“Unfortunately most of our services – many of our services anyway – have been built to follow the same model, really a reactive model but they’re full of people who care a huge amount about their community.”
Host Mike Moffatt is joined by the Mayor of Barrie, Ontario, Jeff Lehman to chat about sparking innovation at the municipal level despite regulatory boundaries and how data can be used to act proactively in the community.
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Canada 2020 released Volume One of its Innovation Project Towards an Inclusive, Innovative Canada in February, 2017. Its authors, Mike Moffatt, Hannah Rasmussen and David Watters examined innovation in Canada through various sectors, and how to measure it. Moffatt and Rasmussen developed Ten Big Ideas to Drive Innovation in Canada.
In writing this volume, Moffatt and Rasmussen wrote that their mission is:
“to increase innovation in Canada by creating a set of Big Ideas, which, if enacted, would have measurable results, whose benefits would be well understood, and that would increase the economic well-being and personal autonomy of the middle class and those working hard to join it.”
With this mission in mind, we examined the government of Canada’s 2017 federal budget and found six examples of inclusive innovation.
From the budget:
Successful 
clusters like the ones in Silicon Valley, Berlin, Tel Aviv and the Toronto-Waterloo corridor contribute significantly to both regional and national economies.
Budget 2017 proposes to invest up to $950 million over five years, starting in 2017–18, to be provided on a competitive basis in support of a small number of business-led innovation superclusters that have the greatest potential to accelerate economic growth. The competition will launch in 2017 and focus on superclusters that enhance Canada’s global competitiveness by focusing on highly innovative industries such as clean technology, advanced manufacturing, digital technology, health/bio-sciences, clean resources and agri-food, as well as infrastructure and transportation.
Our Analysis:
This is an interesting idea – in Towards an Innovative, Inclusive Canada, Moffatt and Rasmussen were also thinking about driving innovation through superclusters. They suggested that academia and research could play a role in driving innovation. In one of their Ten Big Ideas to Drive Innovation in Canada, they proposed creating research clusters of knowledge in universities. Here is their recommendation:
The federal government should fund the creation of a network of cluster research centres across the country at universities within the geographic area of the cluster that would be required to provide a yearly set of deliverables to maintain their funding.
In addition, Moffatt and Rasmussen suggested thickening labour markers in medium-sized cities, outside of major urban centres and clusters like Toronto, Montreal and Vancouver. They suggested the government had an opportunity to grow clusters in medium-sized cities which would allow for the emergence of clusters in these cities.
From the 2017 Budget:
To support the continued growth of Canada’s innovative companies, Budget 2017 proposes to make available up to an additional $400 million through the Business Development Bank of Canada on a cash basis over three years, beginning in 2017–18, for a new Venture Capital Catalyst Initiative that will increase late-stage venture capital available to Canadian entrepreneurs (late-stage venture capital is typically offered to young, established businesses with sales and revenue, in order to help the businesses grow).
With funds leveraged from the private sector, and depending on the proposals received, this investment could inject around $1.5 billion into Canada’s innovation capital market.
Our analysis:
As we traveled the country for our research groups, one comment we heard repeatedly was a lack of Canadian investment by way of venture capital for Canadian companies.
However, there is another side to investment in Canada’s emerging companies, and that is cultural. One participant in our Financial Services roundtable in Toronto talked about the cultural barrier to innovation – that is an adversity to taking risks.
Following our Financial Services roundtable in July 2016, Moffatt wrote in our innovation report, “A concern was raised that Canadian investors and managers may be too risk averse to be full participants in a highly innovative industry. As one participant put it, “[In Canadian MBA programs] there’s not a lot on how to take risk … . In [New York], the mentality of grads out of the U.S. is to take risks. There’s an acceptance that if you do that and fail that’s OK. In Canada, there’s stigma around failure.”
A suggestion was made that foreign investors from countries with higher appetites for risk, such as China, may be able to fill some of the financial (but not necessarily managerial) gaps.
It’s Canada 2020’s hope that the additional $400M outlined in the government’s federal budget will spur investment from other sectors also.
From the 2017 Federal budget:
In recognition of the importance of research excellence and in celebration of Canada’s 150th anniversary, approximately 25 Canada 150 Research Chairs will be created to attract top-tier international scholars and researchers to Canada and enhance Canada’s reputation as a global centre for innovation, science and research excellence. Budget 2017 proposes to invest $117.6 million over eight years for these new chairs, funded with resources within the existing Canada Excellence Research Chairs program.
Our analysis:
As part of their 10 Big Ideas to Drive Innovation in Canada, Moffatt and Rasmussen created the concept of a ‘Canada 150 Goals’ and ‘Canada 150 Prizes.’
They wrote that innovative thinking can solve some of the more difficult social and economic problems the country faces, such as a lack of safe drinking water and substandard housing on First Nations reserves, a persistently large gender wage gap and growing rates of fentanyl and other opioid addiction.
The suggested the use of goals and prizes, which we have adapted from both the XPrize Foundation and the United Nations Millennium Development Goals.
Their Recommendation was that the federal government identify a set of measurable national goals, the Canada 150 Goals. In addition, the federal government should create a set of Canada 150 Prizes, with large cash prizes for projects that will help meet these goals.
From the budget:
As announced in the 2016 Fall Economic Statement, the Government will launch a Global Skills Strategy to facilitate faster access to top global talent for companies doing business in Canada that are committing to bring new skills to Canada and create more Canadian jobs.
The Global Skills Strategy will set an ambitious two-week standard for processing visas and work permits for global talent.
Building on funding announced in the 2016 Fall Economic Statement, Budget 2017 proposes to provide an additional $7.8 million over two years, starting in 2017–18, to implement a new Global Talent Stream under the Temporary Foreign Worker Program, as part of the Global Skills Strategy.
Also under the Global Skills Strategy, the Government will introduce a new work permit exemption for short-duration work terms. The short-duration work permit exemption will apply for work terms of fewer than 30 days in a year—or for brief academic stays—and will be used for short-term, inter-company work exchanges, study exchanges or the entrance of temporary expertise.
Our Analysis:
Participants at our Financial Services roundtable noted the difficulty of bringing in foreign expertise in their sector. Indeed, we were told that if there are talent (or cultural) gaps in the system, immigration might offer an answer.
However, one roundtable participant noted that it takes so long to bring executive-level talent into Canada under the Temporary Foreign Worker Program that a candidate will have typically moved on to other opportunities by the time their application is approved.
Canada 2020 is happy to see that continued improvements have been made to this program, and hopes that it will bring more talent into Canada in the future.
From the budget:
Budget 2017 supports innovation in key growth industries—clean technology, digital and agri-food—with new measures that will improve access to financing, encourage investment, support the demonstration of technologies and build the capacity necessary for Canadians to take advantage of growth opportunities and create good, well-paying jobs.
