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Canada vs. U.S.: Why Young Workers Are Choosing to Leave · The Missing Middle Podcast

• 0:00
  SPEAKER_00: It tends to be the best and brightest.
• 0:02
  SPEAKER_00: So that's a real problem, you know, if Canada is basically being uh America's farm team.
• 0:07
  SPEAKER_01: It isn't young Canadians who are abandoning Canada, but Canada that has abandoned that.
• 0:12
  SPEAKER_01: Class Enomics, hosted by Sabrina Mado and Mike Moffat.
• 0:18
  SPEAKER_00: So, Sabrina, you wrote a column for the National Post that got a lot of attention.
• 0:22
  SPEAKER_00: I was really glad you wrote about this because it was something that was bothering me as well.
• 0:26
  SPEAKER_00: And here's the setup that there's this venture capitalist named Patrick Pichette, who was speaking at the recent federal liberal convention in Montreal.
• 0:35
  SPEAKER_00: And he suggested that young Canadians who take jobs in the United States and who move should be charged a half a million dollar exit fee.
• 0:43
  SPEAKER_00: And this was his back of the napkin estimate of what taxpayers spend subsidizing a Canadian university education.
• 0:49
  SPEAKER_00: So he's basically saying, hey, if you got your education here and should leave, you got to pay for that education.
• 0:55
  SPEAKER_00: So you owe us half a million dollars.
• 0:57
  SPEAKER_00: What was your reaction when you heard that proposal?
• 1:00
  SPEAKER_01: Shocked and appalled.
• 1:02
  SPEAKER_01: Hearing this floated at a federal liberal convention was stunning and completely absurd to me.
• 1:07
  SPEAKER_01: And while I want to be clear, there's no indication that this is a serious policy proposal under consideration by the liberals.
• 1:14
  SPEAKER_01: It does represent something that's gone quite mainstream.
• 1:17
  SPEAKER_01: And that's this dangerous idea that young people aren't a future worth investing in, but a resource to extract from.
• 1:24
  SPEAKER_01: Now, obviously, trapping all but the wealthiest young people in a country isn't something you do in a capitalist society or democracy.
• 1:31
  SPEAKER_01: But going beyond that, that$500,000 figure doesn't square with reality.
• 1:36
  SPEAKER_01: Young Canadians are graduating with more debt than ever into a job market where those degrees are worth less, where even people with jobs and good salaries can't afford rent, let alone to save for a home or start a family.
• 1:48
  SPEAKER_01: And unemployment among young people is at its highest in decades outside of early COVID.
• 1:53
  SPEAKER_01: These aren't young people taking half a million dollars of taxpayer subsidies and going to the states because they're entitled or not loyal to Canada.
• 2:04
  SPEAKER_00: Yeah, I couldn't agree more.
• 2:06
  SPEAKER_00: And this drove me absolutely nuts.
• 2:08
  SPEAKER_00: Like we're we're gonna start charging for exit visas, you know, like like they used to do in communist East Germany.
• 2:13
  SPEAKER_00: Like I just I could not believe this idea.
• 2:16
  SPEAKER_00: And I think it's a a note to political parties, just don't put randoms on stage during your conventions because you don't know how that's uh going to work out.
• 2:25
  SPEAKER_00: So I was appalled by the idea.
• 2:27
  SPEAKER_00: But let's move to this question of why uh young Canadians are moving to the US in the first place.
• 2:33
  SPEAKER_00: Like, what do you see as uh attracting them down there?
• 2:36
  SPEAKER_01: Well, they don't see an economic future here.
• 2:38
  SPEAKER_01: They can't get jobs, and again, even if they can, they can't afford a good quality of life or to start families, and then they look south and they see salaries that are 50 to 100% higher.
• 2:47
  SPEAKER_01: They see housing that's hundreds of thousands, if not in some cases millions cheaper, and opportunities that no longer exist here.
• 2:54
  SPEAKER_01: So this is an opportunism for young people.
• 2:57
  SPEAKER_01: For many young Canadians, looking south is the only path to the kind of life their parents took for granted.
• 3:03
  SPEAKER_01: And the irony is the conditions pushing people out were largely created by policy choices made to protect older generations' wealth and interests.
• 3:11
  SPEAKER_01: So to suggest young people have somehow ended up on the advantageous side of an unfair bargain or breaking Canada's social contract is absolutely crazy.
• 3:20
  SPEAKER_01: In fact, the exact opposite is true, but politicians are afraid to match rhetoric and policy with this reality because, of course, the large baby boomer vote.
• 3:28
  SPEAKER_01: But I want to put a number on what's actually happening here.
• 3:31
  SPEAKER_01: Braindrain is often talked about in these vague terms, uh, but economists can actually measure it.
• 3:37
  SPEAKER_01: What does it cost Canada when young educated workers leave and how do those losses compound over time?
