Tech Employment In Ottawa-Gatineau Increased Only Marginally From 2014 To 2019, While Jumping More Than 35 Per Cent In Toronto And Vancouver.

By James Bagnall

It’s no secret the first year of COVID has been very good for high-tech. Canadians shopped online in record numbers, streamed movies and school lessons, and equipped their home offices for telecommuting. The tech firms that made all this possible prospered to a degree that was unimaginable last March. Revenues shot up, market values exploded and hiring continued apace despite the absence of in-person interviews.Canada’s 33 largest cities last year recorded a net gain of 67,000 high-tech jobs, according to Statistics Canada, bringing the total to 700,000.

Yet, one of the big surprises of tech’s resurgence has been the relative weakness of the national capital region, one of the most tech-intensive in the country. Nokia, Ericsson, and Ciena — which build the infrastructure that underpins the online economy — run major operations here. Shopify, the e-commerce enabler, is also headquartered here. Not to mention, a lively group of software startups has been forming across the city.

Despite this, Ottawa-Gatineau was the only large urban area to record a drop in tech employment last year. Yes, it was a very marginal 400 jobs, but it compared with net gains of nearly 38,000 for Toronto and 11,000 in Montreal. Even Calgary and Edmonton — not usually considered high-tech hot spots — each saw increases in excess of 3,000 jobs. The capital region’s performance is even starker when viewed against a longer horizon.

Go back to 2007, the last full year before Nortel Networks — once our largest private-sector employer — began its descent into oblivion. High-tech firms in the region that year employed an estimated 61,000 directly, representing nearly 10 per cent of the local workforce. That was the highest such ratio in the country by a fair margin. When Nortel slipped into bankruptcy in 2009, the impact was huge. The region’s high-tech workforce dipped to an annual low of 40,000 before recovering to about 46,000 — a level that has been static for the past five years.

Given the massive shock of Nortel’s implosion, that’s actually not a bad outcome. But in the meantime, the rest of the country’s tech industry has caught up to or surpassed the capital region. Consider that while Ottawa-Gatineau shed more than 15,000 tech jobs between 2007 and 2020 (annual averages), Toronto added 94,000 and Montreal and Vancouver bulked up by 25,000 each.

The result is that Toronto is now the country’s most tech intensive city. Last year 7.6 per cent of its workforce was employed directly by high-tech firms, up from 5.3 per cent in 2007. The capital region last year was number two at 6.3 per cent, but only just. The comparable ratio for Montreal and Kitchener-Waterloo was 6.2 per cent. For Vancouver, it was 5.9 per cent.

The Kanata North Business Association, which advocates on behalf of what it calls Canada’s largest research and technology park, prefers a different measure of intensity — one that places the capital region on top. The association points to a recent tabulation by CBRE, a consulting group, of all tech employees, no matter what industry they work in.

By this estimate — an occupational rather than an industry view — roughly 10 per cent of workers within government or manufacturing could be considered high-tech. Other sectors are less intensive. CBRE calculated some 76,000 tech workers in 2019 lived in the capital region, or 11.3 per cent of the total. Toronto’s tech workforce of a quarter million made up about 9 per cent.

But if your intent is to call attention to an industry known for entrepreneurial force, this isn’t the way to do it. A very significant percentage of these tech workers in Ottawa-Gatineau work directly or indirectly for government or schools and hospitals that rely on government funding Not only that, the CBRE reports that even by its more favourable definition, Tech Employment In Ottawa-Gatineau Increased Only Marginally From 2014 To 2019, While Jumping More Than 35 Per Cent In Toronto And Vancouver.

Which points to another explanation for the region’s relative decline in high-tech.

Toronto, Montreal and Vancouver all have the advantage of larger populations and significant pools of venture capital. According to tabulations by the Branham Group, an Ottawa consulting firm, 15 of the 25 largest Canadian tech firms by revenue are headquartered in either Toronto or Montreal, and the vast majority of the 25 biggest multinationals are based in or near Toronto. Decisions about where to locate branch operations are related to the proximity of customers and transportation hubs such as international airports.

Large corporations of course offer a stable base of employment. But the real growth in tech jobs tends to occur in startups that are hitting their stride — something known in the industry as scaling up. Here, too, bigger cities have an advantage. A recent analysis by Wakefield Research of Arlington, VA defined a scaleup as a firm with at least three straight years of 20 per cent plus growth in employment and revenue. Wakefield examined the experience of some five million U.S. firms between 2006 and 2012 and found that less than two per cent fit the criteria. These scaleups, however, accounted for 35 per cent of all the job growth.

Shopify certainly qualifies as a scaleup. Its global workforce, estimated at more than 8,000, has increased by more than 60 per cent in the past two years alone. Yet that hasn’t benefitted the Ottawa region proportionately, hinting at another trend that runs against smaller centres. Probably less than 20 per cent of Shopify’s workers live in Ottawa or Gatineau as the company has embarked on a global hunt for talent. Shopify is now a major employer in Toronto, Montreal and Vancouver — and is spreading its wings in the U.S., Europe and Asia.

Part of this has to do with the hiring freedom afforded by a remote, work-from-home strategy, which Shopify has adopted enthusiastically. Software firms can do their work from anywhere, giving them access to a much deeper pool of talent. It is easier to find the precise technical skills and experience they require, in larger cities. Scaleups also depend on a ready supply of investment capital. “Toronto has a significantly higher number of venture capitalists and financial support,” says Leo Lax, the executive managing director of L-Spark, a startup incubator based in Kanata. “So you end up with many more startups there,” he adds.

During the first nine months of 2020, for instance, startups in Toronto, Vancouver and Montreal each raised more than $700 million in fresh venture financing while in Ottawa 13 firms secured a total of little more than $100 million during the same period. To some extent Ottawa is still paying for the telecom crash of 2001. That was the beginning of a lengthy stretch in which venture capital firms lost fortunes as their multi-billion dollar investments in Ottawa startups turned to dust.me platforms.

This news was originally published at Cape Breton Post.