FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Friday, June 12, 1998

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call this meeting to order and welcome everyone here this morning. As you know, as the order of the day, pursuant to Standing Order 108(2), the committee resumes its pre-budget consultation process.

This morning we have the pleasure to have with us representatives from the Natural Sciences and Engineering Research Council of Canada, the Canadian Advanced Technology Alliance, IBM Canada, and Nortel.

We will begin with presentations from the representatives from the Natural Sciences and Engineering Research Council of Canada, Dr. Thomas Brzustowski and Mr. Steve Shugar. Welcome.

Dr. Thomas A. Brzustowski (President, Natural Sciences and Engineering Research Council of Canada): Thank you, Mr. Chairman, and thank you for the invitation to appear before the committee today. You have posed some very important questions, and I really appreciate the opportunity to answer them.

I would like to express, Mr. Chairman, my thanks on behalf of the science and engineering research community to the committee for your very positive response to my message on young people that I presented last year. I can't begin to tell you the extent to which morale in the universities has improved. They are now convinced that somebody has listened. This committee has listened and you reported clearly. You advised the Minister of Finance unmistakably. We are very grateful for the results that achieved. So thank you to the committee.

[Translation]

You have posed four very important questions, and I shall be pleased to answer them from my perspective, as President of the Natural Sciences and Engineering Research Council of Canada.

[English]

You must realize, Mr. Chairman, that while these questions are in an area where NSERC's activities have an impact, the council has not studied or debated questions of such breadth. What you're going to hear from me are personal opinions that are shaped by what the council does. I cannot represent them as the voice of NSERC, the corporate voice. I hope you will accept that.

I'll deal with the committee's four questions in turn and briefly. You have a somewhat longer text in front of you.

The first question: With the budget now balanced, what message do you wish to send to the government as to the priorities it should set for a fiscal dividend? I really believe that what the government must do is give priority to measures that are both broad and extremely consistent, to enhance Canada's capacity for wealth creation—for wealth creation particularly by innovation, particularly by bringing new goods and services to market, particularly by increasing productivity through process innovations. This has to be achieved in a country that is very depend on trade, and therefore very much of an open economy, in a world economy in which rapid change is driven by advances in science and technology.

As far as I'm concerned, this requires three things. The first is people capable of generating and using new scientific and engineering knowledge. Second is the opportunities for them to use their skills and knowledge to the full to bring new goods and services to market—that's product innovation; to improve the ways we make and do things, or process innovation; to solve major new problems in all aspects of our lives; and to keep the whole thing going by creating new knowledge. The third thing that's needed is the implementation by government of a set of entirely consistent long-term measures to create the environment that will encourage these people to do all these things in Canada.

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Mr. Chairman, I'm aware this may sound like a string of slogans. It isn't. Many knowledgeable people have proposed measures that could move us toward the main goal in all three ways. I'll talk about some of these. There are some that are investments that truly deserve to be called strategic. Others are tax reductions and other tax measures that might have a catalytic role. Still others involve revising and updating government policies and practices to make them appropriate to modern circumstances and to achieve what I call “strategic coherence”, and I stand by those words.

I feel very strongly that underlying all of that must be the government's growing capacity to have the fiscal freedom of choice, the choice that comes in annual allocations when the cost of servicing the national debt declines. So obviously I'm supporting some balance among investment, debt reduction, and tax decreases.

I have stressed measures that promote Canada's capacity for wealth creation because of a belief—and I think I'm on very firm ground on this—that wealth creation is the source of the prosperity that will enable us to provide for the well-being of Canadians in all the ways that reflect our values, whatever these might be. Without the prosperity we can't have that.

If I move on to the second question, “What are the appropriate new strategic investments and changes to the tax system that would allow the government to best achieve those priorities?”, I propose three investments and one tax measure, as well as one investment that I think is a very minor one, a new way of doing something.

First and foremost—and you won't be the least bit surprised by this—continue to build support for university research and the advanced learning of those of our brightest young people who have the ability and the interest to work at the leading edge of science and technology. We've taken some important steps in the 1997 and 1998 budget, and those are very much appreciated, but we shouldn't bask in any sort of glory of excessive achievement here, because we still have a long way to go in these areas to become competitive with our trading partners.

The second investment is a significant increase, in fact a doubling at least, of the program of the networks of centres of excellence, a program that was made permanent only in the 1997 budget. This is a program that brings those who create knowledge into close contact with those who use it productively in the economy. I used the words of Peter Drucker when I say this. This program has had such an impact, has had such an effect of a cultural change in the research community, and to some extent even in the business community of those people who deal with researchers, that we have created a capacity to assemble these critical masses of research capability to address major issues on a nationwide basis. In this competition we will have success rates down around 2% or 3%, maybe 6%, simply because of the constraints on the budget.

You should know what impression this makes among people who have been persuaded by the rhetoric, by the example that this is the right way to go: 72 letters of intent for the networks of centres of excellence competition. The selection committee invited 11 groups only out of those to submit full applications, each a stack of paper about this thick documenting partnerships, collaboration, plans, and prior achievements. Because there's only $9 million per year available for this competition, I don't expect any more than two or four networks to be funded—four if they're quite modest. We're talking about very low success rates.

My concern is that when success rates are so low, then those who almost make it in one competition just abandon the whole enterprise, because the next competition is only three and half years away. Rather than improving it for next year's competition, they abandon the whole thing. So I think we've got a major success on our hands, and we have to use it to its fullest.

• 0915

My last suggestion for an investment is really a minor one. I think it would be very good and very efficient in this case for the government to act on behalf of the collective private sector, not just to find out who are the highly qualified Canadians coming up for graduation here or abroad, but actually bringing in front of those people a range of employment opportunities that have been submitted by the private sector. I think this would be more proactive than just measuring the consequences. It's certainly more active than merely offering a list of people abroad. I call this “first, recruit our own”.

Finally, as a tax measure I realize that I know very little about taxes, but I have heard enough over the last few years to persuade me that some creative way of using capital gains as a catalyst to promote the creation of wealth-producing capacity in this country could do a lot of things. What I mean is that if people create new wealth-producing capacity in the country, new ways of adding value, or increase that capacity in existing enterprises, any capital gains they realize on that should be taxed very, very lightly, and perhaps not at all in the case of an initial period for start-ups.

On the other hand, if anybody realizes a capital gain by taking an enterprise that had wealth-creation capacity and reducing it or destroying it, closing down the company to sell off the assets for real estate value or something like that, the tax on capital gains should be punitive. And there should be a middle ground for capital gains that don't affect the wealth creation capacity.

The third question, Mr. Chairman, I'm going to answer very briefly. How can we help Canadians prepare to take advantage of the opportunities offered by this new era? I can answer that in one sentence: through child development and then the education of all Canadians to their full capacity. Starting off with pre-school, with early childhood development, get the kids ready to learn before they enter kindergarten, because that's where the patterns for future capabilities are set, and then take them as far as they can continue learning.

Even if this sounds like a slogan, I'm going to utter it, because I think it's so important. The access of Canadians to education, even at the most advanced and the most expensive level, has to be based only on their ability to keep learning and not on their ability to keep paying. I think that's essential for the country. And life-long learning opportunities should be there after formal education.

As my last point, the answer to the question “What is the best way the government can help to ensure that there is a wide range of job opportunities in the new economy for all Canadians?”, I'm going to say something that I realize is politically risky. I'll say it very carefully so that I'm not misunderstood.

In Canada we seem to believe that we don't need to be concerned about our best and the brightest, that they can look after themselves. That is a very generous, very well intentioned view, but I worry about it. We certainly must help those who can't help themselves. There's no question about that. That's one of our strongest values. But we must also meet the different and particular needs of our best and brightest. And I say that because you've been hearing a lot of public discourse recently of examples where when the best and the brightest do look after themselves as we expect them to, we don't always like what happens. When they leave Canada for places where they're offered jobs and use their skills and knowledge and challenge them to grow, where they can make more money and keep more of it for their own use, then we don't like it one bit. We feel the country is being shortchanged. We wish they were making their contribution here. We resent the fact—I resent it as a taxpayer—that Canada invested in their education and some other country will reap the return on that investment. That really bothers me. But we have to understand the reasons why.

For these reasons, I believe that government should give serious attention to the needs of those young Canadians who have the greatest ability to develop advanced skills and knowledge in science and engineering and to be very innovative. They need first of all the research environment for their advanced learning. It has to be competitive with the rest of the world. They need the opportunities to use those skills. That's a major factor in people's decisions whether to stay in Canada or leave, whether to stay at home or go somewhere else. They need a business climate that promotes innovation, and they need personal incentives to do their work in Canada.

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In return, they contribute to prosperity. They are the job creators for others. And I don't say this as some sort of an echo of trickle-down economics, in which I've never believed. The process I'm describing is that those Canadians who find new ways of adding value on the economy and produce world class innovations—and they have to be—will create jobs for other Canadians through what I call the inevitable operation of the economic multipliers, and with high multipliers in the areas that depend on the most recent advances.

What's needed from government is the recognition of the essential role of these people and a consistent—and I keep coming back to this—and broad set of policies, all of which reinforce one another. We have to get away from the possibility that some interpretation here discourages something that is being promoted by a program there. These have to be consistent and broad. And their goal is to create an environment in which these people, the job creators, might succeed.

I thank you for listening to me, Mr. Chairman. I would welcome questions from the committee when the time arises.

The Chairman: Thank you very much, Dr. Brzustowski, for a very thoughtful and inspiring presentation.

We will now go to the Canadian Advanced Technology Alliance, Ms. Shirley-Ann George and David Perry. Welcome.

Ms. Shirley-Ann George (Executive Director, Ottawa, Canadian Advanced Technology Alliance): Thank you. Good morning.

On behalf of the Canadian Advanced Technology Alliance, CATA, we would like to thank you for the opportunity to express our views on the brain drain and the federal government's role in ensuring that Canada is prepared to be a world leader in the new economy to the benefit of all Canadians.

