The Knowledge Economy Needs to (and Can) Benefit the Whole Country

Canada’s economy is transitioning from a resource economy to a knowledge economy. I have some bad news and some good news. First the bad news. This transition is tearing the economic heart out of towns and cities across this country in favour of the three largest cities and a handful of regional university towns. This is a threat to our culture, our way of life and our economic and social stability. Now the good news. We have all the tools at hand to fix this problem and are young people are starting to show us the way forward.

In recent years, voices as diverse as Robert Reich, Charles Murray and Thomas Piketty have fervently argued that our economy, society and perhaps our democracy are under threat from growing inequality. The problem they describe is as true for Canada as it is for America: economic growth is not raising all boats and, more problematically, urban educated elites (like me) are completely insulated from that fact. Reich and Murray each go further to argue that we have in fact permitted the manufacturing base that supported a large segment of society to be eroded and have replaced it with nothing at all. This is destroying our smaller towns and cities, denuding them of young people and risking the happiness and security of the elderly left behind.

Both Reich and Murray note that the root of the problem is not necessarily trade but education. But Murray, a man I generally disagree with, made a further point that I believe merits consideration. He argues that our system of education and concentration of employment in major cities has stripped cities and towns of their best and brightest. Communities require a mix of skills to be successful and young, intelligent go-getters are critical.   Without them, there is no return on communities’ investment in the education of their youth. Moreover, losing them has led to economic disaster for the bottom 50th percentile, economic malaise for the next 45th percentile and an unprecedented boon for the upper 5% for whom technology allows even greater gains through automation and robotization. This is not just “unseemly”, it is wrong and damaging to the entire society.

The Canadian public knows this to be true. Recent polls have consistently shown that almost 60% of Canadians consider violent class conflict to be an unsurprising possibility if the current inequality is not addressed (EKOS http://www.ekospolitics.com/index.php/2016/07/fear-and-hope-understanding-the-national-mood/).   But all is not lost, like Scrooge in A Christmas Carol, we may yet redeem ourselves and we have never had more tools available to do it.

The solution, in my view, is straightforward: encourage the relocation of IT and information-based jobs out of the big cities and into regional centers and even small towns. With today’s technology, there are very few reasons to justify concentrating jobs in Toronto, Vancouver and Montreal. People do not have to come into the office to work productively. They can work from anywhere. Millennials are culturally and economically equipped to prosper out of the office and technology platforms are readily available to enable remote work at an unprecedented scale.   This means that we do not have to move whole companies to move jobs. We just need to let people who do the jobs decide where they want to live and take policy steps to broaden the range of viable communities in which knowledge workers can settle.

Think of the benefits of distributing work across the country. Young people would be able to afford homes; a goal that is now completely unattainable for them in major cities.   Their incomes would provide spin off jobs that raise the economic prosperity of the towns and cities where they live. Their children would provide an economic base for strong regional schools. Their presence would revitalize towns and decentralize growth into rural Canada.   If we fail to revitalize these communities, we will pay a terrible price in terms of social upheaval and government expenditures.

The benefits would also flow to employers. Employees who work outside of major cities would be able to accept lower pay while achieving a higher quality of life due to lower real estate and commuting costs and times. There would also be substantial decreases in rent and other office occupation costs that would more than offset the costs associated with managing remote workers.

What then are the challenges? First and foremost, we need a national initiative to spread high speed internet far and wide.   The lack of connectivity in many parts of the country is a significant barrier to economic renewal. Levelling this playing field should be a national infrastructure priority.

Secondly, we need a program for supporting municipalities in establishing, promoting and managing work hubs in small towns and cities to provide knowledge workers with a common place of work even if they are not working for the same company.   This will ease the transition from centralized offices while also helping integrate new residents into the community. The operating costs can be and should be borne by business but no business would front the capital cost.

Thirdly, we need to decouple the regional development incentives from the location of the head office of the businesses that receive them and open them up to entrepreneurs and established businesses, including small businesses, who are prepared to permit one or more employees to live and work in regions that are seeking to attract growth.

But most of all, we need to change the mindset that when the cat’s away the mice will play. My company employs people in four countries. Our Canadian staff resides and works in 5 different municipalities in two provinces. We leverage technology to knit a diverse workforce into a strong team. Any company can do this.

This is achievable and vital to the success of our country.

Mark Walker is president of FLODocs, Toronto, which makes automated change management and compliance software for cloud platforms.