Budget 2017 includes a particular focus on the clean technology sector, proposing more than $2.2 billion, on a cash basis, to support clean technology research, development, demonstration and adoption as well as to accelerate the growth of clean technology companies. This includes making available nearly $1.4 billion in new financing on a cash basis over three years, starting in 2017–18, through the Business Development Bank of Canada and Export Development Canada.
Our analysis:
Moffatt writes in Canada 2020’s report Towards and Inclusive, Innovative Canada that Canada is one of the world’s leaders in the production and use of renewable energy. In 2012, renewable energy represented 17 per cent of Canada’s total energy supply. This was a dramatic increase from a decade earlier. In addition to supplying Canadians with electricity, renewables play an important role in our trade with the U.S. Several provinces are net exporters of hydro-generated electricity to the U.S.
Members of Canada 2020’s Clean Technology and Renewables roundtable, held in August, 2016 in Vancouver, would likely applaud this financial support, but would probably re-iterate the need to grow companies beyond the initial stages.
One participant at our roundtable felt that government financing programs were quite useful for the ear¬ly stages of product development, but not for obtaining financing for commercialization. He said that “Sustainable Development Technology Canada is terrific for early stage innovation,” and cited government support through the Scientific Research and Experimental Development Tax Incentive, the National Research Council Canada, the Industrial Research Assistance Program, and others.
“There’s a lot of baked-in support before it gets to commercialization. There is help from the public sector to get across the ‘valley of death.’” he said. Then he added, “But when you get to the first market entrant, there is not a lot of debt financing or private capital. These companies are light on assets, so banks won’t lend to them. So companies, even if they do make it across the ‘valley of death,’ do not have the necessary assets or financing to commercialize.”
6. TEACHING KIDS DIGITAL SKILLS AND CODING
From the budget:
To ensure that young Canadians are well prepared for the way digital technologies will impact future jobs all across the labour market, Budget 2017 will invest $50 million over two years to support organizations delivering digital skills training to girls and boys from kindergarten to grade 12.
Our analysis:
In Towards an Inclusive, Innovative Canada, Moffatt and Rasmussen suggest that early education include numeracy, before moving to digital skills and coding. As one of their 10 Big Ideas to Drive Innovation in Canada, Big Idea 7 is to Create a National Numeracy program that introduces numeracy skills in early childhood education.
They quote a 2012 study by the Conference Board of Canada that found that 55 per cent of Canadian adults had inadequate numeracy skills. Also, inadequate numeracy skills are higher in marginalized groups, such as Aboriginal people in Canada and immigrants. A person with inadequate numeracy skills may be unable to function well in an innovative Canada as low numeracy skills are linked to unemployment, low wages and poor health.
Moffatt and Rasmussen write, “Poor numeracy is a massive challenge for Canada’s innovation agenda and our goal of encouraging economically inclusive innovations.
The goal for this big idea is to build on measures proposed and/or put in place by other countries struggling with the same numeracy issues in order to eradicate inadequate numeracy among adults and children, and to create more positive attitudes towards numeracy in Canadian society.”
In June, Canada 2020 launched The Innovation Project, an initiative devoted to studying Canada’s innovation agenda – the risks, the opportunities, and key factors involved in making Canada a more innovative nation.
As part of this project, we asked Mike Moffatt, Senior Associate at Canada 2020 and Director at the Lawrence Centre at Western University’s Ivey Business School and Hannah Rasmussen, Director at Projection North and Professor at Western University’s Brescia College, to consider how to foster innovative growth in Canada.
Moffatt and the Canada 2020 team traveled to eight cities across Canada to hold roundtable discussions with key stakeholders representing sectors ripe for transformation. We are grateful for the thoughtful discussion and time these roundtable participants gave the effort. While the sectors themselves were very different, common themes emerged: talent and immigration, availability of venture capital and Canadians’ adversity to risk.
From their research and these roundtables, Moffatt and Rasmussen developed 10 Big Ideas for Canada. Canada 2020 will be releasing an idea a day on our website leading up to our 3rd Annual Canada 2020 Conference: The Innovation Agenda.
Each idea is thoughtful and detailed, and Canada 2020 hopes they will spur discussion and debate on the topic as we continue to explore innovation in Canada.
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Canada needs innovative thinking to solve some of the more difficult social and economic problems the country faces, such as:
To tackle these problems, we recommend the use of goals and prizes, which we have adapted from both the XPrize Foundation and the United Nations Millennium Development Goals.
Canada has already set some of these goals. Canada’s commitment to reduce greenhouse gas emissions by 30 per cent below 2005 levels by 2030 certainly counts as a measurable national goal,(2) as does the prime minister’s commitment to “end boil-water advisories on First Nations reserves within five years.”(3) Canada’s goals should follow the SMART criteria :(4)
Some of the UN Millennium Development Goals have been criticized for being unachievable or lacking measurability; the Canada 150 Goals must avoid such goals.
The prizes are different from the goals, but they should be related to them. One such example is Canada’s emissions goal, and the NRG COSIA Carbon XPRIZE:(5)
Goal: Reduce greenhouse gas emissions by 30 per cent below 2005 levels by 2030.
Prize: “The $20M NRG COSIA Carbon XPRIZE will challenge the world to reimagine what we can do with CO2 emissions by incentivizing and accelerating the development of technologies that convert CO2 into valuable products. These technologies have the potential to transform how the world approaches CO2 mitigation, and reduce the cost of managing CO2.”
In this way, the prizes assist Canada in achieving the final goals. Canada’s boil-water advisory goal could be matched with a prize for new water-treatment technologies, and the goal of reducing opioid addiction could be matched with a prize for treatment programs that prove to reduce addictions by a measurable amount.
These prizes would encourage investment of time and capital in finding innovative solutions to our goals and would incentivize Canadians to use their skills and imagination to solve some of the more difficult social and economic problems the country faces.
The Minister of Innovation, Science and Economic Development will be responsible for administering the Canada 150 prizes and identifying the formidable problems to be solved.
One of the benefits of using a prize-based approach is that projects are only funded if they are successful, creating an automatic layer of accountability. The federal government must ensure that both the goals and the prizes have measurable criteria.
Regulatory Failure: A common theme that came up repeatedly in our roundtable was that governments were trying to do too much and were spreading innovation dollars around too thinly, rather than focusing on a few areas where it can realistically expect to succeed. There was a consensus that Canadian governments are too afraid to try to “pick winners,” and this aversion leads to a suboptimal use of resources. The Canada 150 Goals and Prizes are designed to “focus the mind” on a few key areas where Canada has the potential to be a world leader. By choosing specific problems to solve, we allow the government, firms and individuals to focus on developing and showcasing specific core competencies.
Risk Aversion: The Canadian government’s approach to risk aversion in the innovation sphere is to try to “de-risk” the space, by transferring risk from firms to governments. While appropriate in some circumstances, this approach does not teach Canadians how to take risks. Attaching large financial prizes to problems rewards risk-takers and creates an environment in which taking chances is more socially acceptable.
