Victor Dodig is the president and chief executive officer of CIBC.
Canadians can be proud of our place in the world. We are a leader in quality of life and we can point to a solid record of economic growth.
We owe this strong and stable position largely to three traditional pillars of our economy. Natural resources are our competitive advantage – though one we are putting at risk unless we find ways to build the vital links needed to get our energy (both renewable and non-renewable) to more markets globally. In financial services, including banking, insurance and related industries, we are proven international leaders. And in terms of hard assets, including infrastructure and real estate, Canada punches above its weight in part because of our pension funds and asset managers.
But we must recognize that our place in the world is not guaranteed amid an unprecedented shift toward an economy based on intangibles. When it comes to this fourth pillar – the market for services and intangibles such as technology, artificial intelligence, consulting and design – we must do more.
Unlike natural resources, Canada has no built-in advantage in the services economy. The playing field is much more level. To compete, we need more skilled immigration, new ways of looking at education coupled with the creative means of supporting lifelong learning through incentives and tax changes to help keep entrepreneurial companies here.
According to the recent report from the Public Policy Forum, A New North Star – Canadian Competitiveness in an Intangibles Economy, in 1985 only 32 per cent of the value of the S&P 500 was in intangible assets. Today, it’s 91 per cent – meaning what investors value most are not hard assets, but ideas and intellectual property.
Despite this clear shift toward the services economy and our enviable record as a good trading partner globally, only 17 per cent of Canada’s exports are in services. That’s well below other developed economies such as the U.S. and Britain.
This is not a road to success. Getting on the right path requires more intellectual capital and more financial capital.
Intellectual capital is all about our strengths and skills as people.
The Canadian Federation of Independent Business’s most recent survey found that 430,000 jobs had been left unfilled for four months or longer. And by 2021, in the high-tech sector alone, as many as 220,000 high-skilled jobs will need to be filled. When jobs go unfilled, it’s a lost opportunity for companies – and for Canada – that serves as a de facto cap on GDP growth.
Immigration can help close this gap. Contrary to the view that this might threaten Canadian jobs, it does the opposite. By closing this skilled-job gap, we build stronger Canadian companies and keep employers here, building their global businesses on Canadian soil.
We also need more focused education outcomes for those already in the Canadian work force. We are a well-educated country, but half of our university graduates earn an income below the median. That signals a disconnect between the skills of graduates and those that are in demand.
We should develop more programs that give students the hands-on skills needed to help Canada compete as a leader for services jobs globally. Often, those programs are at colleges. We also need to forget the notion that somehow college is not as valuable as university. Both are valuable as part of the more flexible careers that will define our future economy.
In addition, we must shift our mindset toward lifelong learning and help Canadians fund continued education. Empowering Canadians to acquire the skills needed throughout their careers enables people to provide for their families over a lifetime, and helps our country prosper. For that reason, funds invested in RESPs should be made available to Canadians not just to pay for their kids’ education, but to educate themselves anytime they need to retrain.
Beyond intellectual capital, we also need sufficient financial capital for Canadian companies to start here and scale here.
Too many Canadian companies can’t access the capital they need to fuel the next phase of their growth in our country, so they sell – often to buyers outside our borders. We need more tax incentives for these companies to list here, without paying capital gains tax that serves as a disincentive to growth.
These measures are important because growth won’t come from more hiring at 40,000-person companies. It will come from vibrant, expanding 1,000- and 2,000-person companies that need employees with in-demand skills.
Financial capital can help fund their growth; intellectual capital can help power it.
We are incredibly fortunate as a country. We’re rich in resources, with a strong and stable financial services sector, and the infrastructure and hard assets that can attract investment if we manage them well. However, we can’t rest. We need to ensure we do what is required to protect those three pillars, including building links for our energy to reach more markets, while bolstering a fourth pillar – in the new economy for services – to maintain our way of life and prosper in the future.
The time is now to invest in the new forms of capital needed to make this Canada’s century.