Skip to main content
RBC Thought Leadership Skills and Post Secondary

Competency-based Education. Explained.

Category: Skills and Post Secondary

TL Title

tl-title

A smarter way for adult learners to hone new skills

What is competency-based education?

Competency-based education (CBE) is a personalized style of post-secondary learning that allows participants to earn credentials by mastering skills and knowledge at their own pace.

There are more than 1,000 CBE programs offered at U.S. institutions, many at the degree or associate degree level.

In Canada, while several postsecondary institutions are experimenting with CBE at micro-credential and certificate levels, no public Canadian institution offers the chance to earn competency-based degrees or diplomas (Bow Valley College in Calgary plans to offer hybrid diplomas in information technology and cybersecurity beginning in September).

Why did CBE take off in the U.S.?

In 2013, the Obama administration called for individually paced programs that “award credits based on learning, not seat time” as a way of promoting innovation, and creating affordable, accelerated degree pathways for adults. Within a decade, the number of providers grew from about a dozen to more than 600.

What’s different about CBE?

Traditional education vs Competency based education

Traditional degree and diploma programs are generally designed to serve students studying full-time and moving directly from high school to college or university. These students often seek and benefit from a cohort experience—students start and progress together, with a pace set by an instructor. Their final grades vary.

CBE degree and diploma programs are designed for adults who already have a level of skill and experience. Programs tend to start monthly or even weekly. Learners move at their own pace with individualized support from coaches or advisors. CBE assessments are usually performance-based tasks or projects that reflect real-life scenarios—a business student might analyze a company’s financial statements and identify inefficiencies, for example, while a nursing student might conduct a thorough patient assessment.

Everyone is required to meet the same high bar. Students pass by demonstrating mastery and are supported to address learning gaps until they do (e.g., they may get rounds of feedback from a faculty coach, persisting until they can perfect a specific task before moving on to the next). This approach allows participants to progress more quickly through content they’re familiar with and devote the necessary time to new skills and concepts.

Who do CBE programs benefit?

In today’s rapidly changing economy, CBE can help adults whose jobs are disrupted, providing them an opportunity to upskill in evolving sectors or reskill to shift into an entirely new area of work. CBE programs could also provide foreign-trained workers the opportunity to earn Canadian credentials aligned with their skills and expertise.

Employers benefit, too. CBE programs can help match skills with jobs quickly. And the focus on mastery ensures that graduates achieve a high level of skill. 

How does CBE work in practice?

Western Governors University–The pioneer of CBE
Salt Lake City, Utah + regional hubs in nine states

On offer: Online undergraduate and graduate degrees in business, education, information technology, health & nursing.

How it works: Most program intakes are monthly. Leaners pay US$4,000 in tuition per six-month term, working at their own pace to earn competency units by demonstrating skills on various tests or projects. On average, a bachelor’s degree takes 2.5 years to complete.

University of Maine at Presque Isle–Nearly doubled CBE enrolment last year
Presque Isle, Maine

On offer: Online undergraduate and graduate degrees in areas such as accounting, education, public policy and management.

How it works: Learners progress through courses in eight-week sessions– US$1,800 per session for undergraduates, US$2,450 for graduate students. An advisor helps ensure students maximize their time each session; programs can be completed in a year.

Capella University –A founding member of the Competency-Based Education Network
Minneapolis, Minnesota

On offer: Undergraduate and graduate degrees in business, education, health care administration, information technology, nursing and psychology.

How it works: Programs operate on an ‘all-you-can-learn’ 12-week subscription basis. Students can start any month. An evaluation of the first five years of program delivery found the median completion time was 60% faster in CBE bachelor’s degrees compared to credit-hour versions Capella offered; and median tuition costs were 60% lower.

Download the report

Jackie Pichette is Skills Policy Lead at RBC Thought Leadership

TL Title

tl-title

Canada is about to make historic investments to reorient the economy. The scale and focus of these investments should serve as a wakeup call to anyone working in Canadian postsecondary education or relevant provincial ministries—signaling both opportunity and necessity for change.

The upcoming federal budget is expected to allocate billions for nation-building initiatives like modernizing defence and space infrastructure, expanding computing capacity, and developing renewable energy. The potential rewards–sovereignty, growth and competitiveness–are great. As is the risk. We are hedging our bets on talent and innovation.

But as we laid out in our recent report, Testing Times, the postsecondary sector is facing a crisis. Just as Canada is ramping up, colleges and universities are scaling down–closing programs, departments and campuses. Postsecondary institutions across the country need to modernize and re-align their mandates for growth–as outlined in A Smarter Path—but they lack the financial footing, flexibility and connectivity with industry to do so. 

This was the context in which RBC Thought Leadership and our partners at the Business + Higher Education Roundtable convened a summit on Talent, Technology, and a New Economic Order. In September, about 60 industry and postsecondary leaders came together at RBC’s head offices with a shared interest: ensuring Canada’s historic investments yield historic rewards. We focused on three areas of national ambition that depend heavily on postsecondary for talent and innovation:

  • Defence and space capabilities

  • AI and digital technology

  • Major energy projects

The following summarizes the imperatives, opportunities and bold ideas that were discussed.

Defence and Space Capabilities

Today’s threats to sovereignty and security are not the ones that Hollywood war films call to mind. They are increasingly complex and defending against them requires economic and digital strength—and not just on earth. National security and prosperity are increasingly dependent on space infrastructure like satellites, which Canadians use for everything from surveillance and environmental monitoring (some key climate change variables are only measurable from space1) to daily communication and navigation.

But Canada’s capabilities in space, and in defence more broadly, are falling behind global competitors. Government procurement contracts—critical for maintaining and advancing capability and innovation—take significantly more time than comparable procurements in other jurisdictions. Our commercialization of space products and services trails other countries. And years of underspending has hurt Canadian defence capacity, with acute personnel shortages spanning the armed forces; trades and technician roles are particularly understaffed, as are engineers, including specialists in naval combat and aerospace.2

Spending commitments for defence and space provide a historic opportunity.

  • Canada is spending $9 billion on defence in 2025–2026, including $2.6 billion for recruitment and retention, and has pledged to raise defence spending to 5% of GDP annually by 2035.

    • In addition to building conventional defence capabilities, this is an opportunity for Canada to innovate and advance new technologies for purposes like surveillance and forecasting.

    • We can also lean into existing strengths. For example, Canada is already ahead in developing wildfire monitoring capability (microsatellites) that can be used to track fire activity and inform management efforts at home and internationally.3 In addition to threatening lives and livelihoods, wildfires can destroy critical infrastructure like communication systems and energy grids and cause political instability — our ability to respond quickly is an important part of a national defence strategy. 

  • The federal commitment to establish a Bureau of Research Engineering and Advanced Leadership in Innovation and Science (BOREALIS) is an opportunity to invite industry and postsecondary partners to quickly advance dual-use technology (defence and other civilian applications).

Three ideas from the summit that would give Canada an edge in defence and space:

  • Position Canada as NATO’s firefighting nation

    • Use a portion of new defence spending to grow earth observation capabilities, AI-enabled disaster response and drone technologies for wildfire management.

  • Build BOREALIS to match models like DARPA and ARIA

    • Both the Advance Research and Invention Agency (ARIA) in the U.K. and the Defence Advanced Research Projects Agency (DARPA) in the U.S. fund high-risk, high-reward projects, free from political constraints and academic processes.

  • Retrain automotive workers for shipbuilding and space sectors

    • Design new competency-based postsecondary programs that let experienced workers with relevant skills move through programs quickly–saving time and money–on their way to an industry-recognized credential.

AI and Digital Technology

Companies and organizations around the world are adopting AI to achieve productivity gains and become more efficient. Canadians are moving slowly by comparison. Despite being home to a concentration of the world’s top AI researchers and foundational AI models, when it comes to AI maturity, about 70% of Canadian companies are “crawling” or “walking,” and few (7%) are “running” —less than half the proportion of runners globally (17%) .4

Our top talent tends to move abroad, as do their ideas (most AI patents developed in Canada are owned by foreign entities5). And Canadians are less confident leveraging AI tools to boost productivity at work than our global peers.6

Government commitments and initiatives are opportunities to drive progress.

