Calgary’s growing tech sector has been held up as a way for the city to shift from an energy industry that has been stuck in a downturn for years, but deep funding cuts from the provincial government have put that sentiment in doubt.
The city and its economic development agency have been trying to attract new tech companies and the jobs that come with them, as a means of diversifying Calgary’s economy. The oil sector has shed tens of thousands of jobs in the wake of a price crash five years ago.
Those efforts have been hampered by a lack of higher-end skilled talent, lower salaries and preconceptions that Calgary is cold and remote. As well, even the best-trained oil-patch workers don’t necessarily have the skills needed to quickly transition into the tech sector.
Lucrative incentives from the provincial government have helped offset those concerns, with the opening of new game studios and other tech startups routinely highlighted as proof that the strategy is working.
However, last week’s budget cancelled most of those programs across the province in favour of a corporate tax cut that tech companies say they have no way to take advantage of. New companies to the city say they chose Calgary because of those government supports, as well as an affordable lifestyle.
“It was a bitter pill for me to swallow,” said Keith Warner, whose video-game studio, New World North, opened earlier this year and now employs 26 people, with other positions still unfilled.
“I’ll be honest, I was pretty upset.”
Mr. Warner said he set up shop in Calgary over Toronto after being enticed by the province’s tax incentives, as well as the affordable housing market and proximity to his company’s headquarters in Colorado. Now, none of the provincial funding is available.
The budget, which was the first for Premier Jason Kenney’s United Conservative government, outlined more than $1-billion in cuts over the coming years, including the cancellation of a number of incentives for tech and other industries.
Those cuts included the elimination of the Alberta Investor and Interactive Digital Media credits – those incentives gave a 30-per-cent tax credit for investors that provided equity capital to small Alberta businesses and up to a 30-per-cent refundable credit for labour costs, respectively. The government also cancelled three other business tax credits.
Instead, the province says it is focusing on a reduced corporate income tax of 8 per cent over four years, down from 12 – something of little use to tech startups that may go several years without making a profit.
“During that time that you’re losing money, as you’re trying to build your company, then a corporate tax break means nothing,” said entrepreneur Greg Hart, who founded Thin Air Games along with Mr. Warner.
Alberta now lags behind other provinces in providing incentives to investors or startups. A majority of provinces have some form of tax credit or fund, such as the 45 per cent Saskatchewan Technology Startup Incentive or the $200,000 New Brunswick Startup Investment Fund.
Mr. Warner and Mr. Hart said Thin Air Games was almost derailed this week as investors threatened to pull out amid the incentive cuts.
Mr. Hart said the provincial funding is important for a burgeoning tech sector looking to allay investors’ concerns about potential risks. He said it could take 10 to 15 years for a sector to mature to the point where it can attract investment on its own.
“When you’re trying to shift things, you need to signal what it is that you want to have happen,” he said.
Still, Mr. Hart said Thin Air Games will press ahead with plans to bring 10 fledgling game studios to the city and fund them for two years. He acknowledges that the project will be delayed as the company seeks other investments.
“We have a powerful ecosystem growing,” Mr. Hart said.
Since 2006, the number of people employed in tech jobs has increased from just shy of 50,000 to close to 63,000 a decade later, according to a 2019 Brookfield Institute report. That equates to 7.9 per cent of the city’s work force, a percentage second only to Ottawa’s at 9.8 per cent.
The provincial government has defended the cancellation of the tech incentives, saying it prefers to focus on the broader economy through corporate tax cuts and other policies. Economic Trade Minister Tanya Fir said in a statement that the government is also developing policies to better attract foreign investment and is open to working with the video-game and tech industries about how that could help.
As the province pulls back its support for tech companies, the Calgary Economic Development (CED) agency is launching a $4-million advertising campaign to attract more tech workers to the city, with promises of numerous outdoor activities and affordable living. The agency says there are 2,000 vacancies in the sector, a figure taken from averaging snapshots of job listings from websites such as Indeed.
CED president Mary Moran says that Calgary’s strengths are in the application of technology to existing industries, such as energy and agriculture, rather than being a stand-alone sector.
“What we’re not is a pure high-tech place in Calgary," she said. "We’re not like Waterloo or some of the things that you see in Toronto or Ottawa. It’s rare for us to create companies like Shopify.”
There is also hope that a rising tech sector could compensate for layoffs in the energy industry, which contributed to Calgary’s high unemployment rate of 7.1 per cent in September. Ms. Moran said she believes skilled energy workers can easily transition to tech jobs, making reference to white-collar professions such as engineering.
Mr. Warner, the president of New World North, said the pool of unemployed workers in Calgary hasn’t made it easier for his company to find the right people.
“Sadly, the higher-end skilled talent does not exist here and so that’s caused a strain on my recruitment.”
He added that the workers he and others in the sector need aren’t necessarily interested in relocating to Alberta’s largest city. They see Calgary as cold, remote and lacking a community, although he quickly adds that he believes those thoughts are unjustified.
Another challenge is the higher-than-average salaries in the energy sector, which deter the transition to other professions, according to a 2018 Communications Technology Council report. The report quotes workers who are used to earning $150,000 being offered half that for a junior developer role.
Mr. Hart, of Thin Air Games, said more university training isn’t the answer to that dearth of talent. Formal schooling might teach programming languages, but it doesn’t create the repertoire of technical skills and the mindset needed in a fast-evolving tech industry. He aims to build those skills through his education organization, EvolveU.
He’s also concerned that the province is trying to reignite an energy industry with a finite timeline rather than putting resources into a tech sector that will continue to grow.
“We can’t afford not to become at some level a significant player in [tech], or else we become irrelevant and that’s dangerous,” he said.
“And I don’t think there are enough people that fully appreciate that.”
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