I brought with me Mr. David Perry, who is one of Canada's leading high-tech recruiters and who will be available to answer any questions you may have on why so many high-tech workers are leaving Canada.

As a bit of stage setting, over the last five years, through good management and some good luck, Canada has entered into a new era. Canadian governments are spending no more than they take in, and they are making efforts to prepare Canadians to be part of those who will benefit from the knowledge economy. This is not something we should take for granted. We have to be very careful that we don't think it's our god-given right.

It's important to understand that the world order has already changed. No longer do second and third world countries depend on what they grow or what the find in the ground or on the generosity of others. It's well within their grasp to set a strategic plan, build a business environment that is globally attractive, and build high-tech workers in a massive amount. This allows them to move into a first world country very, very quickly. Our competitors are not G-7 countries like Italy and France, which we like to compare ourselves to. Our competitors are countries like Ireland, India, and Taiwan.

Canada and Canadians must understand that governments now must become as aggressive and as competitive as high-tech companies. We must understand that although we are doing okay today, the wolf is at the door; he wants to eat our lunch, and he's very, very hungry. Fortunately, we have everything that we need to be successful. We also have every opportunity to throw our children's future away. The federal government has made many important moves over the last few years, including such things as deficit reduction, programs like SchoolNet and LibraryNet, which give access to our young disadvantaged children, and the Millennium Endowment Fund, which is going to allow many Canadian children to access higher education.

Industry is also doing much to lead Canada into the next millennium. Just looking at information technology, manufacturing, and service companies between 1990-95, we see increases in revenues of 78%, R and D of 47%, and employment of 35%. Using the recently released Stats Canada numbers for computer programmers and analysts between 1992 and 1997, we see a staggering 92% increase.

In our business environment Canada must be competitive for all growth sectors. In industry we call this the need for mass customization. For example, the need for the aerospace industry for funding for programs such as Technology Partnership Canada is very valid but different from what is needed for information technology companies, where the R and D tax credits are essential. These programs are directly responsible for attracting and keeping tens of thousands of jobs in this country.

Unfortunately, our major problem still remains the scarce availability of this industry's raw material: high-tech professionals. These are highly trained individuals. And it's not just a Canadian problem. It's estimated that in the United States there are 340,000 vacancies today, and in Canada easily as many as 20,000 or 30,000.

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If we use 1995 growth numbers and straight-line projections, we could need as many as 190,000 more of these workers in the next five years. Even using much more conservative numbers, it works out to 75,000 opportunities.

While it is a great opportunity, we must understand that our education system is constrained, and unfortunately it is unlikely that many of these jobs will come to Canada. What we must do is work together to ensure that the high-tech industry does not outgrow this country. The challenge may be large, but if we work together, industry and government, there's absolutely no reason we could not do much more to attract and keep many of these jobs and talented workers.

On the industry side, the average salary increases for high-tech workers over the last 12 months is around 6% to 7%. If you go into the areas that are hot, like communications and programming IT jobs, it's very common to find 15% to 20% increases over the last year. It makes one wonder why there's such a fuss about you getting a 2% increase.

Unfortunately, money is not enough to keep these workers. CATA and KPMG have recently undertaken a study to help our members better understand what are the other factors in attracting and retaining employees in the high-tech sector. Unfortunately, globalization means that international companies, especially Americans, have the ability to recruit our members' employees. The companies that do so tend to be the largest and most successful, therefore the highest-paying companies. They are coming to Canada in droves to attend high-tech trade shows designed for the purpose of taking our brightest talent south.

It is a global marketplace, and it is our members' responsibility to counteract salary increases made by our competitors, but we cannot overcome the huge obstacle of the differential and personal taxes. The Americans are very aggressively marketing this to their advantage.

To give you a perspective on how big the difference is, using 1997 numbers, an average senior hardware engineer in Ottawa made about $76,000. In Austin, Texas, they made about $81,000. There is a salary difference there. It's hardly enough to move down the street, never mind pack up your family and move to another country. But when you look at disposable income, you see a very, very different story. In Ottawa, a taxpayer, after paying an average mortgage, taxes, health care, transportation, and consumable, had about $8,000 left over. In Austin it was $26,000. This $5,000 difference is really $18,000, and most of it is in taxation. Ottawa and the five technology clusters that were measured in Canada came out the best, with 11% of disposable income based on base salary. If we go to U.S. clusters, the worst off were places like San Jose, where it was 21%, Boston, 23%, Seattle and Raleigh, 30%, and Austin, Texas, 33%.

This explains why in 1993 about 1,300 temporary workers left Canada to work in the United States. This is the common method for our people to leave. It's not through immigration. In 1995 the number was 3,800, a threefold increase—and the brain-drain surge didn't start until after 1995. Unfortunately, when you look at these numbers you find that only about 20% of them are recent graduates. We are losing our most experienced and talented technical and managerial staff.

So what can you the federal government do to bring back a competitive environment for these highly paid and unfortunately very mobile technology workers? You'll probably never be able to bring parity in our tax system and maintain our quality of life. I think most of us accept that. But you must dramatically close the gap. And you must do this while delivering on your already stated commitment of one-third debt reduction, one-third new programs, and one-third tax reductions. It's not an easy task, but if there's one thing the business community has accepted it is that this government, when they make such commitments, will live up to them.

As you did with deficit reduction, the federal government must announce a plan of attack on narrowing the gap between Canadian and U.S. personal taxes. Measures that could be used include the immediate removal of the “temporary surtax” and then a five-year plan for further reduction. Other personal tax measures you should consider are the U.S. method of income splitting between spouses and the reduction of taxation on stock options that will help us keep our brightest and most valued workers.

Finally, a proposal that CATA is endorsing, and we encourage you to look at it, is the employee share ownership plan put forward by the ESOP Association. This plan would encourage CCPC owners to develop a plan and then share their companies by allowing employees to directly buy into the company. This type of ownership would be very valuable in keeping and attracting workers. The ESOP Association has some very impressive numbers from the U.S. on the increased profits and growth of companies with these types of plans. It's a win-win for all of us. We encourage the government to seriously consider their proposal and to enact legislation that will benefit all Canadian companies that wish to share ownership with their employees.

• 0930

In summary, high-tech employers and employees have waited through many budgets as Minister Martin got our house in order, and we applaud your efforts. Now is the time for the government to deliver on its commitment for lower personal taxes.

Thank you.

The Chairman: Thank you very much, Ms. George. It was a very thoughtful presentation.

We will now move to IBM Canada, Mr. Wayne Scott. Welcome.

Mr. Wayne Scott (Government Programs Executive, IBM Canada): Mr. Chairman, good morning. Thank you for the opportunity to come to speak with you and your committee about matters that we at IBM think—and have seen from discussions with other companies in the sector—are critically important, not only to our sector, but to Canada as a whole as we look forward.

You have before you a brief, which includes two parts. The first three pages I'm going to go through quite quickly. This represents my thinking about how we might think about the losses of skilled people from Canada, some of the structure within the movement of people. The second part of the brief I'll look at in a little more detail and make some specific recommendations that I think you might consider in addressing this problem for Canada.

Beginning on page 2, this represents, anchored by a brief case study from our software laboratory in Toronto, an assertion that we really are experiencing a loss of critical skills. This is a matter of importance to companies, but also, as you've heard from others here this morning, to Canada as a whole.

On page 3, I outlined four points in what I call the life career process, which I think is useful to think about in terms of loss of skilled people from Canada. The first of these is at the point of graduation from high school and the selection of a university for study. While it's important for us to take advantage of study opportunities at leading institutions around the world, every time a student goes abroad, they get more comfortable with the idea of staying there.

Second, and more important, is graduation from university and the choice of first job. Here we're seeing dramatically increasing activity by U.S. recruiters on Canadian campuses, particularly of our leading universities.

The third point, for those who choose to go on to graduate studies, is the choice of university for graduate studies. This is a two-edged sword. It's very important for our bright Canadians to go off and bring new knowledge back to Canada as a result of studying at leading schools in other countries, but as they do so, they become more comfortable with the idea of staying there, and they're exposed to those job markets.

Finally, as you've heard from CATA, the source of greatest loss is from experienced people in our workforce.

Going on to the top of page 4, something that's very important as we think about what we might do about stemming the loss of skilled people from the information and communication sector is the structure of this sector. When we think of it, we normally think—many people—about the large participants, such as IBM and Nortel. Here in Ottawa you have a community of very successful companies that come to mind, such as Newbridge and others. However, the fact is that this sector is dominated by small and tiny companies.

Industry Canada data, for example, said that in 1995 the software and services sector contained over 14,000 firms, with an average employment of less than 10—and that includes the large firms. So this really is a sector that consists of small and tiny companies, and that has some important implications for the labour market dynamics.

I'd like to make the point very clearly that we see responding to the U.S. challenge for our top people as very much a shared responsibility. I'm not here this morning to talk about the things the government should do to solve this on behalf of industry, but rather the things we would recommend you consider to complement those efforts we're taking as employers.

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Let me briefly look at the three factors I think are important when we each choose where to live, where to work, and who to work for. First of all, on the work itself, I think this is a matter employers have the primary responsibility for. The quality of the work, the challenge of the work, and the quality of the workplace have been found through several studies to be critically important factors in retaining skilled people. I think we have seen a substantial investment in these aspects of the workplace from employers in Canada.

The second and perhaps most widely discussed aspect of workplace choice is compensation. While it falls in the middle of the list of factors important to job satisfaction, it rises to the top of the list in job attractiveness. Compensation, high salary offers, and signing bonuses are a critically important recruiting tool, and one that our U.S. competitors are using very effectively.

The third factor is life style. Canada has many advantages in terms of life style. While not compelling for many people, we must use these advantages to the full extent.

With that background, let me turn to some specific recommendations. Obviously, as you've heard from others and as you've heard again this morning, there are no simple solutions.