  • Defence funding could help drive postsecondary-industry collaboration on AI research and innovation (to commercialize dual-use AI, for example).

  • In the days following the summit, the Minister of Artificial Intelligence and Digital Innovation Evan Solomon announced a new AI Strategy Task Force of Canadian researchers, entrepreneurs and industry partners charged with developing a federal AI Strategy. The strategy will include “actionable insights and recommendations” to drive leadership in areas including education and skills, as well as commercialization.7

Now is the time to invest in home-grown innovation and quickly scale up and retain AI skills to capitalize on our advantage. Here are three ideas from the summit:

  • Buy Canadian technology first

    • Canadians–businesses, postsecondary, governments– should be the first customers for our own innovators, rather than wait for U.S. market validation.

  • Allocate more corporate resources for staff training

    • Employer-sponsored training in Canada lags international peers8 –our top 100 companies, based on market cap, should increase corporate training budgets and partner with postsecondary providers to deliver AI upskilling that develops internal capacity for productivity and growth.

  • Teach AI skills across postsecondary disciplines

    • Canadian colleges and universities should ensure students, no matter the program, develop AI literacy skills that they can leverage post-graduation.

Major Energy Projects

Canada faces unprecedented energy demand as we expand computing and space infrastructure and pursue industrial growth. Net-zero policies driving a clean-energy transition place additional pressure on electrification and create demand for critical minerals—key to batteries, solar panels, magnets and wind-turbine motors. And oil and gas will continue to be a critical part of the energy supply mix to help reduce costs for consumers and ensure reliability.

A new Major Projects Office plans to fast-track energy projects to meet rising demands but is up against widespread skills shortages. Older skilled-trades people, for example, are retiring at faster rate than they are being replaced,9 and engineering students are not pursuing mining pathways (mining represents just 1% of engineering enrollments10).

Skills gaps are also an issue. Massive infrastructure projects will only be successful with people who can collaborate and solve problems in real time.

Canada’s nation building agenda creates momentum that postsecondary, industry and governments can use to address skills challenges and meet energy demands:

  • High-profile projects present an opportunity for postsecondary providers and industry to communicate career opportunities in energy sectors.

  • Indigenous populations are growing faster11 than the general population, and are often closer, geographically, to energy projects. Strong partnerships and education strategies that deliver community-based programming can empower community members to take on key roles and fill skills gaps.

  • Canada has delivered on major energy projects before—nuclear refurbishments at the Bruce A Nuclear Generating Station in the early 2010s is a great example.

Three ideas from the summit to capitalize on Canada’s energy momentum:

  • Backstop training for major projects

    • Provincial and federal governments should support human resource strategies and training initiatives, particularly for planned projects that are expected to stall due to a lack of talent.

  • Build an energy skills strategy

    • Major players in the energy industry need to dedicate time and resources to inventorying and projecting skills needs, factoring in evolving technology. They should work with postsecondary providers to design training programs that prepare graduates to hit the ground running.

  • Develop skills in partnership with Indigenous communities

    • Industry and postsecondary institutions should partner with Indigenous communities to design and offer training programs that prepare Indigenous talent for careers in the energy sector.

Enabling Transformation: Bold ideas for change

The path forward will take an urgent and coordinated effort from governments, postsecondary institutions and industry. The world is not standing still. Competitor nations are racing ahead in space exploration and AI adoption, while also investing in skills and infrastructure. Canada has the tools to compete—and lead—but only if we align our systems to meet this moment with urgency and ambition. Summit participants surfaced the following recommendations for governments, postsecondary and industry to take immediate action on.

Federal Government

Leverage the AI strategy for skills: Canada’s new AI strategy should have guidance for postsecondary that supports their modernization, e.g., explicit advice that helps institutions efficiently and effectively develop necessary AI skills (including an understanding of risks and when not to leverage AI) among staff and students, across disciplines.

Build Defence and Energy Workforce Alliances: Canada plans to launch up to five Workforce Alliances “to tackle urgent labour market challenges, drive growth and advance industrial strategies.”12 These should include alliances in defence and energy.

  • Each alliance should bring major employers, unions and postsecondary leaders together to talk supply and demand.

  • Alliances should inventory projects and programs already in place; detail current and projected skill gaps, regionally; consider how skills demands will evolve given new technology; identify and engage appropriate program providers to meet skill needs.

Capitalize on global strength in wildfire management: Use a portion of new defence spending to grow earth observation capabilities, AI-enabled disaster response and drone technologies for wildfire management.

Empower the Defence Investment Agency: This newly announced agency should have the mandate to streamline goals and operational requirements across the Department of National Defence, the Department of Public Works, Public Services and Procurement Canada and other departments, as applicable.

Modernize research and innovation funding: Funding criteria should focus more on outcomes and less on process.

  • Consider a new research and innovation agency, like the Defence Investment Agency, to review and coordinate “tri-agency” funding and other relevant programs–ensuring a balance of funding directed to strategic priorities, and between inquiry–and mission-driven research. Such an agency could lead or support additional changes like:

    • Embracing a model like DARPA with BOREALIS: fund high-risk, high-reward projects, free from political constraints and academic processes. 

    • Reforming the Scientific Research & Experimental Development (SR&ED) tax credit (building on reforms made in 2024) to incentivize commercialization.

    • Revamping and expanding national sandboxes,13 creating more opportunities for collaborations between industry, military, universities and colleges, focused on rapid prototyping and testing new defence and space capabilities.

    • Ensuring any new funding commitments are leveraged strategically. For example, at the summit, the federal government shared plans to fund additional research chairs to attract top American academics to Canada. Funding should be tied to strategic priorities and focus on attracting talent with experience driving mission-driven research projects. New chairs should be expected to help build capacity and act as champions for change in Canadian universities.

Backstop training for major projects: Coordinate with industry and relevant provincial governments to provide immediate financial support for training required to advance major energy projects.

Incentivize talent recruitment and retention: Offer tax credits for global talent needed to fill urgent skill shortages (i.e. energy project managers), and to retain exceptional Canadian graduates (i.e. in technology fields). 

Stabilize annual international student caps: Outline realistic, stable international student targets that enable appropriate population inflows and longer-term institutional planning.

Prioritize Canadian technology: Commit to using Canadian technology, including AI and space-based technologies, unless no domestic supplier offers an appropriate product or service. Prioritize Canadian technology in all future procurements and seek to be an anchor customer for promising Canadian start-ups.

Provincial Governments

Protect postsecondary systems: Increase domestic per-student funding (potentially tied to performance criteria or outcomes) in line with inflation. And/or offer more flexibility for institutions to set tuition, ensuring access is protected with robust government student assistance systems and institutional set-aside programs (that reserve a portion of tuition revenue for financial aid).

Offer strategic direction: Outline modernized expectations for transferable skill development.14 Institutions should develop AI literacy skills and collaboration skills, for example, across disciplines.

Backstop training for major projects: Coordinate with industry and the federal government to provide immediate financial support for training required to advance major energy projects.

Facilitate work-integrated learning partnerships: Consider replicating the U.K.’s Knowledge Transfer Partnerships, a granting program co-funded by industry partners that pairs recent grads with business or community organizations to solve innovation challenges.

Fund innovative pilot projects: Help institutions break the mold and develop competency-based education programs divorced from seat-time, for example, and ensure policy and qualifications frameworks are set up to scale successes.

Prioritize Canadian technology: Commit to using Canadian technology, including AI, unless no domestic supplier offers an appropriate product or service. And prioritize Canadian technology in all future procurements.