Evangelism: Canada currently has the world’s attention thanks, in part, to the international popularity of Prime Minister Justin Trudeau. By choosing specific problems to solve and by having large prizes attached to solving them, the prime minister can use his star power to highlight our innovative clusters to the world and make Canada “the place to be” for innovation.
Inequality of Opportunity: A large segment of Canada’s population is left out of government programs on innovation because they do not know how to navigate a complex regulatory environment. Using prizes that anyone can access opens up government-driven innovation to all Canadians.
Benefits: The approach of goals and prizes forces the government to focus on a few key priority areas. Furthermore, since prizes are only awarded for success, there is little financial risk for the government. If no innovation occurs, no prizes are awarded.
Costs and Risks: As with most, if not all, innovation programs, the government could end up paying for innovations that would have happened without the program. Furthermore, the government may choose the wrong areas as “winning” ones and fail to incent innovation in areas with a greater chance for success.
Economic Inclusion: Since many of the goals will be around assisting vulnerable populations, successful completion of these goals will lead to an improved quality of life, a lower cost of living and higher incomes for those in need.
Autonomy: We would recommend that when choosing the Canada 150 Goals, the government try to have at least one or two that would be autonomy-increasing if successful.
In June, Canada 2020 launched The Innovation Project, an initiative devoted to studying Canada’s innovation agenda – the risks, the opportunities, and key factors involved in making Canada a more innovative nation.
As part of this project, we asked Mike Moffatt, Senior Associate at Canada 2020 and Director at the Lawrence Centre at Western University’s Ivey Business School and Hannah Rasmussen, Director at Projection North and Professor at Western University’s Brescia College, to consider how to foster innovative growth in Canada.
Moffatt and the Canada 2020 team traveled to eight cities across Canada to hold roundtable discussions with key stakeholders representing sectors ripe for transformation. We are grateful for the thoughtful discussion and time these roundtable participants gave the effort. While the sectors themselves were very different, common themes emerged: talent and immigration, availability of venture capital and Canadians’ adversity to risk.
From their research and these roundtables, Moffatt and Rasmussen developed 10 Big Ideas for Canada. Canada 2020 will be releasing an idea a day on our website leading up to our 3rd Annual Canada 2020 Conference: The Innovation Agenda.
Each idea is thoughtful and detailed, and Canada 2020 hopes they will spur discussion and debate on the topic as we continue to explore innovation in Canada.
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Clusters are beneficial because they allow for economies of scale, and access to skilled labour and innovation largely happens in geographic clusters of interrelated companies and institutions. In his 2014 report, Spencer 72 identified 230 separate geographic clusters in 21 different industries in Canada. This included a higher education cluster in Charlottetown that employed 2,066 people in 2011, the aluminum cluster in Saguenay that employed 3,687 people and the food and beverage cluster in London that employed 6,972 people. Firms in these clusters benefit from being in the same geographic region with shared local knowledge and a shared pool of talented workers.
However, there are large information gaps at the local cluster level, as clusters have very different needs and are facing very different challenges regarding innovation. Through the creation of cluster research centres, gaps in the cluster’s ecosystem will be identified, idea sharing will be increased, data will be collected and shared and regulatory failures will be identified.
The deliverables for each cluster research centre would include the following:
The development and ongoing administration of the cluster research centres will be the responsibility of the Minister of Innovation, Science and Economic Development and the universities and colleges where the centres are located. In his 2015 mandate letter to the Minister of Innovation, Science and Economic Development, the prime minister mandated the development of an Innovation Agenda that included expanding effective support for “the emerging national network for business innovation and cluster support.”73
The requirement for a yearly set of deliverables to maintain funding provides accountability. Checks and balances must be put in place by the ministry to ensure the delivered materials are of acceptable quality. These deliverables will be made public to disseminate information and to ensure quality.
The cluster research centres are designed to address, either directly or indirectly, a wide array of market and regulatory failures that can occur in a cluster.
Thin Markets: Cluster markets are thickened by more workers and more firms. The research centres help increase the supply of labour through their recommendations to address skills training gaps,
as well as sharing of best practices to tap into historically excluded sources of labour. More firms can be created through the centres better matching start-ups with sources of capital to obtain funding. Both sides of the market can also be thickened through the advice the centers provide to governments on skills and funding gaps.
Externalities and Knowledge Spillovers: Knowledge spillovers will be created through the meetings assembled by the centre and by increasing “collisions” through the other activities of the centres.
The centres will disseminate best practices and other forms of knowledge that can be adopted by other firms.
Network Externalities and Co-ordination Failures: The cluster research centres create a geographic space for people in the cluster to meet, share ideas and develop new approaches.74
Evangelism Externalities: The cluster research centres act, in part, as a champion for the local cluster and should serve to promote the values of the cluster to other Canadians, enhancing the reputation of the cluster.
Regulatory Failure: One of the responsibilities of the centres is to address regulatory failures by providing regulators and lawmakers more local knowledge of and feedback about the cluster. A common complaint we heard from regulators in our roundtable was this: “We hear from 40 different cluster stakeholders about 40 different issues; we don’t know which problems are the most important.” Cluster research centres can provide “triage” guidance to regulators, so the most pressing priorities are addressed first.
Risk Aversion: One of the tasks of the centre is to provide awards to innovators and other successful risk takers, thereby creating role models and encouraging others to do the same.
Inequality of Opportunity: The cluster research centres will directly reduce inequality of opportunity by looking for bottlenecks that are excluding people from the local market. Additionally, these centres will look for ways promote companies that seek ways to diversify their hiring.
Benefits: These centres will help address skills shortage, and gets universities and the private sector used to working with each other. If these centres create stronger clusters, it not only benefits the workers and companies within the cluster but creates spin-off employment and prosperity in other local industries.
Costs and Risks: There is a financial cost to setting up and running these centres will cost money. Industry Canada recently funded a similar research centre at Western University with $1 million a year for five years. We estimate that each cluster research centre would cost between $500,000 and
$1 million a year to run.
Firms may resist participating in centres or may see them as a way to ensure the government enacts policies and approaches that benefit the industry but not the overall goal of the research centre. There is also the possibility of political interference with the work of the cluster research centres or in choosing which research centres get funded. The centres will need to have a level of independence to ensure this does not happen.
In June, Canada 2020 launched The Innovation Project, an initiative devoted to studying Canada’s innovation agenda – the risks, the opportunities, and key factors involved in making Canada a more innovative nation.
As part of this project, we asked Mike Moffatt, Senior Associate at Canada 2020 and Director at the Lawrence Centre at Western University’s Ivey Business School and Hannah Rasmussen, Director at Projection North and Professor at Western University’s Brescia College, to consider how to foster innovative growth in Canada.