Let me talk for a moment about the competition for new graduates, the best and brightest from our school systems. Employers must take the lead here in competing aggressively on Canadian campuses for Canadian graduates. An important opportunity for employers and universities alike through the undergraduate process is the effective use of the cooperative study programs and internships.

These programs provide three important things. First of all, they provide early work experience, helping equip students for the workplace. Secondly, they're an important source of income for students, assisting in the rising cost of university education. Finally, to the point of this morning, they let students and employers get to know each other before graduation. We hear repeatedly as we talk to our new hires and as we recruit on campuses that work-term experience is a very important factor in the choice of employer.

Another aspect of this is that as the colleges and universities in Canada respond to the growing number of jobs in this sector, we're going to have to dramatically increase the number of co-op and internship placements. Large and medium-sized companies today are fully engaged in these programs with colleges and universities, but we are really strained in terms of stepping up to the growing number of students in our sectors. If we go back to the structure of the sector, it's critically important that the smaller companies find ways to engage in the co-op and internship programs as well. Yet with a cost of $10,000 to $12,000 per work term, small companies find it difficult to do so.

This leads me to my first specific recommendation, and that is that this committee consider recommending that the federal government in its next budget provide financial assistance to companies that provide these important co-op and internship placements for students in high-demand, knowledge-intensive disciplines. This assistance could be delivered either as a direct grant or a tax credit, and would do two things. It would support the students who want to pursue these studies, so important to our economy as their costs rise. Secondly, it establishes the working relationships that help keep our best students here in Canada.

Let me briefly touch on the next decision point, and that is those students going on to graduate school. Choice of graduate school depends largely on two factors: the reputation of the school, and the availability of financial assistance. We are encouraged by the additional funding for research and graduate studies provided in the most recent federal budget. As my recommendation number two, we would recommend that this government maintain an increased funding for research and graduate studies in disciplines that support the high-demand, high-growth sectors of the Canadian economy. My colleague has spoken far more eloquently and completely about this matter. We would like to add our endorsement for his perspectives and recommendations this morning.

Finally, we deal with the competition for experienced people, the place of greatest loss for our economy. Employers must take the leading role here. Factors such as challenging and meaningful work, the opportunity for ongoing training, and flexible workplace conditions are absolutely critical. Without the significant investment that employers have made to date, our losses would have been much greater.

• 0940

However, given the importance of compensation as a recruiting tool, we can't ignore the significance of the personal income tax differential. CATA has illustrated some of that here this morning. While an immediate dramatic change is clearly not possible, given the fiscal priorities this government has set out and that we as citizens support, it is important to send a signal to our top performers, those who contribute the most, that they are valued for more than just their ability to pay tax at top marginal rates.

One very important difference between the Canadian and U.S. personal income tax structure is the income level at which the top marginal rate is reached. In round numbers, Canadians pay top marginal rates on incomes over approximately $60,000, while in the U.S. top marginal rates are reached only at an income of approximately $250,000. So we hear, and quite correctly, that in many jurisdictions the top marginal rates aren't dramatically different between Canada and the U.S. Many of our early career people in Canada are paying top marginal rates after one or two years in the workforce, which is very different from that situation in the U.S.

My final recommendation is to call on this government, with the advice of this committee, to announce and commit to a plan to narrow the personal tax gap between Canada and the U.S. over time, setting out clear goals and milestones.

In summary, I'd like to say once again that this matter of keeping our best and brightest in Canada is critically important to Canada's future. We're at a turning point, and we appreciate the opportunity to come and discuss this with you. I welcome your questions later on at the appropriate time. I thank you for your attention to this matter.

The Chairman: Thank you very much, Mr. Scott, for three very specific recommendations, which we certainly will review very carefully.

The next presentation will be made from the representative from Nortel, Dr. Claudine Simson. Welcome.

Dr. Claudine Simson (Vice-President, Global External Research and Intellectual Property, Nortel): Thank you. Good morning, Mr. Chairman and distinguished members of the committee.

[Translation]

I would like to begin by thanking you for this opportunity to appear before the Committee today and represent Nortel, as Vice-President of Global External Research and Intellectual Property.

[English]

As you know, Nortel designs, builds, and integrates communications products and advanced digital networks for customers all around the world. More importantly, Nortel is committed to Canada for the investments in research and development. In recent statistics we saw that Nortel spent more than 25% of the whole research and development investment in this country.

[Translation]

Today, in the brief time allotted to me, I would like to use Nortel's experience to consider a few key points relating to the challenge of building and retraining a pool of top quality, technically expert employees.

[English]

My first point is that knowledge has become the fundamental driver of economic growth. Indeed, innovation creates businesses and new jobs, and as such it represents the fundamental source of growth of wealth in this society. However, innovation depends on people with highly qualified skills required to compete in the global economy. Moreover, to respond to the needs and demands of today's information society, the emphasis on scientific and technical talent is absolutely becoming critical in order to have continued success in this economy from our country. The availability of a leading-edge, knowledgable workforce is critical to the growth of the high-tech industry in Canada. It's also one of the key elements for industry to continue and investments to grow in this country. For example, Nortel announced last year 5,000 additional jobs in the knowledge-based area in Ottawa over the next couple of years. This is only one of the facets of our aggressive recruitment in Canada.

My second point is that most of the Canadian information technology companies are increasingly facing difficulties in finding sufficient numbers of highly qualified people in order to sustain that growth in the workforce. If it is left unattended, I believe this problem is only going to worsen with time.

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[Translation]

The problem is not confined to Canada; we have heard it said, and it is a fact, that the world's information technology workforce is globally mobile. Just last week, an article in the Globe and Mail indicated that the United States' supply of long-term visas for people with specialized skills has run out five months ahead of schedule.

[English]

That means that the workers in the advanced technology fields are among the most sought after, and Canada is a prime recruiting ground. I'm not simply referring here to the quantity of the people who are being recruited out of the country, but rather, and more importantly, on the quality and the high level of skills. At Nortel, for example, we find that the many employees who choose to leave the company to go to the U.S. are those we can least afford to lose. They are people who have spent a few years with us learning to supplement their academic skills with the practical experience gleaned from Nortel's global presence in the telecommunications industry.

It is not the number of people lost that is such a concern, although we see the trend is increasing, but it's rather the valuable skills lost for the country. These people are usually the top performers, with leadership and entrepreneurial skills to create future wealth and job opportunities for economic growth. Their value to Nortel, but more importantly their value to this country, is extremely difficult and time-consuming to replace.

My point number three is that our need for experienced professionals cannot reasonably be addressed by short-term solutions. The pool of people with the leading-edge knowledge that are going to enter the workforce needs to be increased.

[Translation]

That requires the support of our education system from the elementary to post-secondary levels. First, we need to work at the elementary and secondary school levels to enhance curricula for greater focus on science and technology, improve delivery of curricula via teacher training, and especially bring technology into the classroom.

[English]

The recently announced federal program on connecting Canadians is certainly an excellent initiative in that respect.

Promoting science and technology to students at a very young age must become a key priority. For instance, the private sector, such as people like us in Nortel, are working on that. Recently we announced the first winners of the Nortel Ottawa high school scholarships. Over the next three years we are going to provide a select group of students from high schools in the Ottawa region entering science or engineering degrees in universities a $1,000 scholarship, plus a work term at Nortel.

Also, the federal government announcement of the new Millennium Scholarship Endowment Fund is certainly an excellent initiative. However, I would like to recommend that we firmly focus that fund more precisely on science and technology disciplines.

[Translation]

Another particularly effective program is the establishment by NSERC of the Chairs for Women in Science and Engineering to influence young women to select these disciplines as a career.

[English]

These programs need to be expanded to tap into that pool of resources from the female community to go into science and technology. As you probably know, Nortel sponsors one of the chairs, which is a chair in Ontario.

Also, I would like to suggest that the government consider support of a proposal that has been put forward to create a critical skills foundation to promote more effective K to 12 education, with a focus on science and technology. This is a bit of the equivalent of the Canada Foundation for Innovation; that too addresses the K to 12 education system. This initiative could certainly be supported by the private sector, and we could offer promising high school students summer work jobs or part-time jobs.

In addition, we certainly need to look at the post-secondary education system.

[Translation]

Indeed, in this country, Nortel already hires about one out of every four Bachelor's graduates in Electrical and Computer Engineering and Computer Science. At the Master's and PhD levels, it's even better: Nortel hires about one out of every three post-grads.

[English]

If one single company in this country is hiring over one-quarter of Canada's total new graduate output, there is a startling sign that the supply of the new graduates in those disciplines is certainly inadequate.

• 0950

So there is a critical need for building and strengthening a wide portfolio of collaborative initiatives between the governments, post-secondary education institutions, and also the private sector in order to increase that pool of highly qualified graduates in those key disciplines.

Also, we believe that fostering a world-class research infrastructure and encouraging the knowledge transfer from education to the private sector are absolutely key factors for developing but also for retaining the critical skills we need, the best faculties class, the best researchers, and the best students.

The creation of the Canada Foundation for Innovation is definitely an excellent initiative from the government, as well as the NSERC research grant programs and the networks of centres of excellence. All these programs are great. They need to be expanded. And I would like to support my peer, Dr. Brzustowski, for these initiatives to expand these programs.

Of course the private sector needs to continue to contribute. I will give an example of Nortel, with the very large programs we spend on in North America, more than $17 million a year, in research fundings, in pre-competitive era, for the universities. We do that, of course, in collaboration with the federal government and the provincial governments.

That brings me to my fourth point. To effectively meet the challenge of developing but also retaining the very highly qualified workforce we need, the federal government needs to work more closely with the provincial governments and with the private sector.

[Translation]

There are several areas in which the federal government might consider participating. For example, the federal government has stated its intention to move aggressively to prepare Canadians for more effective participation in the knowledge-based global economy. This requires that its tools and infrastructure be well aligned and coordinated.