Postsecondary Institutions

Meaningfully engage employers: Explore new models for industry involvement. Build on successes engaging industry, for example, through university continuing education departments and colleges’ program advisory committees (which involve industry and community partners in curricula development).

Ensure all students graduate with transferable skills: Develop work-ready skills like AI literacy, adaptability, entrepreneurship, communication and collaboration in courses, assignments and work-integrated learning experiences.

Expand access to work-integrated learning: Including but not limited to internships and co-ops; practical programs with applied learning opportunities or immersive field trips, like visiting mining sites with industry partners are also great examples of work-integrated learning.

  • Create opportunities for students to work together across disciplines–like they will in the workforce–to solve problems.

  • Explore opportunities for technology to build experience (i.e. simulators).

Facilitate greater career mobility: Enable workers to navigate a dynamic economy. Consider:

  • Multi-disciplinary programs like the University of Calgary’s new energy science program, which covers a range of in-demand energy fields.

  • Incremental credentialling, for students in programs with low completion rates, like apprenticeships, so they receive recognition for skills gained.

  • Competency-based education programs that allow adults with relevant skills and experience to earn credentials quickly, learning at their own pace.

  • Skills-based transcripts that position graduates to articulate their competencies and succeed as employers shift toward skills-based hiring.

Develop community-based programming: Work closely with Indigenous communities and industry to develop tailored training programs. Consider using mobile training units, and remote or hybrid learning formats (where internet connectivity allows).

Offer upskilling and reskilling programs: This should include programs aligned with opportunities in defence and energy sectors, and to support an AI-literate workforce. Programs must meet the needs of learners with competing responsibilities, embracing formats like remote/hybrid, intensive learning, and competency-based education.

Prioritize Canadian technology: All colleges and universities should commit to using Canadian technology, including AI, unless no domestic supplier offers an appropriate product or service.

Industry

Send executives to participate in federal Workforce Alliances: They should come prepared with long-term project plans and skills projections.

Allocate staff resources to inform program development: Industry representatives with insight into day-to-day and forecasted long-term skill needs should be involved in designing postsecondary programs and work-integrated learning experiences. They should commit to hiring students who complete those programs.

Allocate more corporate resources for staff training: Canada’s top 100 companies, by market cap, should commit to a minimum annual training budget of $500 per employee – roughly double the current estimated industry average.

Innovate with postsecondary partners: Contract researchers at Canadian universities and colleges to overcome issues or improve productivity with new processes and tools. Consider a “relay race” partnership approach, e.g., university ideation, college or polytechnic application, industry deployment.

Reach students in high-schools, colleges and universities: Shareinformation about rewarding careers in sectors in need of talent, like energy. Host secondary and postsecondary student field trips that provide sightlines into specific industries.

Leverage AI for productivity gains: Integrate AI into core operations, not simply pilot projects and provide access to AI upskilling that develops internal capacity for productivity and growth.

Build mutually beneficial Indigenous partnerships: Engage communities surrounding major project sites to lay the foundation for meaningful employment and community benefits, including working with postsecondary to design and offer tailored training programs.

Hire for skills: move from hiring candidates who have held the same or similar job title previously, toward hiring candidates with skills and experience that align with expectations (or skill families), supporting a more mobile workforce and sending clear signals to training providers about which skills are needed.

Prioritize Canadian technology: Canada’s top 100 companies, by market cap, should commit to using Canadian technology including AI and space-based technologies, unless no domestic supplier offers an appropriate product or service.

Author

Jackie Pichette is Director of Skills Policy, RBC Thought Leadership

Contributors:

Jaxson Khan, CEO, Aperture AI

Val Walker, CEO, Business + Higher Education Roundtable

Matthew McKean, Chief R&D Officer, Business + Higher Education Roundtable

Heather Chalmers, President & CEO, GE Vernova Canada

Brian Gallant, CEO, Space Canada

Mike Serbinis, CEO, League

Download the report

Download the report

TL Title

tl-title

Canada is embarking on a major economic pivot and the country’s colleges and universities need to be a key driver in that transformation.

The postsecondary system has long been an important part of the Canadian identity. It has driven discoveries, delivered accessible, quality education and provided economic anchor institutions in communities across the country, underpinning progress and prosperity.

But the sector is not as strong as it once was, and its role in building Canada’s future is under threat. Many colleges and universities are financially unstable, and the sector is often perceived as unresponsive to economic needs; these issues are mutually reinforcing. Postsecondary institutions across Canada are closing programs and campuses and reducing staff to bring temporary budgetary relief. But broader policy and funding changes are needed to ensure the sector’s sustainability.

Like the country’s economy, postsecondary needs to pivot.

Earlier this year, we released a report as part of our Growth Project: A Smarter Path. We offered recommendations to improve the sector’s relevance, including integrating work and real-world experiences into programs and enabling private-sector investment in research and development. Over the summer, RBC Thought Leadership and partners dug deeper, engaging leaders to delve into higher education’s role in addressing Canada’s economic growth challenges.1 The message was clear: the sector is facing a crisis. 

Moved by this urgency, we identified five requirements that are critical to reforming the postsecondary sector and ensuring its relevance to Canada’s new economic strategy.

1. A new financial arrangement

  • A strong postsecondary sector requires sufficient, stable financing.

  • Public spending on Canadian colleges and universities has been steadily decreasing.

    • Once a global leader in both funding and attainment rates2, public spending on postsecondary institutions in Canada has fallen from 1.47% of GDP at its height in 2011, to the current OECD average of 1.1%.3 Canada is not the only country to reduce spending but “few countries have seen declines as sustained and as wide-ranging as we have ,”4 according to a report.

    • As a percentage of GDP growth, public spending is $13 billion short of where it was 15 years ago.5

  • Domestic tuition has not helped make up for the growing shortfall.

    • Provincial governments essentially set tuition levels for most programs by placing caps on what providers can charge; under the current caps, most undergraduates are paying roughly what they would have paid 10 years ago for the same program.6

    • Partly as a result, Canadian students often encounter very large classes which help to subsidize more expensive programs–like medicine.

  • Unregulated international student tuition has been a lifeline for some institutions and subsidized domestic student programming

    • Between 2010 and 2023, international student tuition was responsible for 100% of new operating revenue in the sector.7

  • But in 2024, the federal government capped intake on permit applications and restricted post-graduate work permit eligibility—a major draw for many international students—to college programs linked to national labour shortages.8

    • Ontario has been hit particularly hard: six institutions are reporting more than $140 million in financial damage—losses, cuts and deficits—since 2024.9

    • By one count, there have been more than 850 program suspensions or closures at institutions since the caps were introduced, and 35 institutions reporting 100 or more job impacts.10

    • The federal list of programs eligible for post-graduate work permits has changed multiple times in the span of a year11 making it difficult for institutions to plan.

  • Without a new financial arrangement, institutions are forced to make decisions with their viability in mind, rather than the country’s prosperity. These decisions will have important implications for education quality and access, especially in rural communities where workforce shortages are already acute, as well as the country’s ability to retain top talent.

We see a few options to bring stability to the sector:

  • Increase public spending on postsecondary. That could include more provincial spending, more federal spending, or both.

    • Government funding could be tied to specific criteria or outcomes.

    • One idea raised in our cross-country conversations was to explore a new funding arrangement between the federal government and Canada’s U15–our leading research universities. Participants considered whether Canada could issue special funding to advance research in areas of national interest, potentially freeing up more provincial funding for redistribution.

    • But given Canada’s aging population and competing calls for funding in priority areas like health care, the level of investment needed is unlikely to come from government alone.

  • Another option is to create a larger role for student fees. Offering institutions more flexibility when it comes to tuition could bring a needed influx of funding that stabilizes budgets and encourages a new level of responsiveness to evolving student learning preferences and labour market needs.

    • Greater tuition flexibility would mean higher rates for those who can afford it. To maintain access for those who cannot, provinces together with the federal government should ensure robust financial assistance systems remain in place. Institutions could also be required to reserve a share of tuition revenue for means-tested student aid.