Moffatt and the Canada 2020 team traveled to eight cities across Canada to hold roundtable discussions with key stakeholders representing sectors ripe for transformation. We are grateful for the thoughtful discussion and time these roundtable participants gave the effort. While the sectors themselves were very different, common themes emerged: talent and immigration, availability of venture capital and Canadians’ adversity to risk.
From their research and these roundtables, Moffatt and Rasmussen developed 10 Big Ideas for Canada. Canada 2020 will be releasing an idea a day on our website leading up to our 3rd Annual Canada 2020 Conference: The Innovation Agenda.
Each idea is thoughtful and detailed, and Canada 2020 hopes they will spur discussion and debate on the topic as we continue to explore innovation in Canada.
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In early 2015, the Mowat Centre assembled a roundtable of executives from the emerging information and communications technologies sector in London, Ont., and asked them about their bottlenecks to growth.(1) They identified attraction to and retention of talent in London as their most pressing challenge. Talented technology workers told companies they were reluctant to move to or stay in London for two reasons:
Both of these problems are ones of thin labour markets with only a handful of buyers and sellers. Thin labour markets are often self-perpetuating. A limited number of firms causes talent to migrate out of a centre, preventing new firms from emerging, causing a further erosion of talent from the market.
The “power couple” issue of both individuals having employment opportunities is a particular concern for mid-sized cities. In a seminal 2000 piece, Dora Costa and Matthew Khan examined the migration patterns of college-educated Americans between 1940 and 1990.(2) They found significant “power couple” migration to large centres (defined as cities over two million in population). In 1990, 50 percent of all dually college-educated couples lived in the cities, compared with 32 percent in 1940. Contrast this to the proportion of couples where neither had college educations, which had only modest growth in the period (from 27 percent in 1940 to 34 percent in 1990). Power-couple migration to large cities is not simply due to the college educated (regardless of their relationship status) migrating to larger centres; Costa and Kahn estimate that “coincidental couple concentration suggests that at most 35 percent of the increase in power-couple concentration in large cities is attributable to the growing urbanisation of the college educated.” Ultimately, families matter and drive location choice.
In our view, this leaves Canadian governments with two options:
In our view, the government should take the second approach, while recognizing that “the big three” will continue to grow and have the challenges associated with growth.
In the global war for talent, workers will migrate to areas that give them the most career opportunities. As non-compete agreements limit career opportunities, talent will naturally migrate to jurisdictions that lack such agreements. One example is California, where non-compete clauses are invalid and unenforceable unless they fall under some very specific exemptions,(3) which is oft-cited as a major factor in the success of Silicon Valley’s technology sector.(4) Or as Bijan Sabet, a general partner at Spark Capital told Fortune, “If you’re a graduate of MIT who studied a specialty like robotics and a Massachusetts company says, ‘Come here and sign this non-compete,’ and a San Francisco company says, ‘We know this isn’t your last job — do whatever you want,’ which would you choose?” (5) Peer-reviewed studies back up this phenomenon, with Matt Marx, Jasjit Singh and Lee Fleming finding that “non-compete agreements are responsible for a “brain drain” of knowledge workers out of states that enforce such contracts to states where they are not enforceable. Importantly, this effect is felt most strongly on the margin of workers who are more collaborative and whose work is more impactful.” (6)
A 2016 study by the U.S. Department of the Treasury on the economic impact of non-compete contracts found that “the effect of maximal enforcement of non-compete contracts, relative to minimal enforcement, is five per cent at age 25 and 10 per cent at age 50.” (7) The Treasury study also found that California’s restrictions on the use of non-compete clauses both thickens labour markets and increases innovation through a process of knowledge diffusion. They find that “employee departures impose costs on their firms, but yield benefits for destination firms and act to broadly disseminate improvements in technologies and best practices. Non-compete enforcement can stifle this mobility, there by limiting the process that leads to agglomeration economies.”
While non-compete clauses are often difficult to enforce in Canada (putting us closer to the minimal enforcement end of the spectrum), no province has gone as far as California and simply banned the use in most instances.(8) We would advocate that provinces consider doing so. Explicitly banning non-compete clauses would create less uncertainty of the rights of workers, increase worker mobility and help Canada attract and retain talent. Such a ban would likely lead to higher wages in many industries, so naturally firms will raise concerns about the effect even modestly higher wages will have on their competitiveness. Given that higher wages will lead to attraction and retention of talent in Canada and incent more students into entering innovative fields, we believe it is a price worth paying. Finally, given that we are trying to create economically inclusive innovation, we see higher wages that are driven by market forces as a feature, not a detriment.
An obvious way to address the thin-market problem is through linking mid-sized cities through intercity transit. Consider London, Ont. London’s Census Metropolitan Area (London CMA) has a population of just under 500,000, which includes the city of London, the city of St. Thomas and rural areas and towns around London. The CMA is simply too small to have a significant number of jobs in every occupation, limiting opportunities for couples that work in two different occupations. Furthermore, individuals might be hesitant to take a job in a community with a small number of companies in that same industry. A large number of companies in an industry creates an “option value” for a worker; if they need to leave their job at their existing company, there are plenty of alternatives, which should make it relatively easy to switch companies. However, if there are few local companies in their industry, then workers are “locked in” to their current employer and risk prolonged unemployment should they leave that employer. This potential for “lock in” and unemployment creates significant risk for workers considering taking a position in that community. This problem is particularly acute for ‘power couples,’ where employment options for two people have to be considered.
This thin market problem has a straightforward solution. If it is easy and inexpensive to live in one community but work in other, then the effective population of the community (and its clusters) grows. Consider all of the Census Metropolitan Areas (CMAs) and Census Agglomerations (CAs) of population sizes of 75,000 or more, within 200 kilometers of London, Ont.
|
Community
|
Population
|
|
London CMA
|
474,786
|
|
London CMA + &75K CMA/Cas Less Than 100km aWay
|
1,177,002
|
|
London CMA + &75K CMA/Cas Less Than 150km Away
|
2,143,227
|
|
London CMA + &75K CMA/Cas Less Than 20km Away
|
8,437,721
|
If Londoners can easily, affordably and reliably get to employment opportunities within 100 kilometres of the CMA, the effective size of London’s employment market grows to almost 1.18 million people by adding the Kitchener-Cambridge-Waterloo CMA (population 477,760), the Brantford CMA (135,501) and the Sarnia CA (89,555).(9) Make the radius 150 kilometres, and the market size nearly doubles to 2.14 million by adding the Hamilton CMA (721,053), the Guelph CMA (141,097) and the Chatham-Kent CA (104,075). Finally, a travel radius of 200 kilometres creates an effective market of more than eight million by adding the Toronto CMA (5,583,064), the St. Catharines-Niagara CMA (392,184) and the Windsor CMA (319,246).