[English]

For instance, how should the federal government use its national presence to promote the importance of science and technology disciplines? First, we could increase awareness among members of Parliament and the ranks of senior governments. Perhaps it would be beneficial to organize respective private sector and government secondments, a kind of exchange program, focused on science and technology for people from the government to go into the private sector.

Another possibility could be directed at Canadians in general to raise their awareness. The Governor General awards for literature and arts, the ones we hold every year at the NAC here in Ottawa, are a major significant contribution to raise the national awareness of the importance of the contributions of culture in the country. I suggest that the very same approach be taken to establish an extensive, very high profile program of awards in science and technology to honour excellence in research, excellence in teaching, and productive collaboration between education and the private sector.

[Translation]

I will conclude with my fifth point. One of the most critical issues associated with building and retaining the talent pool is the economics of living and working in Canada versus elsewhere, such as the United States.

[English]

Indeed, the economics of living and working in Canada versus the U.S., for instance, is key to developing and retaining a highly qualified workforce. You heard that before. I will have to amplify that.

This is a very highly complex issue. It has a whole panoply of concerns that we have expressed before. These include, of course, personal income tax rates, but also the perceived attractiveness of housing due to mortgage interest rate deductibility, pensions, and health care. There is no simple answer to that. But as a matter of principle, in a global marketplace for talent we absolutely must consider all factors to balance more favourably an individual's take-home pay when compared with the U.S. and with the other G-7 countries.

There are other potential recommendations I would like to provide to retain Canada's talent pool in science and engineering. Those potential initiatives include incentives such as education savings plans, or perhaps even more, university education expenses, which could be tax-deductible once the graduates stay and gain employment in this country.

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However, before anybody accuses me of putting the entire responsibility on the federal government, let me add that I see the best chance of building and retaining a highly qualified workforce is the combined effort of private sector, government, both federal and provincial, and academia.

[Translation]

The synergy generated by the combined power of government, the private sector and academe can greatly advance the quality and quantity of people who create world-class breakthroughs, and thus strengthen the future prosperity of Canada.

Thank you for your attention.

[English]

The Chairman: Thank you very much, Dr. Simson, for clearly outlining some of the challenges your firm and your industry face. Also, thank you for providing and offering some direction to the committee.

We'll now move to the question and answer session and will begin with Mr. Epp.

Mr. Ken Epp (Elk Island, Ref.): Thank you, Mr. Chairman.

I have enjoyed these presentations. I think they're very insightful. Of course I was in the technology education field for 27 years before I came here, teaching at a technical institute in Edmonton. So I'm quite knowledgeable about the frustrations that students face, particularly.

I guess any of you can answer this. When it comes to finding a job upon graduation, our students are becoming increasingly frustrated. None of you really touched on this. Is there anything the federal government should and could be doing to directly make it easier for you, financially or otherwise, to hire Canadian graduates?

I personally have some problem with tax incentives that favour Canadian students over other students. Yet it seems that a lot of our graduates, including—blush, Mr. Chairman—my own son, leave the country. He couldn't get a job here. He tried for a year, and finally, out of frustration, got a job actually in Korea.

I'd like to ask whether you have any advice for the federal government—anything we could do, directly or indirectly, to make sure that our recent graduates get jobs with your firms.

Ms. Shirley-Ann George: I can take a stab at it.

One of the things that industry has not done a good job on.... We talk a lot about the skill shortage, and the skill shortage for our members is very much at the high end, at the professional workers—those who come out of university with at least one technical degree. It's important that we fill that, because without putting those people to work, we can't get the other teams of people who flow around them—those who would come from colleges, for example, with technical degrees to do the LAN support, that type of work.

We see one of the fundamental pieces as making sure there are the people we can hire at the very high end who will allow us to build the teams of people who come around it.

For some of the graduates who are coming out of our universities and colleges, some of them unfortunately have chosen career paths for which there are not a lot of jobs. We are finding we need to do more work in helping students understand what it takes to get a job. It's no longer enough to have education. It's no longer enough, for example, to be brilliant on your technical skills. You also need to have good communication skills. You need to have good team skills. There are a number of other things we need to do to help these young people.

Many times I get phone calls from young kids, and you can tell over the phone that they probably have great potential, but they're getting in the road of getting their first job because they don't understand some of the skills that are needed. So we could do more in the education system just to help these students understand what it takes to get a job and what we can do collectively by having more of industry go into these schools and help the students understand what's needed.

The government has in the past provided tax incentives for new hires. There have been initiatives where they get, for example, a holiday on paying some of the taxes, like unemployment insurance and those types of things. Those can be attractive to small companies that would like to hire somebody but can't quite afford it.

The Chairman: Mr. Perry, followed by Mr. Scott.

• 1000

Mr. David Perry (Perry Martel International Inc.; Canadian Advanced Technology Alliance): On a more pragmatic note, perhaps—that's what I'm known for—a web site has been set up by the Canadian Advanced Technology Association, in conjunction with industry, to address a lot of these issues. It's www.technoskill.com. We intend to promote that across the country and across the world as the place you start to look for an opportunity. So if kids are coming out of school or if they're expatriates down in California, for example—not that we're picking on the Americans—that's the first place they should turn.

Anything the government can do to help us get that message out would be greatly appreciated and I think would show a fairly dramatic impact on this as well.

The Chairman: Mr. Scott.

Mr. Wayne Scott: One of the things we have experienced over perhaps the last decade is an unprecedented rate of change in the skills required in the labour market as the information technology sector has grown dramatically inside the economy as a whole. That has aggravated the imbalance between the supply of new graduates in the technical disciplines and what's required in the workplace.

In 1995, the most recent year in which the data is available, something in the order of 12% of all Canadian graduates were graduates from physics, hard sciences, and information technology and telecommunication kinds of courses. Yet the labour market requirement was much different from that. The growth was in those disciplines. So one of the challenges for employers and graduates alike is matching the skill and knowledge that graduates have coming out of universities with what we really need.

I talked in my remarks about the value of early career experience even while at university. While that's not enough, that's an important part of linking new graduates with the workforce.

A second initiative of this government in the last budget was the Millennium Endowment Fund, a fund set aside to provide scholarships for students at the post-secondary level. In thinking about what's happening in the university system across Canada, in some provinces at least, the partial deregulation of tuition fees so that tuition fees more closely match the cost of delivering courses, I personally have an important concern about the potential impact of the Millennium Endowment Fund on the choices students make in going to university and therefore their prospects for a job on graduation.

It costs less to deliver a general arts degree. That's one of the reasons why the universities are slow to change. Most universities lose money on an engineering or hard science degree and make money on the high volume of art students they take. If the Millennium Fund Scholarship is a flat.... A number that's been discussed is $3,000 per person. My concern is that although that's very, very important to ensure access to university, it may in fact encourage the imbalance between courses chosen and labour market opportunities on graduation. That's one specific area in which I would encourage this committee to look at the possibility, for example, of matching the size of scholarship with the cost of the discipline chosen so as not to further skew the imbalance we're talking about.

The Chairman: Thank you, Mr. Scott.

Mr. Epp, have you any further questions?

Mr. Ken Epp: I guess I have a comment to make here, which I think is quite apropos.

Having been involved in educating students in the mathematics and science fields for many years, actually 31 in total, I remember a long time ago reading one of our professional documents that said that only about 15%, I think the number was, of students in elementary and high school show what one might call a natural propensity to mathematics and science fields. In other words, 85% of people are more inclined to get into the history and the communication subjects. My own teaching experience over the years bore that out. When I taught high school, when I was a kid, it was about that: around 15% of the students loved math and did well in it, and for 85% it was a struggle.

• 1005

I wonder whether there's something practical we can do to capitalize on the students who love math and science and really make it attractive for them to go full out and develop their skills in this country and keep them in this country. That's really what we're all about here. Are there any comments on that?

The Chairman: Dr. Brzustowski.

Dr. Thomas Brzustowski: Thank you, Mr. Chairman.

That's a very interesting comment. I start off with the observation that I can't believe that Canadian students are all that different from students in other countries, or that Canadian children are all that different from children in other countries. Yet the statistics of the distribution of university graduates supports your comments and the other comments that have been made of the countries.... And I can't remember now whether this is G-7 or more broadly the OECD.

Canada has the lowest percentage of university graduates in engineering, one of the lowest in sciences, and the very highest in social sciences and humanities. The United States has almost equally as low a percentage in engineering, slightly higher in science, much lower in humanities and social sciences, and much higher in law and commerce. In Germany, France, and Japan, the numbers for engineering go way up.

I wonder if this doesn't just reinforce the comments that Dr. Simson made earlier, and others as well, that one has to start at the beginning of the education process, that this is not a solution at the post-secondary level. There's something we do to our kids that in fact fails to reinforce natural aptitudes for math and science that are being reinforced in other countries. It's a searching question, an important question. There's no simple solution, no silver bullet. I think we have to realize that it's more than just a post-secondary problem.

The Chairman: Dr. Simson.

Dr. Claudine Simson: I'd like to reinforce that. In my elocution I talked about specific initiatives with respect to the K to 12. I think there are two important elements for the K to 12 programs. The very first one is looking at the curriculum itself and trying to focus more on science and technology and put more on that. For example, in Ontario we are very active in doing that. We are actually helping them to rewrite their curriculum in science and technology right now. There is the content of the curriculum that needs to be changed, because it is not at par with other countries.

The second part, which is even more important, is the delivery of the curriculum. The teachers need to be educated on how to deliver the curriculum in a very attractive way, not in a very sterile way or a biased way, for instance, against young girls, saying mathematics is too difficult or things like that. So the delivery is important. We need to help the teachers. It starts by the faculty of education, where the teachers get formed, and help them with that delivery.

The last element is associated with giving those teachers the tools. I talked about bringing the technology to the classroom: the federal government can be very active in that. Give them the tools so they can be trained and they can bring excitement into math and science in the classroom for their students. That's absolutely critical.

The Chairman: Ms. George.