  • If international student fee revenue is to continue playing a significant role in funding institutions (as it has for colleges), Canada will need to offer more stable targets that balance a national interest in aligning immigration with forecasted skills needs with an institution’s need for longer-term institutional planning.

2. Responsive mandates

  • With greater financial footing, institutions can play a more strategic role in Canada’s economic pivot—advancing specific priorities. They will be better positioned to do that with mandates that respond to more distinct learner or industry needs. As we noted in A Smarter Path, “we neither need nor can we afford to have every institution offering the same menu.”

  • From afar, Canada’s postsecondary system looks highly differentiated. It includes universities, colleges, institutes, polytechnics, trade unions and employers involved in apprenticeships, as well as additional and sub-categorizations of providers in some provinces.

  • But the distinctions between some of these labels are murky. The system has long been accused of having an “academic drift” towards sameness, with the university model serving as the goal.12 These pursuits have been at least partially motivated by a need to generate revenue within the confines described above.

    • The recent growth in college bachelor’s degrees, and the push for master’s-level offerings are examples.13

    • The style of applied, industry-driven learning that Canadian colleges are known for is expensive to deliver–often requiring technical equipment and small class sizes. With a new funding arrangement, colleges could provide more of this training for Canadians of all ages, including adult learners in need of skills upgrading and youth pursuing careers in the skilled trades where there are persistent labour shortages.14

  • Within the broad categorizations of colleges and universities, institutions can lean into thematic strengths and develop unique reputations.

    • A couple of examples where this is happening to some degree: Lambton College’s collaboration with the local petrochemical industry, and Royal Roads University’s experimentation with flexible learning models.

  • Responding quickly to industry and community training needs will continue to be an essential part of Canada’s economic transition and presents opportunities for institutions with aligned mandates.

    • Plans to fast track major energy projects, for instance, will need to overcome large, technical skill gaps in rural and northern parts of the country.

    • Canada’s armed forces are suffering severe skills shortages in aviation, search and rescue and technicians, to name a few.

    • Of more than 1,000 Canadian adults surveyed recently, less than half felt they could use AI tools effectively, and less than a quarter indicated having received AI training,15 pointing to opportunities for adult upskilling programs.

  • Providing more control over tuition—and creating market competition—might naturally lead institutions toward greater differentiation and specialization.

  • Better data to inform planning would also help illuminate opportunities to specialize and do so strategically.

    • Compared to other jurisdictions, Canada tracks little information about how our education has been functioning, let alone information that would enable foresight about where it needs to go.

    • With better data, institutions could examine, for example, whether certain demographics of students have more success with some program formats than others. And when it comes to lifelong learning, institutions could gain insight into how credentials complement one another or stack together to impact career advancement in specific industries.

We see opportunities for institutions to be more responsive, including: 

  • Updating institutional mandates in ways that play to and develop their unique strengths and meet specific labour force needs (for example, by concentrating on industries or learner demographics).

    • The federal government plans to launch new Workforce Alliances of employers, unions and industry groups, focused on skill development in “sectors under pressure” like energy and advanced manufacturing.

    • Postsecondary providers with relevant mandates should be at these tables, and quick to respond with relevant programming.16

  • For provincial governments: playing a coordination role, ensuring institutional mandates complement one another and align with social and economic needs, creating incentives for institutions to develop and lean into thematic strengths.

  • For the federal government: engaging the provinces in developing regulations to standardize data collection and offering consistent, up-to-date, granular data that allows for program-level analysis and student-level outcomes tracking.

3. Modernized programs and services

  • College and university programs and services need to be more aligned with the world of work and the opportunities available to graduates.

  • Traditional education models make less sense in a context where AI and access to information is ubiquitous. We need to rethink what and how students learn and demonstrate learning; educators have traditionally focused on ensuring students can answer tough questions, we should be equally concerned with whether they can ask creative ones.

  • Analytical thinking, flexibility and agility, are the most sought-after skills among employers and have been for some time.17

    • Industry leaders emphasized entrepreneurial thinking, communication, and a basic awareness of how businesses operate.

    • All programs should be helping students develop and hone these skills, which are best gained in dynamic learning contexts that weave in real-world scenarios, for example, through applied projects, co-ops or internships.18

  • Demands for technological skills, including AI and big data, are fastest growing.19

    • Canada needs its postsecondary programs to produce graduates who are competent technology users; to know when and how to leverage AI to increase productivity, while being aware of its limitations and risks.

  • Institutions need to reckon with technology and AI themselves.

    • Canadian organizations of all kinds, including government,20 are using AI to find efficiencies and improve client experiences, motivated, in part, by the costs of inaction.21

    • Home to some the country’s top technology experts, postsecondary should be moving much faster, finding ways to integrate the latest technology in programs and supporting services to optimize student experiences, operational efficiency and program quality.

    • There are good examples in other jurisdictions: Arizona State University built proactive student support systems based on predictive analytics22 and is using AI to support student decision making with responsive career guidance.23

  • As economic volatility becomes our new normal, lifelong learning needs to as well.

    • This is a key priority for federal and provincial governments. For example, Canada is investing $450 million in reskilling,24 and Alberta’s new job strategy targets adults changing careers.25

  • More program offerings should reflect and appeal to mid-career adults in need of skills upgrading or retraining.

    • When faced with job disruptions, Canadians have tended to pursue short, career-focused programs, if any.26

    • Appealing to adults in these situations means being mindful that they will likely be keen to get back to work as quickly as possible, likely have prior learning and experience to bring to the table, as well as competing priorities (like bills to pay and children to care for). They may prefer to learn at their own pace and according to their own schedule.

    • Competency-based programs have taken off in the U.S. but are rare in Canada. These programs award credentials based on demonstrated mastery, not the amount of time enrolled in a program.27

We see tremendous opportunity and imperative for modernization, including:

  • Rethinking program content, delivery models, assessments, and instructor roles to optimize learning in a modern context.

  • Ensuring every program offers applied learning opportunities that develop transferable skills like problem-solving, communication, technology literacy and entrepreneurial thinking.

  • Leveraging technology and AI. For example:

    • Training faculty and staff to:

      • Effectively integrate AI as part of the student experience (pen and paper assessments to avoid “cheating” with AI are missing the point)

      • Identify places where AI can relieve their own workload.

    • Offering technology-enhanced learning opportunities (e.g., hybrid and distance learning, simulations) and support services.

  • Serving the needs of lifelong learners by presenting all credentials as steppingstones rather than discrete offerings.

    • Expecting that students will return for education multiple times throughout their lives and making that process straightforward and rewarding—this could include experimenting with new models like competency-based education.

4. Updated governance structures

  • Being more responsive and modern requires more institutional flexibility.

  • Externally, regulatory bodies and policy frameworks can be overly restrictive and work against the changes described above. As an example, Ontario’s funding model discourages colleges from developing part-time programs that would appeal to adults in need of upskilling28 and across Canada, qualifications and credentials frameworks centered on instructional hours discourage institutions from experimenting with individually-paced programs like competency-based education.

  • Internally, risk-averse institutional cultures, fragmented governance environments and restrictive collective agreements often layered with tenure, can impede leaders’ ability to take decisive action.

    • The processes involved with developing programs, revamping them or shutting them down to evolve in step with the world outside institutional walls are all very much informed (and paced) according to the structures inside those walls.

A roundtable participant captured the situation well:

[Institutional leaders] are being asked to run institutions like businesses, but are still operating in a legal and regulatory structure designed for a public service model. It’s completely mismatched.

80% of revenue and 85% of expenses are controlled by someone else, two governing boards and four sets of stakeholders think they’re the majority shareholder—but none of them are. The institution is accountable to 200+ pieces of legislation. Meanwhile, industry is moving in weekly cycles. It’s no wonder industry is losing faith in us. We’re bordering on obsolescence—not because we aren’t capable, but because we’re structurally constrained.