Currently, an individual in London who wishes to take a job in one of these communities (or an individual in one of these communities who wishes to take a job in London) can only commute by car unless they have an incredibly flexible work schedule. This time by car is essentially wasted time, where the individual is away from family and cannot work because they are driving. Taking a train or a bus, on the other hand, allows individuals to complete work while they commute. Unfortunately, the earliest a Londoner can arrive at Toronto’s Union Station by train is 8:35 a.m., assuming the train is on schedule. These time limitations makes commuting by train impractical for jobs that involve morning meetings. The situation is worse for commuters taking the opposite trip, as someone living in Toronto cannot arrive in London until 9 a.m. at the earliest. On the return trip, travellers to London or Toronto must leave before 8 p.m., which makes attending dinner meetings difficult.
Increased and more reliable train service, with earlier and later options than currently offered, would significantly help thicken mid-sized markets. Given the challenges these cities are currently experiencing, we recommend this happen as soon as possible. While high-speed rail is a fantastic technology, these cities do not have 15 years or more to be connected to each other, so we recommend enhanced investments in existing transportation technologies happen as soon as possible.
Mid-sized and smaller markets not only have challenges moving people, but also moving data at the speeds necessary for global commerce. These challenges will only be exacerbated with the introduction of 5th Generation (5G) wireless technology. 5G will act as the backbone for everything from the Internet of things (IoT) to driverless cars. However, given large capital costs and the positive network externalities generated by 5G, without smart public policy, the market is likely to under-invest in 5G infrastructure.
Finally, clusters in all-sized markets could be thickened by ensuring that no Canadians are excluded from employment opportunities in clusters due to “socially determined exogenous factors, such
as gender, race or socioeconomic background, beyond an individual’s control.” (10) The first step to addressing barriers to exclusion is having better data so we can determine their root causes. These root causes could include those with the proper skills lacking employment opportunity as well as individuals being unable to obtain the skills they need, which leads us to the following two recommendations:
No new mechanisms are needed, as this idea mostly involves governments doing more of what they already do (transit funding, data collection). Changing rules around non-compete agreements is a one-time activity.
Thin Markets: This proposal is explicitly designed to thicken markets, as the goal is to increase the pool of available workers for hire in fast-growing clusters.
Inequality of Opportunity: This idea increases opportunities for those who get left out of clusters, either due to geography (lack of transit) or because they belong to a traditionally under-represented group.
Benefits: Thicker, more-inclusive clusters create economic wealth and opportunities for all Canadians.
Costs and Risks: Transit is extremely expensive to build, so there is a risk that the benefits do not outweigh the costs. Statistics Canada could have difficulties collecting the needed data because of privacy concerns or budget. Finally, a lack of non-compete agreements could deter companies from supplying worker training.
Economic Inclusion: Allowing people to live farther from work increases their affordable housing options as they are not “forced” to purchase expensive housing if they work in an expensive city. Thickening markets in mid-sized cities will lead to spin-off job creation in those centres, which too often have seen job loss- es through automation and globalization. Finally, a focus on increasing labour market opportunities for excluded groups increases their ability to access good paying jobs.
Autonomy: Increased intercity transit increases autonomy for individuals, as it increases the number of places they can gain employment (or live). It increases their ability to stay with and see a partner who works in a different city. It provides additional opportunities for places to travel to and people to see.
In June, Canada 2020 launched The Innovation Project, an initiative devoted to studying Canada’s innovation agenda – the risks, the opportunities, and key factors involved in making Canada a more innovative nation.
As part of this project, we asked Mike Moffatt, Senior Associate at Canada 2020 and Director at the Lawrence Centre at Western University’s Ivey Business School and Hannah Rasmussen, Director at Projection North and Professor at Western University’s Brescia College, to consider how to foster innovative growth in Canada.
Moffatt and the Canada 2020 team traveled to eight cities across Canada to hold roundtable discussions with key stakeholders representing sectors ripe for transformation. We are grateful for the thoughtful discussion and time these roundtable participants gave the effort. While the sectors themselves were very different, common themes emerged: talent and immigration, availability of venture capital and Canadians’ adversity to risk.
From their research and these roundtables, Moffatt and Rasmussen developed 10 Big Ideas for Canada. Canada 2020 will be releasing an idea a day on our website leading up to our 3rd Annual Canada 2020 Conference.
Each idea is thoughtful and detailed, and Canada 2020 hopes they will spur discussion and debate on the topic as we continue to explore innovation in Canada.
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A common theme that emerged during the roundtables was the importance of access to both research data and government data. Data is a valuable resource for innovation, as long as it is available and easily accessible.
Part 1. Research Data
Canada has a good track record of funding research in the sciences, social sciences and health sciences through granting councils. However, this data is often not stored in a way that means it is protected and shareable among researchers. Without a robust data stewardship program, the data that has already been generated is at risk of being lost, recreated or under-utilized. By storing the data properly, in a comprehensive network of trusted digital data repositories, it will be available to be re-used in a variety of ways, not just by other researchers, but by innovators throughout Canada.
Researchers will not be responsible for the storage of the data. Each university and institute will need to ensure that their researchers have access to a research data management (RDM) program, both the system and policies, to easily and properly store their data.
Universities and institutes may choose to create their own RDM program or use an RDM program already in use at their university or institute. Either way, the data in these programs should be easily accessible to others both inside and outside of the original university or institute.
Universities and institutes will need to be held accountable to ensure that data is properly stored and accessible in these programs.
Part 2. Municipal Data
Canadian cities produce and collect a wide variety of data on aspects of city life such as employment, transit, road accidents and living conditions that are used in their decision-making processes. However, most of this data is only used internally despite the fact that it could be used by innovators (municipal administration, businesses, universities, academies, research facilities and citizens) to create new services, products and businesses.
The ODC will be responsible for:
The aim of the ODC is to make municipal statistical data open, timely, free to use and easily accessible to all.
Part 3. Transparency of Past Government Records
In Budget 2016, the federal government proposed creating “a simple, central website” where Canadians could submit data requests to any government institution or department.(3) While commendable, there is still a missing link. The mandate of Library and Archives Canada (LAC) is to acquire and preserve governmental records of archival value and to make them available to the public. In theory, if a Canadian wanted past documents, he or she could submit a request to LAC.
However, in his 2014 report on LAC, the auditor general found that LAC was not “acquiring all the archival records it should from federal institutions, (4) and that the disposition authorities, “which tell federal institutions which records can be disposed of when no longer needed and which records must be transferred to Library and Archives Canada,” were both incomplete and out of date. Also, LAC had a backlog of 98,000 boxes of government archival records.
While LAC reports that this backlog has been eliminated, it is unclear what records were found and how to access them.
This lack of clarity means that it is possible that if a Canadian submitted a request on the proposed website, they may not get the items requested. If they did get them, they might not be given in a useful format, and they may not be provided promptly.