• 3:42
  SPEAKER_00: I think you're absolutely right about why uh they're moving to the US.
• 3:46
  SPEAKER_00: You know, I taught uh university for 20 years, and I noticed in the last few years, more and more of them want to go to the US for that reason.
• 3:54
  SPEAKER_00: It's uh, you know, not even necessarily employment reasons, but sheer uh cost of living.
• 4:00
  SPEAKER_00: But we can we can actually kind of calculate or estimate the overall impact of this.
• 4:05
  SPEAKER_00: There's a Bank of Canada study from a couple of years back, we'll we'll link to it in the show notes.
• 4:10
  SPEAKER_00: And interestingly, it estimates that two-thirds of Canada's productivity gap, uh, which is producer merita's favorite topic.
• 4:17
  SPEAKER_00: This study estimates that two-thirds of our productivity difference from the United States is due to differences in the productivity level of the top 10% of earners.
• 4:28
  SPEAKER_00: So the bottom 90% Canadians and Americans are just as productive, but that top 10%, we are a lot less productive.
• 4:36
  SPEAKER_00: And a lot of that is brain drain where we lose many of our best and brightest to the US.
• 4:41
  SPEAKER_00: So, you know, you think of a sports team, it loses its best players to free agency to other teams, it's gonna get worse.
• 4:48
  SPEAKER_00: We kind of see the same thing here.
• 4:50
  SPEAKER_00: And it doesn't just affect them directly that when talented people leave, they take their networks, their potential startups, their ideas, their kids with them.
• 4:59
  SPEAKER_00: And, you know, this affects a bunch of different sectors in the economy, whether you look at technology or medicine or finance.
• 5:06
  SPEAKER_00: So the very people that we're hoping to uh build an economy with are the ones that are leaving.
• 5:12
  SPEAKER_00: And then there's this political instinct that you describe in your column about, you know, governments going, okay, we have to do something about this.
• 5:20
  SPEAKER_00: And you can always sync in terms, policy terms of carrots and sticks, and why are people making the decision what they do?
• 5:27
  SPEAKER_00: And you have this guy who wants to kind of apply a stick, okay, we'll we'll put this punitive exit fee on people, rather than asking them, okay, like why are young people leaving?
• 5:38
  SPEAKER_00: You know, and it struck me as revealing something bigger about how Canada has come to think about young people, that they're a group that needs to be punished, that they need to be controlled rather than, you know, actually talking to them and figuring out why they're making the decisions that they do.
• 5:54
  SPEAKER_00: So, what do you think that says about where Canada is politically right now?
• 5:57
  SPEAKER_01: Yeah, the Pichette proposal is problematic enough on its own, but even worse, it's a symptom of a broader framing problem that's impacting policy in so many areas right now.
• 6:08
  SPEAKER_01: And that's the idea that young Canadians are treated as a cost to be recouped or a demographic to extract from, again, not a future to be invested in, which is a reversal of how we've typically seen older generations want to create better futures for younger ones throughout Canadian history.
• 6:24
  SPEAKER_01: The political calculus is part of this, that seniors vote at higher rates, they own more assets, they have more political influence.
• 6:31
  SPEAKER_01: And that naturally shapes what governments protect and of course what they let slide.
• 6:36
  SPEAKER_01: But now there's been this decades-long accumulation of policy decisions, you know, like housing restrictions that inflated home values, tax structures that benefit asset holders, and immigration policy that inflated labor supply without building the infrastructure to match.
• 6:50
  SPEAKER_01: And all of those decisions have landed hardest on younger generations.
• 6:54
  SPEAKER_01: And this exit fee proposal is the logical endpoint of all of that.
• 6:58
  SPEAKER_01: Rather than fix the conditions driving young people away, let's punish them for responding rationally to those conditions.
• 7:05
  SPEAKER_01: It's also politically convenient that blaming young people for leaving is, of course, much easier than confronting the policy failures that made staying so difficult to begin with.
• 7:14
  SPEAKER_01: But after this column ran, I did get some pushback online from some quarters saying concerns about brain drain are overblown.
• 7:22
  SPEAKER_01: And the specific argument was a chart showing that fewer Canadians are living in the United States today than in decades past.
• 7:29
  SPEAKER_01: So, Mike, should I be eating my words here?
• 7:31
  SPEAKER_01: Is brain drain actually not as serious as I made it out to be, or does that chart not tell the full story?
• 7:36
  SPEAKER_00: Well, well, first of all, I'm always happy when you are causing controversy on Twitter and instead of me.
• 7:41
  SPEAKER_00: And, you know, I think the the chart is as far as I can tell, it's factually accurate, but it's answering a different question than the one that you're posing.
• 7:50
  SPEAKER_00: Because what it looks at is the percentage of Canadian-born people who are living in the United States as a percentage of the Canadian-born people residing in Canada.