Ms. Shirley-Ann George: I have one point to add on to that. We also need to look at who is educating our children in math and sciences. By nature, many teachers in fact come from the arts background. These are the ones who are teaching computing science and other science disciplines in our schools. Not surprisingly, if you went to school and you weren't very keen on math and sciences, and fifteen years later you're asked to teach it, you're not going to impart any enthusiasm into those disciplines.

So we need to do far more to encourage our teachers to come through the science side of it. And equally important, we need to encourage our female teachers to go through the science side of education before they move into the classroom, so that we have some role models for these kids that are people who truly love math and science and can show children what an exciting world it can be.

The Chairman: Thank you, Ms. George.

Mr. Loubier.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): I listened carefully to your presentations, which I found most interesting. I would like to make one comment and then ask two questions.

After hearing your presentations and the ones we have been hearing over the past two or three years—Ms. George specifically mentioned 1995—it seems to me we are not doing enough to drive the point home that the current situation is very serious, because it really is.

• 1010

As the representative for Nortel was saying earlier, we now live in a knowledge-based economy. Borders are becoming and more fluid. In terms of competition, the job market for highly specialized kinds of work now covers the entire globe: we are facing competition on all sides.

I think we should be doing more to promote initiatives such as the ones suggested earlier by Dr. Brzustowski, and not worry about being afraid of being called elitist if we decide we want to pay special attention to our most promising researchers. I would have no hesitation about saying, at the appropriate time, given that we are part of a knowledge-based economy and that the economic future of nations, indeed their very existence, will increasingly depend on their strength in such key economic areas as high technology and engineering, that extraordinary measures are required. And they are required now. As far as I'm concerned, current efforts are not sufficient.

When you meet professors and researchers working in the universities and large corporations, who are in contact with one another, you realize that the current climate is quite morose. Even the new measures that have been put in place, while a definite step in the right direction, are not enough to give these researchers, who are often young, either the feeling that they are really part of the Quebec and Canadian research community or the desire to stay here. It is not only a question of compensation. There is also the sense of being on a winning team. There is always a feeling of pride when a researcher makes a discovery in any science or technology-related field. But that pride must be accompanied by the resources needed to pursue excellence.

So, I have no hesitation whatsoever, getting back to what you were saying earlier, Dr. Brzustowski. And you shouldn't either. You said that it was politically sensitive to present things in such a way, but it is becoming less and less so, since we are really facing a potential catastrophe. And that has to be said. We have to support our highest performing and most promising professionals and researchers in every possible way. That should be one of the federal government's priorities in the next budget. And do not believe there is no surplus on the horizon. The government has far greater resources that people may think.

During the last fiscal year, they were saying there would be a $4 billion surplus. In the upcoming fiscal year, the surplus may be as high as $8 billion. Next year, during the 1999-2000 fiscal year, we will probably have reached a surplus of $14 or $15 billion. By 2003, if economic conditions are favourable, we will have a $25 billion surplus. I simply don't believe that we cannot find a few hundred million dollars somewhere to devote to an industry that is in as deplorable a state as the one you have described.

Ms. George, you said earlier that the brain drain had only begun in 1995. You seem to see that as a crucial year. Can you explain why there seems to have been a greater propensity for people to leave in 1995, compared to previous years?

[English]

Ms. Shirley-Ann George: 1995 is about the point when a lot of our companies started to experience exponential employment growth. This was a global factor. What happened is that we had a reasonable rate of growth, and then it took a sharp upward swing. When that happened on a global basis, then these very few experienced workers became in high demand around the world.

It's very common, for example, to go into some of our companies and find out that they have working for them individuals from as many as 20 or 30 different countries, and these are companies of less than 100 employees.

What happened is with this spike in growth, the Americans needed our workers. We build world-class technologists in this country, and we were a very attractive place. There were very few cultural differences. They could come in with what they considered to be reasonable salaries and take our brightest away, with them thinking they were getting this huge increase. There's some misconception that with the exchange rate, you build that in when you leave the country. Well, the exchange rate only works if you come home to Canada at night to spend your money. There's still this misconception among many employees that they get to build that factor in as well. So there are a number of factors that hit.

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In some respects this is all good news. This is all growth news—that our businesses are growing quickly and they need more employees.

The Chairman: Mr. Scott.

Mr. Wayne Scott: It's certainly not the only reason, but one of the things that happened around 1995 was the beginning of the rapid spread of the Internet use. With that came a demand for multimedia products, for software to support rapidly growing networking, and so on. So I think one of the reasons we saw growth accelerate so dramatically around 1995 and into 1996 and in fact on through the rest of the nineties is because of the rapid spread and popularization of the Internet and other network forms of communication.

The Chairman: Thank you, Mr. Scott.

[Translation]

Mr. Yvan Loubier: In the early 1990s, they were already talking about a potential skills shortages problem. I remember the figures published by Statistics Canada in a short report on the Quebec labour market. It said that every year for the previous three or four years, some 75,000 hi-tech jobs—in other words, highly specialized jobs—had remained unfilled because there was an inadequate supply of qualified workers. Do you have any more recent figures that might help us to convince Canadians and the government, at every possible opportunity, just how extensive this problem is? I can assure you that my party will be making this a priority in the coming months.

[English]

The Chairman: Ms. George.

Ms. Shirley-Ann George: Unfortunately, as you saw from the numbers I gave, the people who count these things tend to work on historical data, and it's literally years old. I mean, 1995, that's four years; for us that's like three product life cycles. So current data is very, very difficult to get.

All we can look at are the trends that we see inside our companies. For example, just 175 of our CATA members last year were projecting employment growth of almost 10,000 jobs. So the growth is still out there, and it's expanding. I gave you some numbers of projected growth opportunities.

One of our biggest challenges is the bottleneck that exists inside our universities. In Ontario, for example, to get into some of the more popular schools like University of Waterloo, you need a 93% average to get in. So a lot of the people that have the skills and the talent and the ability to perform for us as educated workers simply can't get into the education system. We have recently worked with the Ontario government to double the enrolment in some of these programs, but that's unfortunately at least four years off before we start to see some of the results.

There's no short-term fix. You can't send somebody to a six-month course and have them go into Nortel and build an ATM switch. It just doesn't work that way. These truly are professional-level jobs.

The Chairman: Mr. Perry.

Mr. David Perry: You really need to look no further than Montreal to understand. The University of Quebec at Montreal and McGill have graduated, over the last eight to ten years, fifteen or twenty individuals who have spawned fifty or sixty companies. I mean, the new engine of the Quebec economy is high tech, and for every one of those individuals who came out of one of those universities, they've built companies that have 100 to 200 people surrounding them. So I don't think you'd have to look too far to sell it to the population.

The Chairman: Mr. Scott.

Mr. Wayne Scott: One of the things that really inhibits both universities and companies actually attacking the problem in an organized way is the lack of good labour market data. This is a problem that's well understood now by Industry Canada and HRDC. My understanding is that they've set as a priority to address this labour market information need. But certainly the support and encouragement of this committee I think would be welcome in ensuring that the need is met.

The Chairman: Dr. Simson.

Dr. Claudine Simson: There is a point that I think is very important, and it is related to one of the questions. It's the climate that is residing today in the research society in this country. The climate is very morose; it's very low right now, because people have been cut and cut and cut. We saw the grants from NSERC were cut, and now we have a little bit of increase coming, but still the morale is very low because there have been immense cuts. The salaries in the environment of education are relatively low compared to industry, and we need those professors at relatively competitive salaries, not only not to lose them to other countries, but also to keep them in the education world.

• 1020

When you think about how we can correct that in the long term, we need to have the best and the brightest of the people to educate our kids. It's certainly not the trend we see right now. With the kinds of salaries that are being made in education, it's extremely low. The best and the brightest will not go there, and those people are going to teach our kids for the future. This is a big concern. So there is really a need for a complete change of the education system at the level of salaries, all of that.

The second one is the research foundation. To keep the best and the brightest in the future for the innovation, the wealth generation, you need to have an infrastructure in research. You need basic research. You need people to believe that this country and this government believe in basic research. This is certainly not the case right now. So we have to beef up our activities in that area too.

The Chairman: Thank you, Dr. Simson.

Dr. Brzustowski.

Dr. Thomas Brzustowski: I have one point to add to that, Mr. Chairman, and I think this may be the time to say it.

In a knowledge-based economy, an advanced education in research isn't only an education to do more research. It in fact is a superb education for high-level problem-solving, because the people who have had an advanced education in research know the sources of knowledge; they have their international networks of people who generate it. They've generated some of their own knowledge to high class, to world standards. They know the trends in knowledge and what to look for, what's good, what's bad, how to assess it. These are wonderful skills for the highest level of problem-solving in industry and government across the country, not just to do research. So we have to recognize the importance of that.

The Chairman: Do you have further questions, Monsieur Loubier?

[Translation]

Mr. Yvan Loubier: No, thank you.

[English]

The Chairman: Mr. Szabo.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you, Mr. Chairman.

I think the brain drain started in the 1960s, actually, and the proof of it is Ross Perot and EDS. I think Wayne with know a lot about what happened through the EDS years. They grew very quickly and became one of the leaders in software and computer technology development. One of the problems they found was they got so good and they were so attractive and people were breaking their doors down to get in, but they were losing them just as quickly as they came, the reason being that they came from the best place.

As a result, EDS introduced a promissory note system where the employees coming in got their training, but you had to sign a five or a seven-year promissory note that would be amortized after you completed your training. They basically locked you in, unless you wanted to buy out. Of course the best and the brightest still bought out of the promissory note, simply because the biggest and best companies will always be able to take into account what it's going to cost to get the best and the brightest.

So I don't think we're really talking about, as Mr. Scott put in his presentation, Webster's definition of brain drain being the migration of professional people from one country to another, usually for higher salaries and better living conditions—a very simplistic situation or problem with a simple solution. But we're not talking about a simple problem; we're talking about a complex problem. And as we all know, complex problems do have a simple solution, and it's wrong. We have a complex problem that requires a lot more thinking. This is maybe where we need some of our best and brightest doing some thinking.