For the research data proposals, we would recommend the newly created Chief Science Officer be responsible for the idea, given his or her responsibility to ensure “government science is fully available to the public.” The municipal data and transparency of data proposals should fall under the purview of the president of the Treasury Board, as the prime minister mandated he “expand open-data initiatives and make government data available digitally.” (5) It may be prudent, however, to create a board formed from the participating cities to oversee the operation and execution of the ODC.
Universities and institutes will need to be held accountable to ensure that their research data is properly stored and accessible. For municipal data, we would recommend the ODC issue an annual report and measure how Canadian cities are doing regarding opening their data, using measurements of readiness, implementation and impact. Furthermore, Library and Archives Canada (LAC) would need to report regularly on their progress, including measurements of the readiness, implementation and impact of the data being digitized.
Regulatory Failure: We have data that is being collected and has value, but it is not being made available for use, which is preventing knowledge spillovers. By making data more easily available, researchers will have more timely and complete information to build into their research, creating an environment in which new products and processes may be developed more quickly and easily.
Inequality of Opportunity: By not releasing data and making it easily available, we are disproportionately benefiting firms and individuals that have the resources and ability to recreate this data or discover ways to access them. Our proposal levels the playing field to ensure equal opportunity to be innovative.
Benefits: Innovation will be encouraged by releasing research data to innovators as well as to other researchers. Opening up municipal data can help drive the creation of innovative businesses and services that deliver social and commercial value. By making government data open, we can better understand actions the government has taken in the past.
Costs and Risks: There is a risk that Canadian researchers may be resistant to sharing their data. We believe it is important to follow the lead of the United States and make data management and specifically data sharing a requirement of the Tri-Council research grants. There will be a financial cost to universities and colleges, but we believe these can be kept manageable. For the ODC proposal, the main risk is that a system will be built that cities will refuse to join. The financial costs are relatively modest, with the yearly budget for the Helsinki Region Info-share (HRI) Service in Helsinki, Finland, being less than $100,000.(6)
The main risk to our transparency proposal is setting a goal the government cannot meet. In 2014, the auditor general of Canada noted that LAC was behind schedule on retrieving government documents and had a growing backlog of approximately 98,000 boxes of records.(7) There is a potential that LAC will find this goal too onerous and may fall behind schedule again.
Economic Inclusion: By ensuring that research data is available to other researchers and innovators, we can ensure that economic opportunities are not limited because of a lack of data. The availability of this data will be particularly valuable to small businesses that do not have the resources to collect large amounts of data.
Autonomy: Better access to municipal data will give citizens and community groups the tools they need to understand the decisions of local governments better and influence those decisions through evidence-based proposals.
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In June, Canada 2020 launched The Innovation Project, an initiative devoted to studying Canada’s innovation agenda – the risks, the opportunities, and key factors involved in making Canada a more innovative nation.
As part of this project, we asked Mike Moffatt, Senior Associate at Canada 2020 and Director at the Lawrence Centre at Western University’s Ivey Business School and Hannah Rasmussen, Director at Projection North and Professor at Western University’s Brescia College, to consider how to foster innovative growth in Canada.
Moffatt and the Canada 2020 team traveled to eight cities across Canada to hold roundtable discussions with key stakeholders representing sectors ripe for transformation. We are grateful for the thoughtful discussion and time these roundtable participants gave the effort. While the sectors themselves were very different, common themes emerged: talent and immigration, availability of venture capital and Canadians’ adversity to risk.
From their research and these roundtables, Moffatt and Rasmussen developed 10 Big Ideas for Canada. Canada 2020 will be releasing an idea a day on our website leading up to our 3rd Annual Canada 2020 Conference.
Each idea is thoughtful and detailed, and Canada 2020 hopes they will spur discussion and debate on the topic as we continue to explore innovation in Canada.
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Canada’s immigration system is incredibly complex, with more than 60 different programs that admit non-Canadians to the country. A detailed description of each is well beyond the scope of this report, so our recommendations will be at a high level. Our immigration recommendations revolve around one core point: the system as a whole needs to make a larger distinction between tradable and non-tradable sectors of the economy, and focus on bringing in workers with skills valued in tradable sectors.
To explain the idea, we first need to understand what tradable sectors are and, secondly, we need to understand why the distinction matters. To address the first issue, we will use the Australian Bureau of Statistics definition of tradable sectors.
Tradable sector: “A domestically produced good or service is defined as tradable if it is actually traded internationally, or it could be traded at some plausible variation in relative prices — this includes domestically produced goods and services which replace imports in the domestic market.” (1) Illustrating the importance of the distinction between tradable and non-tradable when examining employment dynamics in a local economy is best done through the use of examples from the services industry.
First, consider Saskatoon’s technology sector, specifically companies that program applications or design video games. Because their products are purchased by users all over the world, these companies are competing against companies from Bangalore to Helsinki; their competition is not other companies in Saskatoon. As such, the size of Saskatoon’s tech cluster can grow arbitrarily large because the market is worldwide and the success of one local company does not come at the expense of another. Because the industry can grow arbitrarily large, it can absorb additional workers without any downward pressure on wages, and may even raise wages in the sector as a thicker labour market attracts tech companies to Saskatoon. Furthermore, the success of a local tech company brings in outside capital and creates employment opportunities in other industries. In The New Geography of Jobs(2) economist Enrico Moretti found that one additional job in the tech sector creates five additional jobs in the economy at a variety of different skill levels. Moretti defended the five-to-one ratio in an interview with Stanford’s Kathleen O’Toole:(3)
The way to interpret the multiplier is to imagine dropping 1,000 innovation jobs in one city but not in another, and then going back 10 years later to measure how many additional local service jobs there are in the city that experienced that innovation-sector drop of jobs. So it’s a long-run effect, but it’s not impossible for three reasons.
One is that the average high-tech worker tends to do very, very well, and people who are wealthy tend to spend a large fraction of their salary on personal and local services. They tend to go to restaurants and movies, and to use taxis and therapists and doctors on average more than people who are paid less.
The second reason is high-tech companies themselves employ a lot of local services; everything from security guards to IP lawyers, from the janitor to the very specialized consultant. High-tech companies tend to use more services than manufacturing companies.
The third reason is the clustering effect. Once you attract one of those high-tech workers, then in the medium to long run, you’re going to be attracting even more of those high-tech workers and companies, which will further increase your multiplier. So it’s a long-run number, measured over a 10-year period.
Contrast this with the market for brick-and-mortar drugstore pharmacists in Saskatoon. Pharmacists at brick-and-mortar drugstores provide a non-tradable service, as their customers are local in nature.
While the number of pharmacists in Saskatoon is not fixed, it can only grow so large, as there is a limit to how many pharmacists the local market can reasonably absorb. As such, firms in the market grow and increase revenue more by seizing market share from their competitors than from growing the overall size of the local market. Due to these constraints, a sudden and significant influx of pharmacists to the Saskatoon market would drive down wages and increase unemployment as the local market would not be able to fully absorb the increase due to the non-tradable nature of brick-and-mortar pharmacy services.
