New threats to an old problem: The pandemic has made ‘brain drain’ even worse

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Like every CEO, Adam Froman, who leads Delvinia Holdings Inc., a research technology firm based in Toronto, got used to bracing for the unexpected in 2020.

But with much of the world locked down and unemployment rates at double-digit levels, it never occurred to him that he’d have to worry about poachers from international technology companies coming for his most talented staff.

Yet that’s what happened. In a new world that saw physical borders close and virtual ones open, highly skilled software engineers, data scientists, and coders didn’t have to go through the onerous process of getting a U.S. employment visa to work in Silicon Valley. Instead, when bedrooms became the new boardrooms, they could stay where they were, while getting a raise of about 30 per cent.

It was a new twist on an old problem. “Brain drain” has long been a challenge for Canadian technology firms, which struggle against the gravitational pull of Silicon Valley, Boston and other U.S. hotbeds for cutting edge research. Froman was forced to contend with a minor exodus of staff just as demand for his own services was taking off. He said many of his peers were dealing with the same issue.

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“People started having a choice at the end of the year, after they’d been in their homes for eight, 10 months working, saying, ‘What do I want to do with my life?’” Froman said in an interview.

For many, this has meant life changes — buying a house or getting a pandemic puppy. For others, though, it’s meant they’ve re-evaluated their work life.

Canada can ill afford raids on its precious reserve of highly educated specialists.

The pandemic has accelerated the shift to a digital economy in which success will be determined by scientists and coders more so than hard assets such as oil and precious metals. Employment in professional, scientific, and technical services was 1.5 per cent higher in February than a year earlier, even as overall employment remained about seven per cent lower, according to Statistics Canada’s latest survey of company payrolls.

Demand for such workers is beginning to test supply. Fourteen per cent of respondents to the Bank of Canada’s latest quarterly Business Outlook Survey said they would have “significant difficulty” meeting an unexpected increase in demand, among the highest levels on record. The central bank said “many” firms reported difficulty attracting workers at current wages or that their staffs are maxed out, and that employers in the skilled trades and information technology were the most likely to report strain. “Many firms expect these constraints to persist.” the report said.

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Brain drain has plagued Canada’s tech sector for decades, even to the extent that government enacted immigration policy as early as the 1980s to combat the exodus of bright minds drawn to heftier salaries in the United States.

In recent years, Canada has been able to more than offset the loss of homegrown talent by making it easier for the best and brightest from the rest of the world to work here. As former president Donald Trump made it more difficult to get a U.S. work visa, Prime Minister Justin Trudeau’s government introduced a program that allowed technology workers to obtain a Canadian visa in a matter of weeks.

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Before the pandemic struck, immigration accounted for more than 85 per cent of population growth in 2019, according to government data. The country issued more than 400,000 temporary work permits and admitted more than 340,000 permanent residents, with a majority of them being economic immigrants.

But with Trump gone, Canada’s advantage could suffer. President Joe Biden already has started to unwind some of Trump’s immigration measures. The shift to a work-from-home culture adds another layer of difficulty for Canadian recruiters: why sign on with a company in a cold country such as Canada when you can work from wherever you want at a higher salary?

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“Canadian tech companies will have to compete harder to hire STEM workers from abroad,” said Brendon Bernard, senior economist at employment website Indeed Canada.

The lockdowns were a shock to how a lot of technology companies did their work.

At Delvinia, the culture was enhanced by regular coffee breaks and constant bantering between workstations. But with everyone at home, exchanges had to be scheduled. Froman watched as his employees fell into a pattern of keeping their heads down and merely coding away. An element of creativity and collaboration was lost. With much of the fun gone, offers of higher salaries from companies in the U.S. and Europe became more tempting. Froman was able to hire 35 new people as his orderbook filled up at the end of 2020, but he lost about 20 people, half of them accepting offers for remote work mainly in the United States and some in the United Kingdom.

Canadian tech companies will have to compete harder to hire STEM workers from abroad

Brendon Bernard, senior economist, Indeed Canada

While anecdotal and survey-based evidence of a talent shortage is widespread, not everyone buys it.

Abdullah Snobar, executive director at Toronto-based DMZ, a startup incubator, said Canadian tech firms tend to resist paying higher wages, even though they aspire to be global players. A 2017 study by researchers at Brock University and the University of Toronto, found that even in tech co-op placements, Canadian firms offered students an hourly rate of $20 while American firms paid US$50-an-hour.

Some also question whether an industry dominated by white men suffers from blindspots. Carolyn Levy, the Canada president of technologies at Randstad Interim Inc., the Dutch consulting firm, said women have a high turnover rate at tech companies because they often are paid less than their male peers and because they struggle with macho office cultures. Snobar reckons there are “thousands to hundreds of thousands” of Black youth across the country who “could be the next big thing,” but rampant unconscious bias in the industry holds them back.

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“I never liked the fact that people say we have a talent shortage, because to me, that’s bullcrap,” said Snobar.

The pandemic could prompt technology companies to adapt. Levy said the imperative of staffing up to keep pace with backlogs could force recruiters to look outside their existing networks for talent, which could open doors for marginalized groups.

Froman, who spent months fretting over the threats foreign companies posed to his business, eventually realized he could learn from them. Delvinia now approaches remote work as an opportunity to recruit Canadians in markets outside of Toronto. Froman prefers to have his team in one place, but after a year of working from home, he concedes that managing a scattered workforce is preferable to turning away new orders.

Still, Froman is also betting that technologists will start to miss the office. That will leave him with something to offer to Canada-based talent that foreigners can’t: a cure for loneliness.

“I’m betting on the fact that when people start socializing, we’ll want to be together.” And that’s going to be hard when a set of your employees are abroad, he added.

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In all of this, though, some see a benefit for the future. Chris Albinson, a Canadian venture capitalist who spent the better part of two decades in the Valley, doesn’t see the phenomenon of virtual brain drain as necessarily bad. He’s also the incoming CEO of Communitech, a leading Waterloo incubator.

“The way I look at it is the flow of people, ideas and capital are really critical to you having global success,” said Albinson. “If Satya Nadella (the Microsoft CEO) wants to come in and hire 1,000 Canadian engineers and train them on everything about what’s awesome about the cloud, so that they can go do their next startup in Saskatoon or in Regina, that’s awesome.”

Financial Post

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