We see a need to explore options to improve efficiency and flexibility

  • Provincial governments could engage postsecondary leaders to understand and dismantle regulatory roadblocks, including exploring the ways in which professional regulatory bodies facilitate or inhibit responsiveness.

  • Postsecondary leadership together with labour unions could review collective agreements and/or governance and human resource policies—striving for balance between job protection and institutional viability—drawing on union experience and expertise to outline new expectations like modernized job tasks and teaching methods.

5. Practical, mission-driven research

  • Together, Canadian governments, postsecondary institutions and businesses need to do a better job of ensuring research advances national priorities, supporting Canadian communities and businesses with timely innovations.

  • Compared to other advanced countries, including the U.S. and Japan, or the OECD average, Canada’s spending on research and innovation is persistently low.29

    • A key reason for this is our business sector: largely made up of small- and medium-sized enterprises without research budgets30 and branches of multi-national companies whose head offices in other jurisdictions are driving innovation.

  • On the other hand, Canadian postsecondary spending on research is high compared to global peers.31 Essentially our postsecondary sector is carrying the weight here; and given the stakes, could be oriented more strategically.

  • Traditionally, success in postsecondary research is measured in terms of publication output and citations;32 often, government grants unintentionally encourage similar ideas and incremental change.

  • Research often ends at the ideation phase with little incentive to push toward patents or commercialization; promising innovations and innovators go elsewhere, like Silicon Valley.

  • For many institutions (and departments within them) advancing innovations, and ensuring they go beyond the ideation phase, will require a reorientation—from exploring topics to advancing goals—and an openness to taking on research contracts with industry partners who have defined milestones and clear deliverables in mind.

  • This is not to say there is no place for inquiry-driven research. Nobel Prize winning research by Geoffrey Hinton33 or Arthur McDonald34 might not have been possible without such freedom. But mission-driven research needs to take new precedence.

Opportunities to incentivize mission-driven Canadian postsecondary research include:

  • Updating federal granting to incentivize research that produces intellectual property (IP) or advances national priorities.

  • Focusing institutional research strategies (as part of updating mandates) to advance specific industries or public interests like health care, national defence, or food security.

  • Rewarding innovation and community impact in tenure and promotion processes.

  • Experimenting with new approaches and collaborations—Canada’s defence spending commitments, for instance, offer a prime opportunity. A new Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS) could draw on academia and industry strengths to drive innovation, much like the Advance Research and Invention Agency (ARIA) in the U.K. or Defence Advanced Research Projects Agency (DARPA) in the U.S.–both of which fund high-risk, high-reward projects, free from the typical political constraints and academic processes.  

  • Industry coming to the table with more funding for research contracts.

Canada is relying on its postsecondary sector to supply the skills and innovation needed for an economic transformation. Ensuring, the sector is up to the task will hinge, crucially, on a new funding arrangement. And that, may hinge on public support. Modernizing as set out above will help the sector grow social license.

But this task should not fall entirely on postsecondary and policy makers.

Employers, expecting to benefit, need to be ready to engage and collaborate too: sharing information about job opportunities and skill expectations, shaping curricula and evaluating competencies, developing work-integrated learning opportunities, and funding research and innovation.

Educators in K-12 have a role to play as well. It is time guidance counsellors shed the outdated notion that skilled trades are less valuable than university degrees, and that degrees and diploma are the end point of education.

Upskilling is no longer optional. It must be seen and described—at levels of the education system and in the labour market—as the new baseline for success.

Jackie Pichette is Director of Skills Policy, RBC Thought Leadership

Downlod the report

Download the report

TL Title

tl-title

Overview

Economic theory and evidence tell us that the more educated a society is, the more productive its economy will be. Countries or regions with highly educated people will attract advanced industries, generate more savings and investment and create entirely new economic sectors.

That promise is not yet fulfilled in Canada. Despite having one of the world’s highest rates of postsecondary education and a steady rise in postsecondary attainment over the past quarter century, economic performance, including productivity, is lagging. Too many graduates have advanced degrees that don’t deliver an advanced economic return. Not enough employers can build teams with the right skill sets. Too often, students don’t know how their programs line up with the labour market. And our international students continue to struggle to gain productive work in a fast-changing economy.

The challenges are all the more pressing in a worsening trade environment in which many Canadian businesses are looking to quickly pivot to more global, and more competitive, opportunities. Trade wars mean talent wars.

Of course, this is not entirely new. Canada’s postsecondary sector, and employers and governments, have been working for years — decades, really — to build a more productive, knowledge-driven and skills-based economy.

But for all the innovations in workforce-readiness, there‘s still a substantial gap between education inputs and economic outcomes, which Canada’s struggling economy and productivity cannot afford.

In this report, we identify why Canada is not reaping the benefits of its globally respected postsecondary education systems and we make recommendations about how to address our current postsecondary education/productivity disconnect. Getting that relationship right is key to sharpening Canada’s competitive edge. At the end, we present examples of what more productive economies have done to leverage the knowledge capital and research capacity of their postsecondary systems. And we highlight innovative experiments in postsecondary delivery, giving food for thought.

RBC launched The Growth Project initiative this year to discover a new generation of ideas for the Canadian economy. Throughout this project, we’ve been exploring key drivers of economic growth including productivity. To build on our report on why the economy is stuck in neutral, we’ve partnered with the Business + Higher Education Roundtable (BHER) to address the role of postsecondary education in Canada’s productivity crisis.

Productivity is an important measure of an economy’s efficiency at generating additional income from each hour worked. Some economies generate more additional income per hour worked than others, leading to better economic performance and growth.

Where we are

Canada’s labour productivity growth falters even as more Canadians obtain postsecondary education

Source: Statistics Canada, RBC Economics

Canada’s population is highly educated but our productivity doesn’t match — We are the most highly educated population in the G7 and above average across OECD countries. In 2024, some 63% of Canadians aged 25 to 64 had a postsecondary credential compared to an OECD average of 41%.1 Yet these two charts show that our productivity record has not kept up and is not only lagging our peers but has worsened over the past decade even as the rate of higher education, including for new Canadians, has improved.

And that productivity growth lags many OECD countries

Average annual labour productivity growth, 2014-2023, %

Source: OECD, RBC Economics

Our graduates get jobs, but their incomes  — College and university graduates experience lower levels of unemployment and earn more over time than Canadians with a high school diploma or less.2 But, regardless of education level, Canadians earn an average of 8% less than their American peers,3 a gap that is wider in many professions.4 This is one reason for a perennial migration — a brain drain — of people with advanced degrees to the United States and a loss to Canada, economically and otherwise. The differing costs and standards of living in the U.S. aside, Canada still only falls in the middle of the pack when we look at individual returns on investment from higher education compared to peer countries.5

Postsecondary Education in Canada

Canada does not have a singular postsecondary education system. Each province and territory holds responsibility (a constitutionally protected authority for provinces and federally delegated for territories) for establishing and regulating its universities, colleges and institutes, including giving power to grant degrees and diplomas and making choices about provincial funding and tuition. This has led to variation in policy and systems across the country. About 64% of postsecondary students are enrolled in universities and 36% in colleges6, the vast majority in publicly funded institutions split among about 100 universities and 200-plus colleges, including 13 polytechnic schools7. This is alongside more than 1,500 private vocational colleges, about half in Ontario8.

Universities have traditionally offered longer-term degree programs in subject disciplines and public colleges have offered shorter-term diplomas in career-focused programs. But provincial governments outside Quebec and the four Atlantic provinces have also allowed public colleges to grant degrees9, and diploma and certificate programs are frequently found at universities. The federal government contributes to the postsecondary systems indirectly as well, through research grants, student financial assistance and provincial transfer payments10.