Beyond Moretti’s findings, there is empirical evidence to support the wage effects of immigration on tradable and non-tradable sectors. While there is a substantial body of literature showing that, in many cases, higher levels of immigration do not lead to lower wages on average,(4) this does not necessarily mean that the effect of higher levels of immigration is identical across industries. A recent study by the Bank of England found that the impact of immigration differs across industries, and that “the biggest effect is in the semi/unskilled services sector, where a 10 percentage point rise in the proportion of immigrants is associated with a 2 percent reduction in pay.”(5) The fact that these people disproportionately work in non-tradable sectors supports the theory of the differing effect of immigration on employment and wages between the sectors.(6)
Canada requires high levels of immigration to address demographic challenges and ensure that it has the skilled workers necessary to compete globally in tradable sectors. If it brings in too many workers from non-tradable sectors and drives down wages and opportunities in some industries, it risks a public backlash that puts Canada’s immigration goals in jeopardy. We need only look at Brexit and the backlash against “Polish plumbers” to see how antipathy towards immigration is often related to employment in non-tradable sectors.
There are Canadian examples of the immigration system being used to prevent wages from rising in non-tradable sectors. The Temporary Foreign Worker program is a prime example. Through an Access to Information request, the Alberta Federation of Labour found that “between April 25 and December 18, 2012, more than 2,400 ALMO [Accelerated Labour Market Opinion] guest-worker permits — which are supposed to be reserved for highly skilled employment — have been granted to fast-food restaurants, convenience stores and gas stations.”(7) By bringing in these workers, Canada is holding down wage increases to low-income workers. While it is possible that some of these jobs could be uneconomical at higher wages, these are not the type of jobs that create spin-off jobs through increased flows of foreign capital.
In a 2014 Toronto Star editorial,(8) Liberal Leader Justin Trudeau suggested some reforms to the Temporary Foreign Worker Program to deal with the economic effects it has on Canadian workers as well as the possibility of exploitation of guest workers; two of those recommendations continue to have value today.
When implementing policy, one must worry about unintended consequences. One way firms could deal with restrictions on temporary foreign workers is to turn those positions into unpaid internships. These internships are problematic from an equality of opportunity perspective, as the opportunities created can only be obtained by those who can afford to work for free. Because of this, unpaid internships are illegal in Ontario unless a very restrictive set of conditions is met.(9) In some other provinces, regulations are vague about the legality of unpaid internships.(10) This leads us to the following recommendation:
Meanwhile, while fast-food companies and gas stations were able to bring in temporary foreign workers, export-oriented high-growth companies were unable to obtain and retain the workers they needed. Companies that have hired foreign graduates of Canadian schools under the Post Graduation Work Permit Program are seeing these workers deported as companies struggle to navigate a byzantine set of rules.(11) Tech companies in London, Ont., report they have opened offices in the United States since they have found regulatory barriers make it too difficult to bring talent north of the border.(12) Other companies at our tech roundtable held this past summer have moved operations outside of Canada, and taken Canadian workers with them, to be able to access the talent they need. The tax revenue these companies generate and the spin-off jobs they create could be going to Ontario but are instead going to California, simply for regulatory reasons. This needs to stop.
By focusing our immigration system on tradable sectors and away from non-tradable sectors, we can attract and retain talent in Canada, increase the competitiveness of our export industries and increase wages and job opportunities for Canadians.
Although our focus to this point has been on wages, reforming our immigration system with a focus on tradable sectors creates an environment for innovation, as described by the Expert Panel on Business Innovation in 2009:
Canada’s domestic market is relatively small and geographically fragmented. Small markets are less conducive to innovation than large markets (like the United States) because
i. they offer lower potential reward for undertaking the risk of innovation, and
ii. they tend to attract fewer competitors and thus provide less incentive for a business to innovate in order to survive. (The Canadian domestic market is relatively “cushioned” and pre-tax business profitability, as a percentage of GDP, has exceeded that of the United States in most years since 1961.)
The innovation success of countries like Finland and Sweden shows, on the other hand, that the disadvantage of a small domestic market can be offset by a strong orientation toward innovation-intensive exports.(13)
Canadians need higher wages and more opportunities and Canada needs to be more innovative. Through restructuring Canadian immigration programs, we can simultaneously accomplish both.
Immigration is a federal responsibility, with the exception of Provincial Nominee Programs and the Canada-Quebec accord. Immigration falls under the jurisdiction of Immigration, Refugees and Citizenship Canada with some exceptions, such as the Temporary Foreign Worker Program, which is jointly administered by Immigration, Refugees and Citizenship Canada and Employment and Social Development Canada.
Beyond the recommendations given earlier on accountability measures that should be put in place for the Temporary Foreign Worker Program, we recommend the following:
Thin Markets: A shortage of skilled workers limits the growth of innovative companies in fast-growing clusters such as the Kitchener-Waterloo tech sector. The complexity of regulations along with processing times cause issues for companies, a point Immigration Minister John McCallum recognized in a Globe and Mail interview when he stated: “Tech firms’ idea of a quick immigration processing time is more like six days rather than six months … for us six days would be a stretch… but at the same time … we want to open our doors to the best and the brightest … so, obviously, I will be working very hard to try to accommodate their needs as best I can.”(14)
These problems hit clusters in small and mid-sized cities particularly hard, as they do not have large local networks of immigration lawyers and experts from which to draw experience. One advantage that clusters in mid-sized Canadian cities should have is the significant number of international students that study in their colleges and universities. However, companies report that it is difficult to retain these individuals after the expiry of their Post-Graduation Work Permits.(15)
Inequality of Opportunity: The poor design of some immigration programs, most notably the Temporary Foreign Worker Program, prevents wages from rising in non-tradable sectors and limits job opportunities for low-income Canadians. Well-designed immigration reforms will disproportionately benefit workers who are the most marginally attached to the labour force.
Benefits: A successful reform of Canada’s immigration systems to focus on tradable sectors has three big benefits:
Costs and Risks: If the plan works as intended, wages should increase in the non-tradable sector. Of course, this also likely means that the price of goods and services will rise accordingly. Furthermore, it could cause skills shortages in certain non-tradable sectors.
The largest issue is that this plan could fail or have unintended consequences for a variety of different reasons. Changes to immigration policies are tricky, and there is no guarantee that governments get it right. The biggest potential roadblock is that the plan requires governments to be able to distinguish between job types that are largely in the tradable sector and those that are not.
Economic Inclusion: By refocusing our immigration policies to tradable sectors, we can ensure that government policies are not reducing wages and limiting economic opportunities for Canadians. Furthermore, due to the positive employment spillovers created by high-skilled immigrants in tradable sectors, wages and employment opportunities are increased for everyone from lawyers to barbers to construction workers. Our immigration system should have as an explicitly stated core goal of increasing wages and job opportunities for Canadians.