I think there are two types of brain drains. We're talking about those pure researchers, thinkers, leaders, the ones who are on leading-edge and cutting-edge thinking and ability to think. The other group are those that are marketable, more for their style than substance. Those are companies who need the optics, because they've got tons of people who can think, but they don't have the face, the image people.

The issues that came up.... I looked at some of the debate and the discussions in the past on this issue, and I think I narrowed it down to about four areas of concern: salaries, generally, which for all intents and purposes is an issue of self-interest; taxes, which are somewhat related, but the responsibility is more government than it is corporate; quality of life considerations; and finally, the need for self-actualization in the Maslow hierarchy.

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If I had to tell you how I felt about this, I probably would say that since 90% of Canadians make less than $60,000 a year, I'm not going to be very anxious to make changes to the income tax system to try to do something at this level, because I've got to maintain fairness and equity across the whole system. I can't try to nail jello to the wall, because I know it won't work. No matter how much I try to entice people by some tax changes, like a capital gains something, it's not going to work. It's too narrow. It's not substantive enough for people to hang onto.

On the salaries issue, as I said, businesses and corporations will always take that into account when they're bidding. If you are the best and the brightest, you will go. You will always be approached by the highest bidder. It depends on what your value system is.

On the quality of life issue, I have to tell you that the United Nations can't be totally wrong in terms of taking the holistic picture of quality of life rather than simply being how many cars can I have. Quality of life obviously we all know, and I don't have to talk about that issue with you. You know what we're talking about.

So for me it really comes down to the issue is leaders, thinkers, those who are purists in the sense that there is this fine line between the winner of the gold medal in the 100 metres and the person who comes second, but that little edge and that little difference is what we're really trying to get to. I think the pure area is where we have to be very careful. I think we responded somewhat in the last couple of budgets with regard to reinstating some of the dollars to the granting authorities, the research granting authorities.

This brings me to the question. Having said all that to paint a picture of where I'm coming from, the C.D. Howe Institute basically said they didn't think there was a brain drain. They figured if you look at it on a net basis, we have immigration and we have export of brains. I think that brain mobility is an important objective for us as well, because no one company can keep all the best employees for themselves. If you do, you will stifle them, and we all lose. So they have to move. We can't expect one country to provide the perfect jobs for all the perfect people. It won't happen. It can't happen. It's an unrealistic objective.

Therefore necessarily we have to encourage in fact brain mobility, because we will get the benefit of cross-border brain mobility as well. So maybe what we're really managing is net brain movement to make sure we're in the ball park. Clearly the primary objective will be to encourage brain mobility so we always can find somewhere, whether it be domestically or abroad, the people we need to do the jobs we have. So maybe our role would be to make sure we provide the challenges, the skills, the opportunities for the pure thinkers to be able to be as good as they can be.

So the question is do we really have a brain drain, or are we in fact just managing the mobility of brain power?

The Chairman: Dr. Simson, followed by Ms. George.

Dr. Claudine Simson: I'd like to comment on this thing about the net. We have people going out and we have people coming in. What's important is to see the mix of skills of the people coming out and the people coming in. There was certainly no analysis of that, asking if the people coming in have the skills that correspond to the growth in the job market for this country. That's the analysis we need. We in the industry know the people we lose. Those people certainly have the skills. They have the leadership skills, the technical skills. They are the well-rounded individuals, the guys who are all going to create wealth and job opportunities elsewhere. We know that bit. We need to understand what's coming in to analyse the net part of it.

I think you talked about these tax issues. We believe, when you look at the private sector, that we are working in a global environment, so we have global salaries. I can talk for Nortel: we have North American salaries, no doubt about that. But something the private sector cannot compensate is the disparity in the tax system, which Shirley-Ann George talked about. That's something the private sector cannot afford to do, because we have global rules for compensation and we have a global workforce. That's something we should not really overlook. It's quite important, because when you truly look at it, it's not a couple of percent. We are talking in the 20% to 25% range, as Shirley-Ann George gave as a statistic. That's a very big differentiating factor that we should look at.

• 1030

The last point is about self-actualization. To have people come here and stay here, they need to believe they have a future. This is important for us. And more and more right now, with the uncertainties, are we truly...? We heard about this pushing the excellence, getting Canada to be up there in a position of leadership. We need to have that kind of spirit in the country, and that's not the spirit right now. I think we have to work even on that and have all our programs from the government and the private sector move toward that direction.

The Chairman: Ms. George.

Ms. Shirley-Ann George: You brought forward several interesting points.

I agree with you that it is very important we take our elite brains and make sure they have the ability to work and grow inside this country, but that in and of itself is simply not enough. To have these few individuals who are very happy and then find out that all the development work and manufacturing has left the country isn't going to do us a lot of good.

When you look at these reports that have been out recently on how Canada is coming out with a net surplus in high-tech workers, I urge you to take a second look at those numbers. There are a couple of very important things that are missing there.

First of all, an immigrant from India who has come in from their education system as a computing programmer is not the equivalent of somebody who is leaving Canada who came out of the University of Waterloo or U of T and has three to five years of experience. We are talking about completely different talents. Unfortunately, the numbers that have been given don't take that into account.

The other thing that's not taken into account in those factors is that when Canadians leave Canada for the U.S., with the advent of NAFTA it literally is I believe either $50 or $100 and 30 minutes at the border and they go down as temporary workers, not as immigrants. So these literally hundreds and thousands of individuals who are going down under that route are not being counted in your numbers.

Without a doubt, if we don't do something on the tax system at this $60,000 range, this number is going to turn into a flood. We've seen the rise in number of people leaving, and it is substantial. You simply cannot have a tax system where you hit the highest marginal tax rate in Canada at $60,000 and in Austin, Texas, it is at $263,000. That is too big of a gap. It's not justifiable to these individuals. When they look at the benefits to their families of working either here or in the United States, you will find that the financial benefits of going to the U.S. are substantial. They're not moving their families to inner city ghettos of Washington, D.C. They're moving their families to locations that have comparable crime rates to Ottawa, and in some cases lower rates of assaults and murders. They're moving to very nice locations, thank you very much, and our taxation system is definitely a very serious contributor to this.

The Chairman: Thank you, Ms. George.

Dr. Brzustowski.

Dr. Thomas Brzustowski: Mr. Chairman, I obviously can't comment on the situation in the private sector, but I have a document the committee might find useful, which supports the very last comments that Mr. Szabo made. It deals with post-doctoral fellows. These people are the people who have already made the commitment to try to go on and become scientists, the thinkers, maybe the pure researchers.

What I shall leave with the committee is a survey of post-doctoral fellows conducted by Cheryl Wellington and colleagues. She is a member of one of our policy committees and is herself a post-doctoral fellow in medical statistics. There are seven findings here.

I'll just point out that the PDFs training in the U.S.A. rated their work environment significantly better than those training in Canada, particularly for facilities and infrastructure. That's one of the findings. Another finding was that 81% of these people, who've already made the decision that they will accept a lower salary for a long time in order to develop their skills and work in the science areas, rate the availability of future employment as a severe stresser. The last finding is that the confidence in finding a job in Canada is significantly lower than that in the U.S.

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So certainly your stress on making the conditions better for these people I think is well placed. I think it would meet some of the needs that have been identified in that survey.

I'm happy to leave that document with the committee if you wish.

The Chairman: Thank you. We appreciate that.

Mr. Perry.

Mr. David Perry: As an economist and statistician, I look forward to reading the C.D. Howe full report. I live and breathe this every single day, and I can assure you there is no conspiracy in this country; there is a shortage, and it's really critical. It accelerates faster than our debt does, probably. I don't think I'm exaggerating too much.

What it really comes down to, if you want to talk about the net of people coming in and people leaving, is that it's.... Perhaps I can paint a picture. We're all in a race here, and there's only one country that's going to win. We're back in the pack, and we may never catch the Americans, but we can come in second. Here's what that means to us. Right now, I guess for the last 100 years in Canada we've been the net suppliers of raw material rather than finished goods. We're approaching the same thing in the technology industry. We can either become the net supplier of raw materials, be that brains or just people working on other people's programs somewhere else in the world, cutting code, or we can actually come up with the products and export that.

I assure you that exporting finished products is going to bring far more financial wealth into this country than the former. So we may not catch the Americans, but we can come in second, and second looks like a pretty good place to be right about now.

The Chairman: Mr. Easter.

Mr. Wayne Easter (Malpeque, Lib.): Thank you, Mr. Chairman.

I thoroughly enjoyed the presentations, because you forced me to think about some things I don't normally think about. I make that point because I think that's the crux of the problem here.

I come out of the natural resource area. I will argue in this House that funding and research and development go to natural resources, agriculture, fisheries, mining, forestry, etc., which is in competition with you.

The point I'm trying to make is that your message that there's a need and there's a tremendous opportunity there is not getting through. It's not getting through to me as a member of Parliament. I just happened to come to this committee today. The message got through today. So if it's not getting through to me as a member of Parliament, it's not getting through to citizens out there, even with all the work of Industry Canada and your companies and others. And it's certainly not getting through by advertising in The Globe and Mail, because most Canadians don't read it. It's not getting through to parents who are wondering where their kids should go to university or whatever.

So that's message one. I think that certainly has to be worked on in terms of how do you get the message out there that there's a need from your point of view and there's an opportunity from the point of view of youth in this country in terms of where they put their life's work and experience. And I think there's an opportunity for many people in my neck of the woods in these industries. I come from Atlantic Canada.

The other point I want to make is the brain drain.... I agree with you: I think the brain drain can be dealt with in the shorter term by some of the points you have raised, whether it's taxation or whatever. I think that's a much easier problem to deal with. I see a greater problem, and that is all those brains out there that we're not utilizing. There are all kinds of them. I know three young people in my riding who, when they went to high school.... I think this begins from grade one to grade twelve, personally. It comes naturally to them in terms of the new technologies, but they were bored. The three of them together could outpace their teachers manifold. One of them right now is working at a restaurant. The two others are working at an Internet company for $8 an hour. That's in Prince Edward Island.

