President & CEO
RBC Financial Group
10th International Metropolis Conference
October 20, 2005
Thank you, Mayor Miller.
I'm sure that I'm not the first to say how appropriate it is for Toronto to be hosting Metropolis, given we are one of the world's most ethnically diverse cities. It's not by chance that "Diversity: Our Strength" is Toronto's motto.
I'm here to make a case for its importance to the future strength and prosperity of the whole country.
It is interesting that when asked, in the Canadian Values Poll, "what makes Canada unique" -- the number one answer was "diversity and multiculturalism."
To put this in perspective, "hockey" ranked dead last.
Yet to find "diversity", above everything else in the top spot, makes a strong statement about the way Canadians define ourselves.
"Diversity: Our Strength" is a great slogan.
But diversity is not just one city's strength. It can and should be the country's competitive advantage.
Canada currently faces economic challenges. Our standard of living lags behind the United States' and other countries. Our real per capita GDP growth is slipping in world rankings. Our productivity growth is sliding which reflects deteriorating relative prosperity.
So while we are starting from a reasonable economic base, a strong fiscal position and a high quality of life, we cannot be complacent, because we are losing ground in an increasingly competitive world.
If Canadians want vibrant, prosperous communities and an excellent standard of living, then we need to become one of the world's most competitive nations to foot the bill. The bottom line is that you can't have a well-intentioned social agenda without a sound economic agenda.
We have to address specific issues related to economic policy if we are going to live up to our potential. One of those issues, and the topic that I would like to comment on, is immigration and diversity.
We believe that one of the ways to grow Canada's economy is to better leverage both diversity in our workplaces and immigration.
In fact there are few countries that stands to gain as much economic benefit from diversity and immigration as Canada.
If we succeed we will have an unrivalled advantage. If we fail, we will pay a heavy cost in lost opportunity, and will face an uphill battle in finding ways to grow our economy and pay for an ambitious social agenda.
Earlier this year, I asked our Economics department to quantify the cost to our economy of failing to realize the potential of immigrants as well as other under-utilized human capital pools.
We released that report, called "The Diversity Advantage," today.
The report is 24 pages long, and makes 22 recommendations ranging from tax to policy reform. It makes a hard-hitting case for a national productivity agenda, an issue that is now a current priority for our governments, but one that needs concrete policy actions.
Today, I'd like to talk specifically about the sections of the report that deal with immigration, and will review a handful of our recommendations. I'll also give some practical examples from RBC.
Immigration has historically been critical to Canada's growth, yet it has seldom been as important as it is today. Competitive advantage is no longer defined by one's resource base, and is no longer measured by capital assets like plants, equipment and machinery. Competitive advantage in today's dynamic world will be driven by one's ability to tap human capital-to innovate and adapt, develop new markets and foster new companies.
But Canada is a small nation. Our birth rate just hit an historic low, and our workforce is aging. While Canada's 10 million baby boomers have accomplished much, they have not delivered in the baby department. Ten million parents have had only 8 million children. That's not enough to maintain the status quo, let alone grow our labour force.
The reality is that we're already staring labour shortages in the face. If we are going to succeed, we are going to have to import talented people to make up the gap - in other words invest in human capital.
Right now, new Canadians make up about 70 per cent of the growth in the Canadian labour force. By 2011, they will account for all of it.
This situation is not unique to Canada: in countries like Italy, Spain and Germany, birthrates are falling and their workforce is graying. We'll be going head-to-head with them in a global war for talent, not to mention with powerhouses like China and India, who are pouring investments into education, and also working to retain and attract human capital.
Our labour force will stop growing without increased immigration. A shrinking workforce, smaller business-economic base and a declining tax base does not augur well for future economic prosperity. How well we meet the challenges of diversity will determine our future success in attracting talented immigrants as global competition for that talent intensifies.
And without a talented workforce, Canadian business will be unable to achieve strategies of innovation and growth, or forced to implement these strategies in other parts of the world.
Currently, Canada welcomes about 220,000 immigrants a year. At that level, we calculate that our labour force will stop growing in about 10 years.
Our report recommends that Canada consider raising its target to as many as 400,000 immigrants a year. By our calculations, this would stem the impact of our aging workforce and low birth rate.
Further, we must make a concerted effort to attract skilled workers into those industries that are currently suffering labour shortages, and encourage the migration of new immigrants to centres beyond Toronto, Vancouver and Montreal.
And, to succeed, we must also provide an environment where new Canadians can maximize their potential. This can be Canada's competitive advantage, but we have to work harder to make it happen.
We'll need to make some short-term investments on the ground before we reap the long-term benefits of increased immigration.
For example, we must solve the real and pressing needs for programs such as language training and foreign credential certification.
Municipal governments also need to be a partner with their federal and provincial counterparts in determining immigration targets and migration strategies, because cities are truly where the rubber will hit the road. That's where the pressure will be felt for increased infrastructure, such as transportation and energy.
For cities like Toronto, already suffering from budget shortfalls, this is already a challenge, but doubly so when you consider that cities are dependent on the slow drip of property taxes for revenue. Our report calls for an immediate and fundamental reform of the revenue-raising authorities of municipal government.
All levels of government must raise the bar, coordinating their policies on identifying, accepting and integrating immigrants.
But we can't assume that raising immigration targets will solve all our problems. We must also work aggressively to release the untapped potential in our current workforce.
It's no secret that we don't have the best track record in this area and it has been slipping. Over the past decade immigrants have arrived in Canada better educated and at similar stages in their careers as those born in Canada, but evidence suggests that they have been less successful than earlier waves of immigrants. They have not found jobs that match their skill levels, are earning less than those born in Canada or experiencing higher unemployment rates.