• 7:59
  SPEAKER_00: And yes, that number has declined.
• 8:01
  SPEAKER_00: So if we're looking at just that metric, it looks smaller than it did in the 1990s.
• 8:08
  SPEAKER_00: But there's a problem with that.
• 8:10
  SPEAKER_00: And the problem is that it's looking at where someone was born and not where they're coming from, right?
• 8:17
  SPEAKER_00: And we know a lot of folks living in Canada weren't born here.
• 8:21
  SPEAKER_00: So it's kind of a misleading metric.
• 8:24
  SPEAKER_00: I think what we should be looking at is net emigration from Canada.
• 8:28
  SPEAKER_00: That is the number of individuals who are leaving the country.
• 8:32
  SPEAKER_00: And it hit a 50-year high last year.
• 8:35
  SPEAKER_00: And that's probably an undercount.
• 8:37
  SPEAKER_00: If we actually look at the American data of Canadians moving to the US, their data is actually higher than our data on Canadians moving out or people from Canada moving out.
• 8:48
  SPEAKER_00: And the reason why we're probably undercounting is that we don't have any kind of mandatory exit registration program.
• 8:55
  SPEAKER_00: You know, we work from tax filing data and other data rather than hard counts.
• 9:00
  SPEAKER_00: So what ends up happening is a bunch of folks end up leaving the country and we have no idea.
• 9:06
  SPEAKER_00: We have no idea that they're not here.
• 9:07
  SPEAKER_00: So the true picture is probably considerably worse than what uh Canada's data shows.
• 9:13
  SPEAKER_00: But what we do know from the data that we do have is the composition.
• 9:17
  SPEAKER_00: So not just the number of people who are leaving, but you know, some information about them.
• 9:22
  SPEAKER_00: What we do know is that 70% of the folks leaving have at least a university degree.
• 9:27
  SPEAKER_00: The Canadian population as a whole, or working age population as a whole, is only about a third.
• 9:32
  SPEAKER_00: So it's, you know, disproportionately well-educated folks.
• 9:36
  SPEAKER_00: And, you know, the that Bank of Canada study that I mentioned earlier found that roughly 40% of Canadians who would rank in the top 1% of earners have already emigrated south.
• 9:47
  SPEAKER_00: So again, we're losing those kind of high-skilled free agents that I mentioned earlier.
• 9:52
  SPEAKER_00: And finally, again, I really want to stress this that chart that kind of went viral on Twitter, they're just looking at Canadian-born people.
• 10:00
  SPEAKER_00: So your critics really aren't considering the fact that you have people coming over here from abroad, uh studying at our best uh university.
• 10:09
  SPEAKER_00: So think of like people studying at Waterloo, and then uh they graduate from here.
• 10:15
  SPEAKER_00: And instead of staying in the local economy and staying in the country, you know, they're moving to Silicon Valley or Austin or Denver or wherever.
• 10:23
  SPEAKER_00: Those charts that people are posing, it doesn't capture that effect.
• 10:27
  SPEAKER_01: So Mike, Canada dramatically ramped up immigration over the last several years.
• 10:31
  SPEAKER_01: And one of the justifications was addressing talent and labor shortages.
• 10:35
  SPEAKER_01: But we're now seeing that a significant portion of those newcomers are also leaving.
• 10:40
  SPEAKER_01: Does that mean the immigration strategy was always just masking the brain drain problem rather than actually solving it?
• 10:46
  SPEAKER_01: Or did it even make it worse by dampening young people's employment and labor prospects?
• 10:51
  SPEAKER_00: I think it's a complex story here, but any kind of finding the data is rather uncomfortable.
• 10:57
  SPEAKER_00: So the net emigration numbers that hit that 50-year high, you know, it's not just Canadians leaving.
• 11:02
  SPEAKER_00: So it's a lot of non-permanent residents, international students, uh, and so on that are leaving.
• 11:09
  SPEAKER_00: And it it tends to be the best and brightest.
• 11:12
  SPEAKER_00: So that's a real problem, you know, if Canada is basically being uh America's farm team.
• 11:18
  SPEAKER_00: On the entry side, we have a real problem on the composition that we're bringing in.
• 11:22
  SPEAKER_00: So historically, if we we go back to the 60s, 70s, 80s, and so on, Canada's had this point-based system where we, you know, try and find folks who are most likely to succeed in in Canada, have the greatest skills, and so on.
• 11:37
  SPEAKER_00: And over the last decade and a half, that we've gone from about 67% of our permanent admissions being based on the point system down to 58 uh percent.
• 11:48
  SPEAKER_00: So that is a change that the composition of folks we're bringing in in permanent residency tends to be a little bit less skill-based.
• 11:56
  SPEAKER_00: Uh and that's just permanent residency.
• 11:59
  SPEAKER_00: When we look at non-permanent residency, like temporary work permits, international students, and so on.
