There is a well-documented shortage of tech talent around the globe, and Canada is no exception. This country is expected to have more than 200,000 unfilled high-skilled tech jobs by 2020, according to the Information and Communications Technology Council, and fast-growing Canadian startups are already challenged to fill computer-engineering and data-science positions.
If the market is doing such a great job creating jobs, governments should be focused on supplying more qualified workers for this sector, not subsidizing the creation of even more positions. Alas, not one but three levels of government in Canada would beg to differ.
Last week, MobSquad, a company in Calgary that helps Silicon Valley startups access Canadian engineering talent, secured a $1.5-million grant from the City of Calgary, another $1-million grant from the Alberta government and $500,000 in repayable contributions from the federal government. (Ottawa has promised another $500,000 for more MobSquad jobs in an Atlantic Canada office yet to be announced.)
The money is tied to job creation. For example, Calgary is providing $10,000 for every job created, up to 150 positions.
One can sympathize with Calgary Mayor Naheed Nenshi, who is eager to diversify his depressed oil-dependent economy. But paying out taxpayer dollars for this venture is a bad idea for several reasons.
MobSquad will be competing for talent with local software companies already struggling to fill available jobs. While MobSquad chief executive and founder Irfhan Rawji anticipates many of his positions will be filled by high-skilled immigrants, he anticipates 20 per cent of positions could go to those already working for other local firms.
That means public dollars will subsidize the poaching of employees from local innovative companies, and pressure the already tight local labour market to their detriment.
MobSquad is part of a trend that sees Canada as a cheap “near-shoring” operation for American tech companies. MobSquad and Terminal, a similar operation, are set up to employ high-skilled data scientists and computer engineers in Canada to do work for Silicon Valley startups – who can’t find the talent to fill jobs in their market, either.
MobSquad and Terminal can charge Silicon Valley prices, pay lower Canadian wages and rent, and pocket the difference – a gap so large that venture capitalists have piled in to fund them both. Mr. Rawji readily admitted last week MobSquad is “an arbitrage play.”
While it’s fair game for savvy entrepreneurs to exploit a cost advantage, it’s disturbing to see governments cheering on and bankrolling this activity. Is this the kind of podium Canada wants to own? If so, then we are competing not with Silicon Valley but with markets such as Bangalore and Ukraine, on price.
Cheap labour is only an advantage until it is no longer cheap. It’s not sustainable, which is why successful developing economies such as China moved on to higher value-added activities as they ceded their manufacturing-cost advantage to less-developed markets with even cheaper labour costs.
Unfortunately, one doesn’t have to look far in Canada to find leading figures who believe Canada should play the cheap-labour card to attract foreign branch-plant jobs.
Last year, for example, Ed Clark, former CEO of Toronto-Dominion Bank and then-adviser to former Ontario premier Kathleen Wynne, said in promoting Toronto as a potential home for Amazon’s second headquarters that the province’s “core advantage” was “great talent at a very competitive cost. That’s an edge the government is determined not only to maintain but to sharpen.”
Organizers of Vancouver’s bid for the Amazon operation also highlighted that city’s relatively cheap work force as a draw.
Real economic value in the 21st century is realized by companies and economies that can create and exploit ideas and intellectual property, not provide cheap human capital. Those branch-plant and near-shoring engineering jobs in Canada create value and support head-office jobs in the United States instead of this country.
If Canadian political leaders want to truly create a stronger economy, better jobs and greater opportunities at home, they would be better off helping Canadian startups grow into global giants – or at least not get in their way by giving their foreign rivals a leg up at taxpayers' expense.