This is a waste of human potential: it's like driving a high-performance sports car at 20 kilometers an hour.
But it also represents a direct hit to our economy. If all new Canadians were fully employed at his or her level of education, earning equal pay to someone born in Canada, we calculate that the contribution to Canada's economy would be an increase to personal income in the neighbourhood of $13 billion a year.
That's equals a one-time gain of 400,000 more workers in a year, just from leveraging what we already have in our backyard.
I would not be doing justice to our report without mentioning that we see cultural diversity as just one of three high-impact areas that can enhance Canadian prosperity.
If women, seniors and immigrants, collectively, were employed at their level of education, earning equal pay to men born in Canada, personal incomes would increase by $174 billion, or an equivalent of 1.6 million more workers. To waste this potential is like leaving that sports car idling in the driveway.
Clearly, when it comes to leveraging the potential of immigrants, there is work to be done. The Canadian government's "Internationally Trained Workers Initiative" is a step forward, especially on the topic of foreign credentials. This is one of the most significant barriers to employment for skilled immigrants.
All stakeholders must work towards raising the profile of foreign education institutions in Canada.
RBC uses a specialist firm to evaluate the Canadian equivalents of foreign credentials, so we can make sure prospective employees aren't falling through the cracks. It would be very helpful for all businesses, especially small and medium-sized ones, if someone-government or NGO— were to publish a guide that rated or reviewed these institutions on our behalf.
For Canada to maximize the value of immigration, I cannot overstate the importance of a collective effort by all sectors: government, community, labour and business.
Government cannot bear the burden alone. Governments can establish policies that attract skilled immigrants to Canada, but once they have arrived, businesses, both large and small, have to pick up the ball. But we've been dropping it.
Last year, the Public Policy Forum interviewed over 2,000 Canadian employers about how they are integrating immigrants into the workforce. Here's what they found:
In my view, this failure is not because of intentional biases. It's due to systemic challenges that exist in any organizations, compounded by businesses that fail to recognize the business opportunity from diversity and capitalize on it.
I believe that once businesses see the opportunity rather than the risk, many of the systemic challenges of diversity will disappear.
RBC sets a high premium on diversity. As a matter of interest, I chair our Diversity Leadership Council, made up of senior leaders from across our businesses, and it is the only committee other than my executive committee that I sit on.
This Council sets RBC's employment equity strategy and goals. We meet quarterly to make sure the talent pipeline is being filled with qualified candidates from diverse groups, as well as tracking the results of our recruitment efforts, promotions and terminations.
Each of our businesses has goals with respect to gender, people with disabilities, aboriginal people and visible minorities so we can measure our performance and hold people accountable, rather than just talking a good game.
We focus our approach to diversity not just from a social justice perspective, but as a business opportunity which, in my view, is the best way to overcome the systemic challenges.
Human capital really is our greatest asset, and it would be irresponsible not to maximize it.
Currently, about 23 per cent of our workforce is comprised of visible minorities, and about ten per cent of our executive management team. We know we've got to do better but view it as a long-term program that will be well worth the investment.
We are developing and adapting specific programs to help build a diverse range of employees into our workforce.
For example, we used to ask prospective employees to provide the name of the institution where they received their degrees or accreditations on our job application. But our recruiters were passing over qualified candidates because they weren't familiar with foreign degrees and institutions. So we removed that section from our application altogether-and follow up on credentials and education later in the process. We hope this will move us one step closer toward bias-free hiring.
From RBC's point of view, every new Canadian we hire helps us build institutional knowledge about our key cultural markets both here and abroad-and that's invaluable in the global marketplace.
Economic value is also created by newcomers to Canada because they quickly become consumers of goods and services as well.
RBC, for example, has about 11 million clients in Canada.
Almost 15 per cent of them represent a "cultural market"-which we define as new Canadians and visible minorities. And we expect much of our future growth to come from cultural markets.
When immigrants first arrive in Canada, one of the most significant barriers they face is related to access to financial services.
Imagine you are a newcomer, starting from scratch. You have no Canadian identification. Without a Canadian credit history or work experience, you have trouble getting a loan or mortgage or even a credit card. You're probably not even sure how Canadian banks work and may not be fluent in either English or French.
These are formidable challenges, and clearly, banks have a unique role to play in helping ease the integration of newcomers.
RBC recently developed a "Welcome to Canada" program for new Canadians. Our goal is to put the right products and people in place so that we can serve diverse markets better.
My point here is not to do an RBC commercial-although I would be happy to do so after lunch-- but to show how our business is adapting to the realities of a new marketplace. And part of our business strategy is to ensure that our employee base reflects these realities.
Many of you are likely familiar with Richard Florida's "creative class." It's hard to disagree that creative people tend to cluster in centres of creativity that are multi-dimensional and multi-cultural.
The creative class is transforming our economy, and we, in turn, must transform our cities into centres of creativity.
We must do more than open the door to immigrants-we must make Canada the destination of choice for talented people with skills, energy and drive. And most importantly, we must also create a climate where they can successfully integrate and realize their full potential. I can't state it strongly enough: This is not just about social justice-it's about seizing an opportunity.
Canada faces many economic challenges in today's increasingly competitive world and it is hard to argue that our relative performance is not slipping. But I believe with the right policies, we can maximize our potential and enhance our prosperity. One of the things we have to get right is capitalizing on diversity and immigration.
I hope that today, our report sets out a convincing case for the entire business community, and the country at large. If politicians, business leaders, labour leaders and academics work together, we will capitalize on Canada's diversity advantage.