07/28/2016 05:29 EDT | Updated 07/28/2016 05:59 EDT

Charging Grads Leaving Canada 'Exit Tax' Ignores Economic Realities

Shutterstock / David Hsu

Last month, the Council of Canadian Innovators suggested in an interview with the Globe and Mail that what one could consider an "exit tax" should be charged for graduates leaving Canada for destinations such as Silicon Valley, supposedly in order to recoup Canadian taxpayer dollars. Not only is the statement indicative of how unfamiliar the Council of Canadian Innovators is with the workings of the global economy, it is an indicator of how lacking in understanding the newly formed Council of Canadian Innovators is concerning innovation.

The Council of Canadian Innovators apparently believes that the global economy resembles the Cold War era rather than today's fast paced globalized economy. In many respects, the Council of Canadian Innovators is failing to understand the new dynamics of today's information economy. Indeed, Canada is participating in a new economy where individuals cannot be treated as replaceable widgets. Instead, they must be treated as individual contributors who have the capacity to individually contribute to innovation and growth within an organization.

In breaking down why the Council of Canadian Innovators' exit tax concept is a bad idea, one can break the argument against into three components:

Labour Isn't About Widgets Anymore, It's About Harnessing Individual Thought

The biggest transition that today's organizations must deal with is the fact that the old command and control management style no longer produces the peak productivity that is increasingly required. Thanks to the increasing mobility of both ideas and labor, organizations are having to learn new ways of motivating and retaining personnel.

Indeed, the biggest concern for many organizations is not necessarily how to maximize the output of products but it is how to retain and motivate highly productive personnel. Increasingly, it is about finding individuals who can develop new ideas and execute them as quickly as possible that are enabling individual organizations to maintain their competitive advantage.

Barriers And Restrictions Are Increasingly Meaningless

While the Council of Canadian Innovators seems to be adopting the same attitude as a number of politicians globally which is to place barriers and restrictions to individual liberties and movements, what has been proven time and again throughout history is that restrictions and the resources spent to enforce said restrictions only leads to a wasteful allocation of resources and more misery.

Indeed, thanks to technology, restrictions are increasingly meaningless in today's globalized society. There are increasingly more tools for individuals to make a positive singular impact on society. From utilizing the Internet to communicate their message and building communities for change and action, individuals are more empowered than ever to make a difference and to overcome unnecessary barriers and restrictions.

It Doesn't Address Two Critical Canadian Gap Issues: Financial Incentive And Interesting Diverse Work

Like it or not, what the Council of Canadian Innovators is proposing with an exit tax doesn't address the fundamental reasons that Canadian graduates leave Canada for other locales. Indeed, while the primary focus has been Silicon Valley, the reality is that many graduates leave Canada for other geographic locales through a combination of either better financial incentives or more interesting diverse work.

No Financial Incentives

What the Council of Canadian Innovators fails to understand is that in a free market, the need to pay globally competitive wages is increasingly critical. While work-life balance will appeal to some, others will not be willing to sacrifice financial incentives for some illusory "work-life" balance. Indeed, many would argue that there is no need for them to sacrifice either and that they can have both the financial incentives they deserve as well as the "work-life" balance they are seeking.

In many respects, Canadian CEOs need to stop treating their employees as offshore labour and more as highly intelligent, industrious and innovative personnel who can help their organizations achieve advances on a global scale. Indeed, the stinginess of Canadian organizations when it comes to financial incentives is reminiscent of the "branch plant" economy mentality that dominated the Canadian economy for much of the 1980s and 1990s. If Canada is to stand on its own two feet and become a true global economic power with a truly diversified economy, it must start paying its workforce globally competitive wages.

No Interesting Diverse Work

In today's knowledge-based economy, it isn't about routine but about variety and adaptability. The increasing refrain from today's knowledge workers is it isn't just financial incentives that matter but the impact they are having on society as a whole. Today's knowledge worker is more interested about having diverse work that challenges them on a daily basis from not only an intellectual level but a creative level as well.

These changes are occurring at both a macro-economic and micro-economic level. Organizations are realizing that work and routine are increasingly not synonymous with each other anymore. While routine is initially necessary to learn new skills and processes, it is about constant adaptability that continues to drive processes and innovation forward.

Creating economic barriers for individuals to leave the country won't help the cause of innovation. Indeed, while an individual may physically be trapped in one location they will always be looking for avenues to exit. In many respects, it is like an employee who has only 24 hours to leave on a vacation. While he or she might be physically present at work, they are already mentally checked out and are more than likely less productive than usual.

What the Council of Canadian Innovators fails to realize is the fact that today's innovation economy needs highly motivated individuals to accomplish the innovative feats that are required to be competitive. Strong arm tactics may have worked in the old manufacturing economy but in today's innovation economy, different incentives are required to motivate innovative employees. Indeed, the threat of imposing an exit tax and other draconian measures against ex-pat Canadians not only reduces the "positive" sentiment ex-pat Canadians have, but also reduces the positive externalities that ex-pat Canadians can bring to Canada's knowledge economy.

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