines in the knowledge economy.
However, tax reform is simply a defensive strategy. With the tax-cutting measures taken by a number of other industrial powers, tax incentives have become simply the table stakes in the worldwide war for talent.
Money Isn't Everything
That's why I believe you must look at all the potential incentives for talent to stay. As a January 1999 research monograph compiled by Kepner Tregoe stated: "While no one would be foolish enough to argue that money doesn't matter, much of recent research, including our own, shows that when it comes to employee retention, money is not necessarily the deciding factor."
This is especially true for what I call the scientific or technological elite. This group includes Nobel laureates and groundbreaking researchers who set the tone for technological development worldwide. They are independent. They actively search out challenging and interesting opportunities. And they are highly mobile. These innovators can write their own ticket just about anywhere.
However, this elite group is becoming more democratized. With the ease of communications enabled through the Internet and the growing availability of advanced training, a new and much larger elite is coming to the forefront. And this new elite is not so much interested in pure research as it is in development - in creating the new products, services and processes that will drive the knowledge economy in the future.
Meaningful Work and Quality of Life
I believe that to successfully gain a competitive edge in the future, countries must attract and retain members of this elite group. But, this elite group cannot be lured solely by tax incentives. Indeed, this group is more interested in meaningful work and quality of life.
Fortunately, for Canada, we have a lot to offer when it comes to quality living. Time and time again, we have been recognized by the United Nations as one of the best countries to live in on earth. We have a strong social safety net, a good health care system, a congenial lifestyle, wonderful cities and a beautiful land. We are very lucky here.
What's more, according to the OECD, Canada has the strongest potential to lead in the knowledge-based economy. Our strengths lie in a strong infrastructure, high levels of Internet penetration, and an early lead compared to other countries on the policy front.
For example, Canada is one of the most wired nations on earth and its Internet access costs are the lowest among all the G7 countries. What's more, Canadians have been quick to adopt Internet technology. The most recent figures show that Canadians, on a proportional basis, access the Internet more and stay on-line longer than Americans do.
And because of forward-looking policy initiatives, like the Government of Canada's Connecting Canadians agenda and its Canadian Electronic Commerce Strategy, we have gained international recognition as a leader in this area.
We intend to use these strengths both now and in the future to win the war for talent.
Thank you.