The Challenges

At its best, higher education contributes to productivity by developing a skilled workforce, driving innovation through research and fostering industry collaboration. Postsecondary institutions equip graduates with critical skills, support businesses with cutting-edge research and fuel economic growth by creating new technologies, startups and talent. Research has shown a positive relationship between a region’s economic health and the presence of higher education institutions, with an additional 0.4% in future GDP for every 10% increase in the number of universities per capita11. This effect is driven by boosts to human capital and innovation, not just direct institutional and student spending.

Higher learning institutions also contribute to the social and intellectual vitality of a community, region, and society that are hard to quantify. Nevertheless, Canada’s record underscores that the presence of a higher education system with a high rate of participation and research activity does not always translate into high returns when we look at economic measures.

So, what’s missing? Pinpointing which factors contribute to the overall economic value of a postsecondary education is limited by a lack of data and research12 13. But we can look to other countries with higher productivity and strong postsecondary systems for clues about what works and is showing promise — some of those are highlighted later in this report. We can also identify clear gaps here at home, whether that’s in human capital development or in research.

Disconnects persist between the knowledge and skills outcomes of Canada’s higher education systems and labour market needs.

The OECD has noted that “higher educational attainment does not always directly correspond with higher skills14.” Employer surveys consistently indicate that companies still have a hard time finding new hires with the skills they need, especially interpersonal and communication skills15. We also know that there is a growing gap in graduates’ technical skills related to artificial intelligence, cybersecurity and working with big data, all areas rapidly growing in importance.

Postsecondary business models are inadequate to meet the outcomes expected of Canada’s higher education systems in the current global economy.

Postsecondary institutions have a balance sheet problem. Their finances are rapidly changing due to stagnating provincial government funding, restrictions or even freezes on student tuition increases, and a federal immigration policy shift that has led to steep drops in international students and the significant revenue their higher tuition contributed to the bottom line. The postsecondary revenue crunch is likely to worsen without a reformed business model — one that is capable of responding to the demands of a changing economy.

Trouble is, postsecondary leaders are constrained by insufficient control over their revenue sources, regulations that circumscribe how they run their budgets, and little to no ability to cut or reallocate some of their biggest fixed costs. Staff wages and benefits amount to more than 50% of total expenditures at both colleges and universities16 and a high presence of permanent faculty and teaching staff protected through collective agreements, tenure or both limit institutions’ ability to nimbly adjust or close programs as enrolments and demands change. The hiring of contract faculty to teach students has been one attempt to gain some flexibility but the practice is not a panacea and has led to a teaching underclass with insufficient access to resources or basic job stability.

Amid this shaky and constrained financial picture, academic programs that connect best with high productivity industries are the most expensive to run. Science, technology, engineering and mathematics programs – STEM — have been expanding over the last 30-plus years as labour market and student demands have shifted, from 18.3% of enrolments in 1992-1993 to nearly 26% in 2022-202317. But labs, computers and other equipment mean they cost at least twice as much as training for a humanities or business student. If traditional revenue sources are no longer reliable, colleges and universities need to be freed – and encouraged – to develop fresh revenue streams, funding models and educational redesigns that make sense for them and the broader societal and economic needs they serve. The case of Arizona State University (illustrated later in this report) is an example of an institution that has taken an entrepreneurial approach, reimagining its programs and research activities as well as its business model to gain back institutional control from reduced state funding while making student access a priority, including for marginalized students.

Canada lacks comparable data to assess outcomes of our postsecondary systems and support linkages with labour market information.

It’s hard to fix what isn’t well-measured and Canada falls down on data to assess outcomes of its postsecondary systems20. While completion and employment rates data are sometimes tracked, outcomes data are not uniform across provinces or even institutions; nor is it timely or robust enough to confirm alignment between graduates’ skills and the labour market. The provincial/territorial control of higher education systems may seem to make national standardization of this data a non-starter. But given the renewed exploration of how to better harmonize provincial/territorial economies and trade, there is a perfect opportunity to bring postsecondary institutions into the discussion.

Countries such as the U.S. and Australia do a better job with postsecondary data tracking, enabling well-informed public policy discussions and change. In the U.S., tracking has been federally mandated for institutions that participate in federal student aid programs, and data is available through its Integrated Postsecondary Education Data Systems. Australia has developed its Quality Indicators for Learning and Teaching, a suite of annual government-endorsed surveys that follow higher education students from enrolment to employment.

There is a mismatch of graduates with advanced degrees.

Nearly 15% of Canada’s working-age population hold a graduate degree today — just below the share that held a bachelor’s degree in 1997, at 16%21.But those degrees aren’t always leading to jobs that require them. (In fact, there are more job vacancies for positions requiring only a high school diploma than there are openings for positions requiring a bachelor’s degree or higher22.)

As a result, there’s a rising number of highly educated Canadians working in jobs that do not make effective use of their degree. The OECD has ranked Canada as having the second-highest overqualification rate of 37 countries23, with an overqualification rate of 10.6% for Canadian-born workers and 11.8% for Canadian-educated immigrants in 202324.

Degree-holders undoubtedly enjoy a wage bump compared to those without a postsecondary degree. But that wage premium is shrinking when comparing the benefit of a master’s degree to a bachelor’s. Between 1997 and 2019, that premium averaged 23%. Since the pandemic, that’s fallen to 18% as more graduate degree holders compete for the comparatively smaller pool of jobs that require their credentials.25 What people pursue in their advanced degrees matters too: business PhD holders were the highest earners in a 2021 analysis of doctoral graduates, although they represented only 4% of all PhDs, while humanities and science PhDs (9% humanities and 22% sciences) were among the lowest. Math and computer science doctorate holders meanwhile showed the highest earnings growth in the five years after PhD completion26.

As well, fewer Canadian PhDs are working for private industry, compared to the U.S., which may be partly tied to an economy that is still heavily resource-based and where we have lower levels of industry R&D investment that would demand their skills27. Nevertheless, graduate students have relatively low levels of participation in work-integrated learning experiences (discussed later in this report) and lack opportunities to demonstrate and apply their skills and expertise to Canadian firms that could benefit from them. Canada certainly needs people with advanced degrees, but more thought should be given to which programs are of greatest need and how to make the most out of the skills and knowledge they produce.

Canada has seen expansion of postsecondary campuses and programs over the last 25 years but it’s unclear whether we have the right number or distribution.

Participation in higher education has expanded over the last 35 years and along with it has come expansion of programs and campuses. We need a high-quality postsecondary sector to educate and inspire the next generation of talent and skilled workers while generating transformative discovery. But it’s worth asking whether the size and spread of Canada’s roughly 100 public universities and 200-plus colleges with associated campuses and 25,000-plus programs are aligned as well as they could be with the country’s most pressing needs and the challenge of creating a more productive economy.

This question becomes more urgent given the pullback on international students who until 2024 functioned as a significant counterweight against more recent shrinkage in domestic enrolment and revenue, which has been acute in some regions. Population demographics forecast modest growth among Canada’s   over the next decade before declining to something slightly above current numbers28.

Memories are also relatively fresh of the 2021 financial crisis at Laurentian University in Sudbury, Ont., when the institution declared insolvency due to what was later deemed primarily to be poorly planned capital projects combined with administrative bloat29.

Let’s think seriously about how to better align higher education resources with a broader student demographic and the evolving needs of the economy.

We are not setting up international graduates of Canadian postsecondary education for integration into high productivity labour sectors.

International students are part of the solution to Canada’s future economic needs and its productivity crisis. But over the last several years we’ve seen how the country’s efforts to recruit these students ballooned out of control, leading to students being underserved and/or ending up in programs without pathways to high value industries. As one example, international students are more likely to be enrolled in business or management programs versus STEM30,and many have struggled to find jobs after graduation when their visas allow them to stay.

As Canada works to reduce and recalibrate this student pool, we should focus on recruiting and educating high quality international students with targeted workforce development in mind. The federal government recently made this a requirement, with new rules about fields of study that international students need to be enrolled in to qualify for post-graduate work permits.

