Quick Take: The Reverse Brain Drain

What is the news?

CBRE, a large commercial real estate broker, released a report on tech talent by city in North America. The four fastest-growing cities, as measured by the number of employees percentage-wise over the last five years, were all Canadian. Toronto, Waterloo Region, Vancouver, and Edmonton each increased the size of their talent pool by more than 35%. This compares to 16.4% for the San Francisco Bay Area and 6.7% for New York.

The numbers 

Other interesting numbers from the report

• Tech talent (excluding managerial and administrative roles) accounts for 5.6% of the Canadian workforce or roughly ~900,000 people.
• Only 33.3% of these people are employed by high-tech companies. 
• Tech talent grew at three times the national average over this period.
• Toronto grew at 36.5% and added 66,900 people to the Toronto tech talent pool. This is almost equivalent to Ottawa's entire tech sector and 50% bigger than Calgary's tech sector.

Reasons behind the rapid growth

High-quality post-secondary STEM programs exist across the country. These programs produce the talent the tech sector needs in relatively high volume and outside of a few Universities most of this talent stays in Canada.

 Canada’s and US immigration policies. Over the last five years, Canada has become more immigrant-friendly while the US has become less friendly. This directly helped Canada's largest cities as a talent that wanted to be in North America ended up in Canada.

Increased funding for Canadian tech start-ups and more start-ups scaling up. What do companies do with their funding? Hire domestically and import talent.

 Cost of local talent. Due to salaries, the Canadian dollar, and SR&ED. Canadian talent is viewed as relatively affordable. As such, many scaling tech companies have opened offices across Canada.

Will the rapid growth continue?

My magic 8-ball says: "Reply hazy, try again". Growth in our ecosystem faces both headwinds and tailwinds.

What could hurt future growth?

• The American stance on immigration is slowly turning around and doors are opening up again.
• Move to distributed work. Previously tech talent emigrated for a better job and better lifestyle. Emigrating is not easy or fun. If salaries start equalizing globally a portion of people may decide not to emigrate. 
• Not enough talent available in Canada may mean companies don't open offices in Canada making Canada a less attractive place to immigrate to.

What could help growth?

• Network effects. There are benefits to being located in a city with a lot of similar talent and where that talent is a significant portion of the working population. The Toronto/Waterloo region has a large volume of talent and it makes up a significant portion of the labour force meaning that the region may become a destination for talent seeking other talent. 
• Canadian companies continue to scale and raise record amounts of capital.

Why you should care

The growth of the tech sector in Canada impacts readers of this newsletter's ability to find interesting employment or find talent for their start-up. 

More importantly, the growth of tech employment has positive and negative impacts on our cities. The positive is that it creates well paid relatively secure jobs. The negative is that these jobs make cities less affordable for other people that live in them. We need to think how the entire population of a city benefits from the tech sector growth.

Hopefully, increased demand for Canadian talent will result in increasing salaries for tech talent and companies choose to open offices in Canada due to the quality of talent and not the cost of the talent. 

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