I know these three young people well. I've tried to convince them to either look at Holland College in P.E.I. or some of the other universities in the country and get the training, because there are opportunities out there. But that message is not getting through either. So how do you...? Do you have any suggestions? We've got all kinds of these people in Canada to whom the skill comes naturally. They're in the range of 21 to 24 years of age. The first thing you know they're going to have mortgages, families...

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A voice: VISA cards.

Mr. Wayne Easter: Yes, and that opportunity for them and those on-tap skills for you are going to be lost. Do you see any way you can tap into those people so that they can be utilized in these new industries in the knowledge economy?

So there are two questions for you. I guess there's nothing much can be said on communication, but there has to be a lot of effort made to it. The secondary and I think even greater problem is not the brain drain; I think that would be easy to handle if we had the political will to handle it. The bigger problem is that untapped potential out there that is not being found or utilized as you go through the school system, and it's a longer-term effort to overcome it.

The Chairman: Thank you, Mr. Easter.

Ms. George and then Mr. Perry.

Ms. Shirley-Ann George: I think you've brought up a very important point, and that is that we do need to get into our education system in a much more systemic manner to encourage all Canadians to have the potential in this new economy. When we look at what's happening, there are some very frightening things we need to become much more aware of.

There's a widening gap between the haves or the knows and the know-nots, and a lot of that has to do with economic barriers. In the industry we take it for granted that every family has a computer at home and it's connected to the Internet. That is simply not true. We have whole communities that don't have access to the technology.

One of the most exciting programs I've seen the government bring together, which they're about to launch, is the CanConnect initiative coming out of Industry Canada, where they're in the process of connecting every school. Now they want to bring out a series of programs much like what we did as children in ParticipAction, where we got our little silver and gold plaques each year. They're going to do something similar that will encourage young people to learn technology skills and to become engaged in projects so they can learn these skills.

I think this is critically important, because you become engaged, once you start to learn these things, it's often amazing how fast these kids will surpass all of their teachers and become superstars in their own right. So any of those types of programs that we can do to encourage our youth are critically important. I think we need to spend a lot of time focusing on the very young and have a willingness to commit to a 20-year plan in this country to make sure we do catch these young people and that there is the potential in this country to have an unlimited supply of knowledge workers, because we truly do have the ability to do this if we so wish.

The Chairman: Thank you, Ms. George.

Mr. Perry.

Mr. David Perry: I think the spill-over effect of setting the technology industry on fire will be outstanding, if we can just figure out how to do it.

The Chairman: Professor Brzustowski.

Dr. Thomas Brzustowski: Mr. Chairman, I think that as Canadians we have to do a better job of recognizing where it is in this country that some things are being done extremely well, learning from that and sharing the lessons with others. There's no silver bullet, but let me point out two examples.

In one place in this country achievements in science and engineering are in fact praised; they're brought to the attention of the public in an exciting and in fact exuberant way, with lots of colour, good writing. I don't know what the readership is. I'm thinking of Quebec, which is vastly different from the rest of the country. Québec-Science and Interface journals are absolutely wonderful in identifying the local heroes of science and technology, making the work seem exciting. I would hope we could do more of that in the country and spread it throughout the education system earlier on.

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The other example of why it's important is the city of Calgary, with an unemployment rate of 4.3%, with a decreased dependence on the cyclical petroleum industry, the centre of wireless telecommunications. Nortel has a huge presence there. Calgary markets itself, but it's not widely known around the country as the city with the highest proportion of engineers per capita of general population anywhere—three and a half times our national average. Calgary boasts 20 engineers per 1,000 of general population. You know you can say that's a coincidence that Calgary has achieved all these things and they happen to have a lot of engineers. I think it's much more than a coincidence.

I'm sure there are other lessons around the country. If we could just identify them, share them, try to emulate them, we won't find a silver bullet, but we might improve things.

Dr. Claudine Simson: I'd like to go back to the fundamentals. We talked about improving access to computers and have the children getting enthusiastic exposure to science and technology. I'll go back to really the fundamentals of that are the teachers. If the teachers turn off the kids, we're lost. So we have to really work very hard on the teachers. It comes from the first time, who is going to be teaching.

How are we to entice these children going out of school to go to the faculties of education to become teachers? When you look at the prospects of the difficulties to be a teacher nowadays, it's not a very attractive profession, I can tell you that. The salaries are not very attractive. The conditions are not attractive—they're cut, cut everywhere. So we start with the teachers. We really have to work very hard on that. I don't think there is enough sensitivity about that topic right now. It is not really be advised by the federal government or the provincial governments at all. This is really, for me, a very important part, because we lose the kids. We lose them as soon as they hit grade two, grade three. I mean, they're just gone.

[Translation]

The Chairman: Mr. Bélanger.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): My first comment would be that I, too, feel that the shortage of qualified workers in this area is a nation-wide problem that it is in fact likely to grow worse.

I also believe there is another scientific area that will experience phenomenal growth and eventually overtake the electronics industry: bio-technology and genetics. This is an area currently experiencing breathtaking expansion and that will have an impact on practically every sphere of activity. My colleague, Mr. Easter, should take heart, because if we can afford to invest in research, bio-technology is an area that will play a major role in the fishery, forestry and agriculture. So we are currently facing a shortage of highly skilled workers, but the problem can only get worse, and is likely to do so very soon.

I want to thank our witnesses for their presentations, and I would encourage the Committee to take this issue very seriously, because we will ultimately suffer the consequences in both the medium and long terms.

[English]

I have a question for some of the panellists, who may wish to react to it or respond to it. We're facing a bit of a dilemma. Perhaps unknowingly, but I think knowingly, you've touched on it. I think most presentations have insisted on the need for greater wealth creation. I don't think there's anybody disagreeing with that. Inasmuch as the government's role is to create an environment to encourage greater wealth creation, I think this government has done that and will continue to do that.

I also happen to believe that one of the fundamental raisons d'être of the state, of a government, is the redistribution of that wealth. Because if you don't, you lead to a society that lacks civility, where crime becomes a serious problem and the cohesiveness of your society deteriorates. Therefore I firmly believe this redistribution of wealth is as important as its creation. Yet you're not seeking that. You're seeking a reduction in income tax to be able to compete with a regime next to us, where perhaps wealth redistribution is not as advanced and as well established as it is in Canada.

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I understand where you're coming from. My question essentially boils down to if we are to create the wealth and redistribute it, and if you are advocating a reduction in income taxes for instance, what other mechanisms would you think the government should look at to make sure that wealth redistribution does occur in this country? Or would you be prepared to look at an interim period?

You're asking the government to reduce the debt load, which I think most people agree we should do. Until we've done that, until we've reduced the debt, and thus the carrying charges of that debt, the government, we Canadians, don't have that much room to manoeuvre.

People are asking for more expenditure, generally speaking, on all fronts, not just you. They're asking for a reduction in taxes, as you were. And they're also insisting that we, as a country, as a people, reduce our debt. We can't do all of it that fast. I mean, we can go at it step by step in a balanced approach.

Would you be prepared, in the meantime—and we can define the meantime some other day—to look at higher salaries to make up the differences with the competition you have with the States, more profit-sharing? I don't believe there's anything in Canada now that would prohibit you from doing that, except the general.... You have to be able to compete in the world; I understand that. But perhaps there is room for more profit-sharing, which would encourage people to at least stay. I'm just wondering how much of that has been done, and how much more you're prepared to do, as just opposed to reducing the income tax level.

The Chairman: Thank you, Mr. Bélanger.

Ms. George, followed by Dr. Simson.

Ms. Shirley-Ann George: I think when we're increasing salaries at 15% to 20% a year, it shows that we're willing to go to fairly large extremes to try to counteract some of the competitive forces.

While we agree with you completely that there needs to be a balanced approach, and that the government's best tactic is to show a measurable result in the next budget and then a five-year plan on how to reduce the gap, you're not going to be able to not reduce personal taxation at the higher levels for several years while you do some other things.

The commitment the government's made of a third, a third, a third, is something I think most Canadians believe to be a reasonable commitment.

Mr. Mauril Bélanger: It's not quite a third, a third, a third. It's 50-50: one half of surpluses on debt and tax reduction, the other half on economic and social programs.

The Chairman: Dr. Simson, and then we'll go to Paddy Torsney.

Dr. Claudine Simson: I'd like to go back to the fact that the large companies and some of the smaller companies are global companies, and we work on global salary scales. We're already up there in terms of salary competition with the other countries—not only the States, because we have people everywhere in the world. So we are very competitive salary-wise.

In terms of wealth redistribution, a lot of the companies do a lot of wealth distribution through programs. But where we get hit when we compare to other countries is the taxation on this wealth redistribution, because this is counted as a compensation. We get hit by again the same issue of competitiveness, country by country, by things that are not in the control of the private sector, because we have global guidelines for that, but by the tax issues associated with it.

Mr. Mauril Bélanger: I wasn't referring to wealth redistribution within companies; I was talking about wealth redistribution within the country between people who can barely afford to make ends meet, who can't afford to make ends meet at times, and people who have well-paying jobs. Whether their taxation level is high enough, they still have well-paying jobs. That's the kind of wealth redistribution I was referring to.

The Chairman: Mr. Perry.

Mr. David Perry: I believe that we should all pay more taxes. However, I believe globally we should pay more taxes by lowering the taxation rate and bringing in more winners that will build more companies that will employ more people. So the tax bite gets bigger. Let's not worry about how we cut it up, let's just make this thing much bigger.

The Chairman: Ms. Shirley-Ann George.