That’s a start, but the execution left something to be desired and threw many postsecondary institutions into crisis-mode trying to fill financial and programmatic gaps overnight. When the dust settles, fields of study should be chosen with consideration of regional labour demands too. International students will also need more help to translate their skills to the workplace, via focused career counselling and work-integrated learning opportunities, which some struggle to access due to immigration work restrictions.

Students need a more complete skills toolbox.

We need data scientists who are storytellers, electricians who can communicate technical complexity to their clients, and culture creators who can make magic by leveraging cutting-edge digital technologies. Hard skills and knowledge learned in STEM programs are valuable, but so are the skills where humanities excel: persuasive and effective writing and speaking, critical thinking and creative approaches to problem-solving.

We also know that students may not end up working in the domain where they received their education, whether that was in STEM or business/humanities31. Not enough postsecondary programs encourage cross-pollination across disciplines. But programs such as McGill University’s Bachelor of Arts and Science (B.A. & Sc.) degree, which allows students to study disciplines in both faculties, BCIT’s Bachelor of Creative Industries program that combines training in the arts, technology, and business, or Langara College’s Environmental Studies program, blending biology, chemistry, English and geography, are promising examples32. Many programs leave room for electives, too, where students can acquire that breadth of skills independently.

But this is tinkering along the edges of what’s possible and needed. As enrolments continue to slide in humanities programs, postsecondary institutions must reimagine the core competencies the humanities provide to all students and how to extend that across subjects, disciplines and faculties in a world of growing STEM demand. Critical thinking and the ability to analyze complex problems are top skills for the most needed jobs in the face of advancing artificial intelligence and automation33 as is the ability to identify how to effectively use these technologies. Can we start to break down entrenched silos that prevent the STEAM concept from being embedded more directly into most students’ programs and curricula?

Canadian companies are not making the most of postsecondary research output and are weak adopters of postsecondary research innovations.

In 2022, Canada ranked 10th globally in terms of scientific publications34 and we are a global leader in specific fields, such as artificial intelligence. But Canadian companies aren’t picking up the ball when it comes to making the most of made-in-Canada discoveries. The U.S., with a much better track record, benefits from a more robust ecosystem to support research translation into market applications, including venture capital funding, supportive public policies and an intellectual property framework that incentivizes researchers and postsecondary institutions to pursue commercialization.

All told, Canadian business investment in research and development was just 1.7% of GDP in 2022, putting us below the OECD average and well below highly productive countries like Israel (6.0%), South Korea (5.2%) and the U.S. (3.6%)34. Even in AI research, where Canada is a global leader, we lag peer countries in its commercial use.

How we can do better

The discussion about aligning postsecondary education and training with labour market needs isn’t a new one. Colleges and universities recognize this, and there are growing pockets of innovation. But employers and economic data signal a different story: that Canada is still missing the mark in generating the skills and knowledge needed to meet its evolving productivity challenge in an increasingly competitive world. Here are a few things we can do differently:

Eliminate barriers to institutional innovation.

Postsecondary institutions in Canada require new business models that free them to be more entrepreneurial and in control of their financial destinies while remaining responsible and accountable to the people and communities they serve.

Too often institutions that attempt to innovate are frustrated by a host of mostly provincial but also federal regulations on everything from tuition to procurement to partnerships and mandatory programs without corresponding government financial support. Reasonable deregulation would help clear the way for institutions to become more creative, collaborative and in step with a changing world. Internally, colleges and universities need mechanisms to incentivize change where barriers and resistance exist within institutions to creating or altering programs at scale or incorporating industry into program design.

Enhance the awareness and articulation of skills developed in PSE programs.

Prospective students and new graduates need to know the skills they will emerge with, allowing them to fairly evaluate whether a program is for them and to communicate these skills to employers. Some programs are already clear about this, notably at colleges, but the practice should become widespread and should be tied into a larger drive towards national comparable postsecondary outcomes data that can be linked to labour market information.

The challenge can be more acute for advanced degree holders, most of whom won’t spend their careers in academia. They, and employers, also need to understand what skills they’re developing through their research and how these can be translated to a non-academic workplace.

Get work-integrated learning to where it’s needed most.

Work-integrated learning, or WIL, is the practice of integrating work and real-world experiences into a student’s higher education program. Internships, practicums, co-op programs, entrepreneurial mentorship and field work are common examples. These experiences help students connect and apply their learning to workplace realities, acquire new and relevant skills and assist businesses to recruit and develop students for their specific labour needs.

As such, WIL is part of the solution to Canada’s productivity and skills challenges – two-thirds of employers participating in WIL programs through BHER reported an increase in their productivity.36But while the country has made important strides in providing these opportunities, WIL is not yet the norm – just under half of all postsecondary graduates in 2020 had experienced a WIL opportunity.37 There are also variations in uptake, with PhD students (18%) and those in the humanities (16%) less likely to have a WIL experience38.

Most businesses in Canada are small and medium-sized enterprises (SMEs) and face more barriers than larger organizations to participating in conventional forms of WIL in terms of resources, time and risk. For them, shorter-term, more flexible and less resource-intensive forms of WIL aligned more closely with SME realities and needs make more sense. These should be considered as part of a robust suite of WIL experiences. They include consulting engagements, multiple short-term placements of up to 10 days, online projects and placements, and engagement in industry challenges through hackathons, competitions and course-based projects submitted by employers39.

Develop upskilling and reskilling opportunities.

Businesses have a responsibility to help workers stay current with the skills needed to keep doing their jobs as they evolve with technological and other changes. Postsecondary institutions are well-positioned to be providers for that learning and can take advantage of these opportunities as revenue streams in a reformed business model. Too often Canada’s companies struggle to partner with postsecondary institutions and end up developing their own in-house training solutions40.

To do that well, higher education must stay on top of and respond to upskilling opportunities in their communities, partner with employers (and vice versa) to understand and respond to specific skills gaps and create programs that fit the working and personal lives of learners. Continuing education departments are particularly well-positioned to do this. An opportunity also exists for governments to financially support and promote these programs, such as through tax and other incentives, as they look for policy responses to labour force disruption. Microcredentials – rapid, often virtual courses — are one form of upskilling that have proven effective in complementing workers’ existing skills41.

especially the programs and courses that are developed by postsecondary institutions (for example, Ontario provides access to these via its provincially funded eCampus portal).

Similar opportunities exist for postsecondary institutions in reskilling programs where workers exiting one industry acquire an entirely different set of more in-demand skills. Partnering with local companies’ outplacement programs is one example. Given that it’s a more substantial undertaking than upskilling, the reskilling shift can be trickier, especially if we want it to happen quickly. Competency-based education (CBE) courses may offer a way forward. CBE is singularly focused on mastery of a discrete set of competencies, often required for a particular job, such as nursing. CBE courses tend to be flexible, virtual, personalized, self-directed and recognize prior learning. The approach has been used in limited ways in Canada, is more widespread in the U.S. and may offer inspiration for reforming the structure and delivery of traditional programs42.

Intensify the drive towards institutional differentiation.

Canada has done an excellent job of providing access to public postsecondary education across a big country and into remote communities. But we neither need nor can we afford to have every institution offering the same menu. Not every institution needs its own artificial intelligence research hub or history department.

Differentiation is critical, where public colleges and universities are encouraged to lean into the teaching, learning and/or research they are best at, and discouraged from unnecessary program duplication. The government of Ontario has followed this policy, though without a strategic vision for the sector or what separate roles should be played by colleges and universities43.

Differentiation might mean institutions that are focused on and excellent at teaching mostly undergraduates, such as members of eastern Canada’s Maple League of Universities, or that are highly research-intensive, such as the University of Toronto, or whose teaching and research are strongly aligned with key local industries, such as the country’s polytechnic institutes.

Differentiation can also happen through the business model an institution uses to sustain itself and remain relevant. It can be promoted through strategic mandate agreements negotiated between institutions and government funders, as Ontario does. Government research funding models can also encourage differentiation and build capacity by favouring institutional specialization, such as through the federal government’s Canada First Research Excellence Fund.