Autonomy: At first glance, there appears to be little relationship between the proposed immigration changes and the level of personal autonomy for Canadians. However, a booming tradables sector creates job opportunities and business opportunities for current Canadians in non-tradable sectors. These opportunities could be amplified with enhanced non-tradable sector skills training for individuals that are unemployed or out of the labour force.
In June, Canada 2020 launched The Innovation Project, an initiative devoted to studying Canada’s innovation agenda – the risks, the opportunities, and key factors involved in making Canada a more innovative nation.
As part of this project, we asked Mike Moffatt, Senior Associate at Canada 2020 and Director at the Lawrence Centre at Western University’s Ivey Business School and Hannah Rasmussen, Director at Projection North and Professor at Western University’s Brescia College, to consider how to foster innovative growth in Canada.
Moffatt and the Canada 2020 team traveled to eight cities across Canada to hold roundtable discussions with key stakeholders representing sectors ripe for transformation. We are grateful for the thoughtful discussion and time these roundtable participants gave the effort. While the sectors themselves were very different, common themes emerged: talent and immigration, availability of venture capital and Canadians’ adversity to risk.
From their research and these roundtables, Moffatt and Rasmussen developed 10 Big Ideas for Canada. Canada 2020 will be releasing an idea a day on our website leading up to our 3rd Annual Canada 2020 Conference.
Each idea is thoughtful and detailed, and Canada 2020 hopes they will spur discussion and debate on the topic as we continue to explore innovation in Canada.
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One of the most common issues we heard in our roundtables was the lack of coherence in many areas of government policy, particularly in the area of funding programs. Policy coherence, as defined by the OECD is the “systematic promotion of mutually reinforcing policy actions across government departments and agencies creating synergies towards achieving the agreed objectives.”(1) Policy incoherence can be the result of a lack of communication between departments or a result of conflicting priorities and objectives.(2) It often results in well-meaning policies either conflicting or being unnecessarily confusing.
The Parliamentary Coherence Office and Officer will work to highlight regulatory failures in which different policies contradict each other. For example, policies that create agricultural subsidies on ingredients that are used to make junk food may be in conflict with health policies that encourage consumers to lower their intake of that same junk food. Not only do these contradictory policies confuse Canadians, they also have a long-term economic impact.
The New York Times reported on a similar policy conflict in the United States and noted, “the subsidies damage our country’s health and increase the medical costs that will ultimately need to be paid to treat the effects of the obesity epidemic.”(3)
Similarly, in its report on policy and nutrition, the United Nations System Standing Committee on Nutrition noted the need for coherence within policies to ensure trade policy is supportive of a country’s nutritional objectives and stated:
“The degree of coherence and/or incoherence between trade policy and nutrition action depends
on a wide range of factors, including the forms of malnutrition and the foods affected; the
characteristics of sub-populations and food systems in countries; and the trade reforms and
existing policy and institutions in place in countries and trading partners.”(4)
Another example is the standardization of the way the date is recorded. Different Canadian governmental agencies write the date in different ways (dd/mm/yyyy; mm/dd/yyyy; yyyy/mm/dd), which increases the chances that individuals fill out forms incorrectly. This lack of standardization is also an issue outside of Canada.
The National Post reported in 2011 that “a U.S. customs form requests the day first, and its military abides by the same but spells out the abbreviation for the month — but its civilian population has agreed to write the month first.”(5)
A final example of this need for policy coherence is the policies that create subsidies for the fossil fuel industry. CBC News reported in 2015 that Canada has policies in place to both subsidize fossil fuel industries and to end the use of fossil fuels.(6)
By identifying these regulatory failures, this office can start the process of prioritizing, co-ordinating and implementing efforts in policy coherence.
Given that the “alphabet soup” of funding programs with “overlapping mandates” was frequently cited as an issue at our roundtable discussions, we would recommend innovation policy coherence be among the first issues studied by the OPCO.
The position of Parliamentary Budget Officer was created by the federal government as part of the Federal Accountability Act (2006).(7) The creation of an Office of the Parliamentary Coherence Officer would follow a similar process.
The accountability and measurement mechanisms put in place for the Parliamentary Budget Office can be reused in the creation of the Parliamentary Coherence Office.
Regulatory Failure: From an innovation perspective, the overarching goal of policy coherence is to ensure that policy objectives avoid negative consequences which would affect innovation.
Market Power: Unnecessarily complex regulatory environments create both barriers to entry for new firms as well as barriers to growth, as described by the Canadian Chamber of Commerce:(8)
“I deal with enough policy hassles overseas. Why does Canada’s policy environment have to be so complicated?”
SME(9) manufacturers in Canada often struggle to understand and comply with the underpinning details, incentives, steps and variances among the myriad of policy frameworks in which they operate. As a result, the cumulative impacts and costs of government policies can be barriers to innovation, just as thickening borders between countries — a common complaint of manufacturers — is a barrier to exporting.(10)
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Benefits: There are two main ways that increasing coherence will help increase Canadian innovation. First, by identifying conflicting policy objectives we can start the process of addressing these conflicts and reducing the costs associated with the resulting confusion. Second, policy coherence can exploit the potential for positive spillovers and consequences by addressing potential policy synergies across all levels of government.(11)
Costs and Risks: This position and office are modelled on the PBO and OPBO. The operating budget for the PBO and OPBO was $2.8 million for the 2014-15 fiscal year.(12)
There is a risk that the government ignores the work of the OPCO. The European Centre for Development Policy Management investigated the Policy Coherence for Development (PCD) work and found that there is a lack of political support for the work of PCD despite agreement on the importance of the initiatives. As a result, departments responsible for PCD throughout Europe are under-resourced and isolated.(13)
Another risk will be the potential for government interference in the work of the OPCO. Learning from the experiences of the OPBO, the OPCO will remain independent by not reporting to a cabinet minister. By ensuring the office is funded and by making the office non-partisan, these risks can be avoided as much as possible.
Economic Inclusion: A lack of policy coherence often results in unnecessarily complicated systems that exclude people from participating. This lack of coherence harms small businesses that do not have the resources to navigate incoherent policy environments particularly. The federal government(14) found that “regulatory costs and their impact fall disproportionately on small businesses, as these businesses have fewer resources to devote to compliance.
Stated another way, the fixed costs of regulatory compliance for larger firms can be spread over a larger employee and revenue base.” It calculated in 2011 that the regulatory burden for firms of between one and four employees was $1,029 per employee, whereas for firms with 100 to 499 employees the per-employee regulatory burden was $149.
Autonomy: Confusing regulations due to a lack of policy coherence may deter individuals from starting businesses, though we are not aware of any studies that have examined this issue. To ensure that economic inclusion and autonomy are priorities for government policy, we would recommend that within the OPCO mandate there be a requirement to consider both economic inclusion and autonomy when analyzing government policies.
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