• 12:04
  SPEAKER_00: You know, we've gone from about 67,000 people in 2000 who were living in Canada in some kind of non-permanent capacity to well over a million by the early 2020s.
• 12:16
  SPEAKER_00: And the skill profile of that temporary workforce has been diminishing.
• 12:21
  SPEAKER_00: You know, you and I have talked about this before.
• 12:23
  SPEAKER_00: You know, a lot of it is folks taking um, you know, being students on paper, taking a couple classes in introduction to tourism fundamentals on Zoom, but really they're here to hopefully, you know, in their eyes, hopefully get permanent residency.
• 12:41
  SPEAKER_00: And then in the meantime, they're driving for Uber Eats or whoever, right?
• 12:45
  SPEAKER_00: So that's not exactly what we were trying to get uh when it comes to our immigration system.
• 12:52
  SPEAKER_00: And to and to your second question, I'm kind of all over the place here, that yeah, you know, there is a real argument that the immigration strategy didn't just mass a retention problem, that it actively made conditions worse for young Canadians here, because we have that wage gap uh between temporary workers and Canadian-born workers, and that doubled over over time, right?
• 13:12
  SPEAKER_00: So when you have uh folks coming in who are you know here, basically here to work, which is fine, but you know, they are tied to a particular employer, or if they lose their job, they're they're gonna have to go home.
• 13:28
  SPEAKER_00: They're ripe for exploitation.
• 13:30
  SPEAKER_00: So it allows companies to really exploit them.
• 13:32
  SPEAKER_00: And it's hard as a young worker to compete with that.
• 13:36
  SPEAKER_00: So we really did through the Temporary Foreign Worker Program and international student programs, undercut young labor by bringing in folks that really didn't have as many enforceable uh rights and and protections than uh than younger workers.
• 13:53
  SPEAKER_01: Well, what's in there then?
• 13:54
  SPEAKER_01: So the last line of my column was that it isn't young Canadians who are abandoning Canada, but Canada that has abandoned them and that it needs to put in the work to actually earn them back.
• 14:04
  SPEAKER_01: But for you, Mike, what would earning them back look like in concrete policy terms?
• 14:10
  SPEAKER_00: Well, I think it starts with housing.
• 14:12
  SPEAKER_00: We're kind of big fans here of the housing theory of everything.
• 14:15
  SPEAKER_00: And that's a big part of it, that you know, we need to be able to get homes that are affordable again, both on the ownership side and the rental side.
• 14:25
  SPEAKER_00: And that's a mix of homes, right?
• 14:28
  SPEAKER_00: It can't just all be high-rise apartments that people are looking for, you know, three-bedroom homes with a yard where they can raise a couple kids.
• 14:37
  SPEAKER_00: And, you know, we've put in all of these restrictions and costs to building that.
• 14:43
  SPEAKER_00: So zoning and land use policies and development charges and and so on.
• 14:48
  SPEAKER_00: So I think if you solve that, that probably gets you about two-thirds of the way there.
• 14:52
  SPEAKER_00: And then on the income side, it really is looking at you know, creating a level playing field here so you're not having to compete with workers that have much fewer rights.
• 15:04
  SPEAKER_00: I do think we need to look at our tax and transfer system.
• 15:08
  SPEAKER_00: You know, so much of our money is going to support people who have earned a lot of money in their career.
• 15:15
  SPEAKER_00: So, you know, we kind of help people who live in a two or three million dollar home that they bought for$100,000 back in 1982.
• 15:23
  SPEAKER_00: But, you know, we're not helping those folks at the start of their career who have, you know, precarious employment, they don't have a pension, they have high student debt, delayed assets accumulation, and so on.
• 15:34
  SPEAKER_00: Yet all of our financial supports seem to be going to folks who did really well in the housing market, tax-free over the last 30 to 40 years.
• 15:44
  SPEAKER_01: Yeah, for me, the overall theme here in so many policy buckets is that the brain drain problem is real.
• 15:50
  SPEAKER_01: And it's not a question of young people being ungrateful, unloyal, or entitled.
• 15:54
  SPEAKER_01: It's a value proposition problem at best and one of economic survival for many young people.
• 16:00
  SPEAKER_01: Canada has to offer young people something worth staying for, and that does start with affordable housing and viable careers and a fiscal system that isn't structured to extract from them to subsidize a generation that is on average doing significantly better.
• 16:13
  SPEAKER_01: Thank you everyone for watching and listening.
• 16:15
  SPEAKER_01: And to our producer, Meredith Martin, and our editor Sean Foreman.
• 16:19
  SPEAKER_00: And if you have any thoughts or questions about moving to New York State at age 23, like I did, please send us an email to miscmiddle podcast at gmail.com.
• 16:28
  SPEAKER_01: And we'll see you next time.