Toronto’s recipe for prosperity: More graduates – and more paths to good jobs

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Toronto's lagging productivity and innovation are well documented sore spots. But where remedies have focused mostly on investing in research and equipment, a new report sounds a different warning: The city's talent pool may not be deep enough to make a move up the global ranks.

Though Torontonians are a well-educated bunch compared with other world cities, hidden weaknesses are holding it back from maximizing its potential, says the Toronto Region Board of Trade's 2013 Scorecard on Prosperity. Among a dozen North American cities, Toronto's adults are second only to Calgary in the number of post-secondary credentials they hold, but Toronto has relatively few bachelor's and advanced degrees. Boosting more people into higher learning "will improve the economic performance of the region," the Scorecard argues, noting there is "no room for complacency."

The report points to three cities – San Francisco, Boston and Seattle – that lead North American in productivity and innovation, and also in the number of adults with a bachelor's or higher degree. In Toronto, 39 per cent of adults went no further than high school, while less than a third have a bachelor's or better. The call for more higher learning echoes the provincial government's goal of having 70 per cent of adults with some postsecondary education by 2020, anticipating a new generation of jobs that will require them.

Yet as the current national debate over a perceived skills gap shows, ramping up the population's education levels without building pathways and supports that connect them to careers could backfire, leading to underemployment and driving frustrated graduates to move away.

"Just producing [graduates] in any old thing at any given time doesn't necessarily help. You just set up a queuing problem then," said Don Drummond, a fellow at Queen's University and former chief economist at Toronto-Dominion Bank. "There are a whole range of operations where Toronto could become the world's centre, (and) do not presently have the human capital to do it, but that's not the impediment that has prevented that from happening."

The drive for more degrees

In many ways, Toronto's human capital is strong – problems with transportation, commercializing research, and weak venture capital are all bigger drags on the city's productivity, says Carol Wilding, the Board of Trade's president and chief executive. But "the talent is really what brings [innovation infrastructure] to life," she adds.

The city's apparent deficit in degrees is partly generational. Almost 40 per cent of Torontonians age 25-44 have at least a bachelor's degree, but only 20 per cent of its adults age 55 to 64 do. The country's boom in higher education enrolment is relatively recent, and Canada has more older workers with less education, says McMaster University economist Arthur Sweetman.

"But for the people newly entering the labour market, the reverse is true," he said. "[Canada is] moving up faster than other countries."

Still, Toronto struggles to match its younger generations with the right jobs.

In 2012, its comprehensive unemployment rate, which includes involuntary part-time workers and discouraged searchers, was 25.3 per cent for 15-to-24-year-olds, and 11.2 per cent for those age 25 to 34, according to Statistics Canada. Both figures are higher than in Vancouver, Calgary, Montreal or Halifax, and well above the national average.

Networking talent

With so many people already underemployed, it is far from clear where a new wave of talent would fit. The government funding infusions that drove a postsecondary enrolment boom for the last decade are drying up quickly, and education leaders increasingly acknowledge that simply flooding the job market with graduates without helping steer them to opportunities is no recipe for success.

"I don't believe in just saying that more degrees equals more productivity," said Robert Luke, assistant vice-president of research and innovation at George Brown College. "Education must be linked to the economy, right?"

Partnerships that link colleges or universities with industry to do research and development can build early bridges. The experience "socializes" students in a city and industry even before they finish school, Dr. Luke argues.

Noe T. Galeana, who came from Mexico to study in Canada in 2009, found full-time work with Clear Blue Technologies, the same Toronto-based green technology startup he did research for while he was a student in George Brown's electromechanical engineering technician program. A professor at the college recommended the recently graduated Mr. Galeana for an open job at Clear Blue, where he's now involved in steering prototypes to market.

"I'm gaining great experience," said Mr. Galeana, who feels he would likely "have been in a factory line, fixing some machines and probably bored of it" if he hadn't been connected to Clear Blue.

Yet for all the educated people Toronto produces, a substantial number slip away. About 30 per cent of the University of Toronto's 511,000 alumni have left the Toronto area, and nearly 9 per cent live outside Canada, half of them in the U.S. According to a survey of Canadians who graduated in 2005, 2 per cent of those with master's degrees and 12 per cent with PhDs were living in the United States two years later.

Faraz Siddiqui, 28, is one of the latest to leave Toronto. A U of T graduate with a master's degree in public health from John's Hopkins University in Baltimore, he has worked with Palestinian refugees in Lebanon for the United Nations and interned doing health research at Georgetown University's law school. Earlier this week, he boarded a bus to Baltimore, where he was offered a full-time, public-health job with the city.

"I interviewed [in Toronto], I would like to stay, but it seems like the competition is so [fierce]," Mr. Siddiqui said. Tapping his Toronto network to find opportunities "didn't pan out" – rather, it was a Baltimore contact who gave him the "little nudge" he needed to land work down south.

Clusters as magnets

Many people still think talk of growing Toronto's degree-holding class is putting the cart before the horse.

"If you're hiring someone with a BA or a master's degree or a PhD, they need to have the plant and equipment, they need the computers to make them productive. And it's not clear that Canadian firms are investing," Dr. Sweetman said. That's where industry clusters might help steer the way. Boston's booming productivity revolves around an education cluster with a vast number of universities, colleges and R&D enterprises that helped nurture a concentration of innovative business, information and medical technology ventures paying wages well ahead of U.S. averages.

Closer to home, Mr. Drummond suggests it is entirely reasonable to suggest "Toronto should be the world centre for the study and practice of financial sector risk," or a number of other finance niches, but is missing the collective vision to make it a reality. "There's a lack of confidence, as usual, in Canada, there's a lack of ambition," he said. "And yeah, there would be, then, a lack of skilled talent to fill that. But having 10,000 people with PhDs in financial sector risk walking around Bay Street is not going to do an awful lot on its own."

The immigration factor

Out of 24 major world cities, from London to New York, Paris to Tokyo, Toronto's population has the highest proportion of immigrants – 46 per cent of residents are foreign born. But not enough new arrivals are highly skilled, and those that are tend to be underappreciated, according to the 2013 Scorecard on Prosperity.

Among Toronto's new immigrant population, 55 per cent have a university degree, good for just seventh place among a dozen North American cities, and behind Calgary, Vancouver, Montreal and Halifax. Making matters worse, Toronto fails to maximize its new immigrants' skills, with 40 per cent making "a downward shift in their career" when they arrive. The cost to Toronto's economy is between $1.5-billion and $2-billion each year, the report says. At the same time, Canada is accepting near-record levels of temporary foreign workers for jobs that employers say they cannot fill with local talent, with much of the growth in lower-skill jobs.

"When you have that kind of competition at the bottom of a wage pool, it actually has a downward effect on wages just above it," said Armine Yalnizyan, senior economist at the Canadian Centre for Policy Alternatives. "So it will affect those economic immigrants."