Ms. Shirley-Ann George: I think one of the things we have to remember is that for each one of these high-paying jobs, not only do they contribute significantly in taxes, but the spin-off is at least two to four other jobs. All you have to do is go out Nepean or Kanata to see the growth that is happening in everything from the restaurant business to cleaning businesses to understand that there is significant wealth being redistributed because of the creation of these high-paying jobs.

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The Chairman: Thank you, Ms. George.

Ms. Torsney.

Ms. Paddy Torsney (Burlington, Lib.): Thank you.

First of all, I want to congratulate you on your success. Many of you were here last year and lobbying us for increased funding for research. Certainly the last budget included increases. I know they're not everything you wanted, and I encourage you to keep up your efforts and expand them. I know that I had some terrific letters from people across my riding and across the country. Hopefully you're approaching the other members of Parliament and emphasizing this issue, because it is quite important.

It seems to me that you do need that critical mass. When Mr. Szabo was asking me why some of my friends left Canada, it was because they were in finance, and stuff was happening in New York and that was the place to be. In the same way, I know the research community is trying to create that energy and that vitality that would keep people and attract people in fact. I know McMaster, for instance, is actually in the process of bringing people back from the States to try to create that energy.

I guess yesterday it came up a bit with another group talking about the mentoring and the co-op programs. I know you've identified that it's $10,000 to $12,000 for an internship program, but it seems to me there are all kinds of other ways to do it. I know, for instance, Ms. George has a member company, Gennum, in Burlington, where Ian McWalter is working with high school students on building mega-fabs and actually training the teachers and bringing them up to Queen's so that they can learn more.

The reality is that most of our kids are being taught by people who haven't taken any post-secondary science or math. So they're being discouraged, inadvertently. There's going to have to be a different way of organizing this. We can't necessarily blame the teachers, but maybe here's an opportunity for all of your companies to get very involved. Then the question is going to be if you're located in Kanata and in Burlington and in Toronto, where they can participate and those school children will have a greater chance, what are you going to do if there's no high-tech company in P.E.I.? Don't those kids deserve a chance?

Mr. Perry, I know you commented that you think it will change, but I still talk to students—that's why I had to leave for a few minutes, to talk to students—and when I ask them, hands up, how many kids are going to study engineering, one, two.... They're already self-selecting by grade eight; they've already ruled out these fields and decided they're not going into them. And even when I ask them, “Do you want to make $150,000 a year?”, they just...“Well, science is hard”.

So in the same way, Ms. George, that I didn't do very well in those ParticipAction things, I hope that when we do this SchoolNet program and some other programs we give them a little better chance. We're going to have to give some extra effort for some of those kids, because they night get it later. In the fireball show that McMaster does to students far and wide, hopefully there's some corporate participation in those, because it does generate that energy and that interest in these young people.

So I encourage you. It's quite aside from any government things that we can do. Maybe we need to facilitate and make some investments. I know we do to some extent, but we all have to work on this together. There is a real corporate responsibility. Things like praising our young researchers at Rideau Hall and having the Governor General present them awards and things is really important, but we also have to create that pool of talent across a far greater distribution of the population. Increasingly it's about who has access to information, and some of these kids, in some of the towns, for whatever reason, are just not having the opportunities presented to them.

I'll ask you to comment on that, but I also wanted to ask you.... Obviously you want increased funding for research—I love the early childhood stuff—and networking Canadians and some of these different things that we can do. But on the tax side, is it enough, as somebody suggested in one of our earlier meetings, to present the fact that we are going to get there in a while, or are you absolutely saying that we have to do it in the next round?

Mr. Perry's saying now.

Mr. David Perry: I live in the present world, and I've got 40 clients across the country that every day have products that don't get shipped because they don't have enough hands—not just high-level talent, but just don't have enough hands to do the work. And that's not just engineers. That's the big issue. It's the marketing people, it's the sales people.

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The great irony of all of this is not only have we lost and are continuing to lose great engineers, but the greatest irony is the Americans are tremendous at one specific thing: they can sell and market like none other we have ever seen. But ironically, if you look at the make-up of the high-tech companies down in California, a tremendous amount of that, especially sales and marketing side, are Canadians. There are Canadians driving these huge companies down in the States on the sales and marketing side because they couldn't find the opportunities here.

Dr. Claudine Simson: I'd like to talk about something you said. It's very important, and it's related to the challenge we have for children and teachers. I don't know if the federal government can help with providing some infrastructure for that.

We have in Ottawa a very successful program we have created and supported at Nortel, which is an internship program for teachers done during the summertime. We find them placements and they come to work between four and five weeks in the community. They work with high-tech companies, the large majority of them. They really get a good understanding of what the real world is and go back to the classrooms to create relationships.

We also have a lot of jobs we give to high school students, either summer jobs or part-time jobs. We provide more than 400 a year just in Ottawa. If there is a way to provide any facility for that or foster more of these placements, more internships for teachers maybe as tax incentives for other companies, especially small companies, because it takes time to get a teacher with you, to get kids—some kind of incentive—because I believe it is important to have this kind of role model created.

The Chairman: Ms. George.

Ms. Shirley-Ann George: You bring up two important points. One is mentoring. In talking with our leaders in our technology members, it's very clear that they are very concerned about the education system and they want to make a difference but they don't know how. One of the things that could be very helpful in what Claudine was talking about is this facilitation role.

There are, in a few communities, a group of one or two individuals who play the role of doing simple things like building databases of those who are interested in going in to speak in schools and then going out to the schools and making sure they know that you just go on this web site and you can find individuals who will come in and speak to your students.

There are programs like the Software Human Resource Council is building, some tools so that when somebody goes in to speak they're given a package that says for this age level, this is the kind of thing you should be saying, so that you're not trying to have somebody with a PhD going in and speaking at a PhD level.

Some of these facilitation roles are absolutely critical, and they're also the things that are the absolute hardest to find funding for, but there are some excellent models. We don't have to go out and invent anything new; all we have to do is put a little bit of seed money into some of these programs, something similar to the community investment program that the federal government sponsors, which is designed to help supply that facilitation money so that communities can gather money from their own sources to invest in small businesses. That same type of role could be excellent in trying to sponsor more mentoring in companies.

On the taxation side, I think it's very important that in this budget we need to see some movement, and what we need then is the plan on how we're going to get there. I don't think anybody expects the government to make one huge leap this budget. We all recognize that there's simply not enough money there. But if we can make a move now and then we can make a commitment over the next four to five years, or at least through the rest of this government's mandate, I think that will go a long way. People want to know that it's going to get better.

The Chairman: Mr. Scott.

Mr. Wayne Scott: I have two very brief comments.

You're talking today, in terms of individual employers, with two of the largest players in Canada in this. As with Nortel, IBM has in fact made a significant commitment to the K to 12 sector. In fact that's our primary strategy now for corporate donations, and has been for the last five years.

I go back to the challenge of engaging a broader range of participants in the sector, given their size. Perhaps community-based facilitation, as Shirley-Ann has just discussed, is one of the vehicles. I'm not offering a real answer or a solution, but it really is a challenge to go from the leaders now and engage the next level and down through the community.

I would echo, despite David's living in the present—I guess we all live in the present—that based on the reality we have all lived through and the reality we have today fiscally, we know it's not practical to take a huge step.

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Let me simply reinforce the importance of a direction. Many of the people I talk to and I think probably David would even admit many of the people he talks to enjoy Canada as a home country and would love to find challenging work that lets them feel good about how they're valued. Part of that is salary and bonuses, and part of it is what they're left with at the end of the day. I think the message that we're going to go in the right direction and that we're going to set specific goals and stay that course is a really important one.

The Chairman: Are there any further comments from the panellists? Mr. Perry.

Mr. David Perry: Just one quick one, and that's that we've relied on the quality of life argument for the last five years to keep people here in Canada and to bring people here, and the Americans have smartened up. I don't mean to pick on anyone in particular, but they are the most visible people who do take our graduates.

The issue is quality of life here in terms of our cities are much safer than they are in the States. The thing that is happening now, which you may not even be aware of, is that large American companies are now starting to.... Do you remember the companies towns back in the 1910s and the 1920s?

The Chairman: Yes.

Mr. David Perry: Well they're starting to re-emerge now. Large high-tech companies are starting to go into small towns where it's safe to live and establish communities there and establish company towns. If that trend continues—and I believe it will, because they're smart—our argument for quality of life as a reason to stay diminishes dramatically.

The Chairman: Thank you. That was obviously the final comment for this panel.

I would like to thank you very much for what is always, when you appear in front of the committee, an excellent round table. You bring to light issues that speak to not only present conditions but force us to think about the future.

At any point at which a society is going through a transformation, I think there's always a redefinition of roles and responsibility for not only the individual but indeed the community, government, and the private sector. Although we won't have the time today, if I may I would like to leave you with some homework, and that's precisely the question.

As we build this new society in relation to high-tech firms and the entire business, I'd like you to present to the committee what you see the roles and responsibilities are for the private sector, for the public sector, for the individual, and indeed for communities. I think it is only at a point in time that we're able to paint the future, or at least have an ultimate goal, an ultimate vision you can actually build the apparatus around so that you can reach that vision. By that you can enter into all sorts of areas, like the quality of life argument, Mr. Perry brought a number of points about how the Americans are attracting Canadians, and many of you spoke about the issue related to taxation and the important role that plays. But having said all that, the bottom line is what type of future do you want to build for this country and what role do you see yourself playing?

One of the fundamental questions for me is that I'm quite concerned about the polarization of classes based on technological know-how. I mean, we can continue to retain or attract highly skilled workers, but if at the end of the day you're going to further exacerbate the differences between those individuals who have technological know-how and those who don't, what are we going to do to make things better for everybody? Because ultimately the litmus test for any public policy decision has to be whether you improve the quality of life for people. After all is said and done, that's what it is; that's what it all comes down to, as far as I'm concerned. So I would really like to receive some thoughts on that particular issue.

Having said all that, I must tell you that I was very, very impressed with the panel this morning. Thank you.

The meeting is adjourned.