The growing financial sustainability crisis faced by colleges and universities makes differentiation a strategic imperative for each institution.

Make it easier for Canadian businesses to adopt and invest in research.

Our world-class postsecondary researchers are part of an innovation pipeline that includes Canadian businesses who can adopt researchers’ discoveries, commercialize, refine and run with them, boosting their own competitive edge. But that pipeline is slowed by Canada’s fragmented regulatory and approval processes, at every level of government, which delay and complicate business investment decisions. Streamlining those processes by implementing, for example, a harmonized federal-provincial environmental assessment process for projects of national strategic importance would speed up approvals and drive private sector investment into new major projects.

Our outdated tax system is also in need of a comprehensive review with an eye to encouraging greater private sector investment in Canadian research and development. This review could include an assessment of the impact of recently announced changes to the, could further spur private sector R&D investment.

Conclusion

Postsecondary education is one of this country’s greatest strengths. But we’re not using it to its full potential and we’re not keeping pace with the rest of the world as a result. Our productivity crisis is clear and urgent with direct impacts on the standard of living all Canadians can expect, including the graduates of tomorrow, especially in a global economy that is more divided and disruptive. Governments, institutions and employers must each play a role in bridging the gap:

  • Take action on regulatory and tax reform to encourage greater private R&D investment and adoption of made-in-Canada research discoveries.

  • As federal departments work through a reformed strategy for international students, focus on ways to match their abilities and interests with programs aligned to Canada’s most pressing economic needs, regionally and nationally. Eliminate immigration restrictions that prevent international students from participating in work-integrated learning.

  • Address business barriers and raise awareness about the value of participating in work-integrated learning experiences, especially among SMEs, by investing in partnership and capacity building.

  • Use tax incentives and federal funding to encourage industry partnership with postsecondary institutions in support of cost-effective, high-quality upskilling and reskilling programs for employees.

  • Engage in pan-Canadian work and leverage relevant federal programs and departments to develop comparable, accessible, comprehensive and easy-to-understand data for timely identification and analysis of postsecondary education outcomes, including by institution and program.

  • Implement a clear vision and strategy for the province’s postsecondary systems that differentiates between the purpose of college vs. university programs and incentivizes differentiation within them.

  • Embark on a process of limited postsecondary deregulation that gives institutions more control over their finances, revenue streams and promotes innovation in programs and industry partnerships.

  • In parallel, promote accountability through mandatory institutional reporting of comparable and detailed data on postsecondary outcomes by institution and program, including graduates’ skills, which can be linked to labour market information.

  • Continuously and rigorously review changing labour needs and update labour market information to better support alignment with postsecondary programs.

  • Be explicit about the skills students will develop through the programs and courses offered to them and provide ways to communicate those to employers. Draw on the expertise of continuing education departments which are already well-positioned to help.

  • Encourage, support and incentivize departments and faculty to explore new models of teaching and learning, especially where these integrate skills students will need in the workplace.

  • Break down faculty, disciplinary and subject siloes that interfere with cross-curricular and interdisciplinary learning needed to promote STEAM skills and expose students to problems in high labour demand sectors.

  • Look for novel ways to spread student awareness of work-integrated learning opportunities, why they’re valuable and help them overcome barriers to access.

  • Engage with postsecondary institutions — or intermediaries like the Business + Higher Education Roundtable that can help navigate to and through them — to communicate skills needs and identify potential opportunities for collaboration.

  • Explore becoming a work-integrated learning participant to bridge the skills gap and potentially develop the next crop of employees.

  • Look to postsecondary institutions for short-duration programming to help upskill and/or reskill your employees before turning to untested third-party providers.

  • Engage in local outreach to high schools to raise awareness about their industry, why it’s an exciting place to work and the education pathways to a fulfilling career in that sector.

  • Continue to contribute to labour market information systems by sharing data with governments and collaborate to find new ways to enhance the accuracy and relevance of labour market analyses and policy development.

Global Stories in Higher Education Research and Development

Facilitating knowledge transfer to SMEs – Heilbronn University, Germany

The challenge: Bridge the knowledge gap for local small- and medium-sized enterprises.

The innovation: This applied research university created a virtual AI lab that is publicly accessible, frequently updated and helps businesses understand AI research developments and adopt pragmatic AI solutions in a city quickly becoming known as an AI hub.

Powering startups through global connections — Block 71, National University of Singapore

The challenge: Bridge the knowledge and connection gap for startups.

The innovation: Block 71 was set up in 2011 to create an innovation hub by connecting startups with academic research, mentorship and global markets. It has since spread to 10 other global locations including Silicon Valley, Saigon and Nagoya, leading to more than 100 startups connected with more than 50 venture capitalists.

Creating a research powerhouse through merger — University of Paris-Saclay, France

The challenge: Enhance research institutions’ global and research impact.

The innovation: Created in 2019, this technological research-intensive university brings together 20 prestigious colleges, public universities and research institutes under one campus while preserving their individual autonomy. Through their combined resources, the collaboration has positioned the university as a leading force in global science and technology research, education and innovation.

Fostering local economic engagement – Innovation and Economic Prosperity Program, Association of Public and Land-Grant Universities, United States

The challenge: Connect university teaching, learning and research to local economic development.

The innovation: The IEP program encourages universities to understand, communicate and develop their local economic engagement through a designation process. It also conducts annual awards recognizing outstanding examples of talent and workforce development; innovation, entrepreneurship and technology-based economic development; and other forms of community engagement.

Global Stories in Higher Education Teaching and Learning Innovation

Degree Apprenticeships — Manchester Metropolitan University

The challenge: Address graduates’ skills gaps and boost productivity

The innovation: Degree apprenticeships combine full-time work with part-time study, engaging industry in co-designing and delivering a large portion of the program. Manchester Met has achieved exceptional outcomes through this model, including a 44% median salary increase for apprentices, estimated to be equivalent to a 60% boost in productivity, and 70% of employers reporting productivity gains.

Disrupting the Model – Arizona State University, U.S.

The challenge: Redesign the university to provide broad access to education, advance research of public value and engage in community economic challenges.

The innovation: Under the transformative leadership of Michael M. Crow, the university is redefining the role of higher education under its “New American University” model. It’s been ahead of the curve in offering full degree programs online and improving access for non-traditional students, including a partnership with Starbucks to provide free online degree programs for its employees. On the research and intellectual property side, it has secured more than 1,600 patents since 2003, attracted more than $1.4 billion in investment capital and is considered a leader in technology transfer.

  • South Korea – This east Asian powerhouse has the highest rate of postsecondary education attainment in the OECD, at nearly 70% of its population and is an OECD leader in productivity growth. The country has leveraged its educational advantage towards its economic development, with a strong top-down system of close research collaboration between government, industry and the academic community. Although it is currently facing slippage in its record, its fundamentals remain strong and it stands as an example of what’s possible through robust policy, investment and collaboration.

  • Israel – With a 6.5% growth rate in 2022, Israel’s high-tech sector accounts for more than 15% of GDP and universities are tightly woven into its activities. Israel was ranked first globally for AI talent concentration and fifth for AI talent penetration by Stanford University’s 2024 AI Index Report. This has been attributed to “an exceptional ecosystem of startups, academia, and strategic support from both local and multinational players.”

  • Slovenia – Showing strong productivity gains over the last decade, this small eastern European nation has also seen significant gains in postsecondary education attainment since 2012, from 35.3% of the population to 47.3% in 2022. The country directs about 1% of GDP towards higher education, has seen rapid growth in STEM program graduates and manages higher education within the same government ministry as science and innovation.

Digital Technologies Program, York University

  • The challenge: Address skills gaps in the digital economy and foster a diverse, innovative workforce.

  • The innovation: Canada’s first fully work-integrated learning degree, where students spend 80% of their time in the workplace, including paid work opportunities, and 20% on coursework. The competency-based curriculum allows students to apply real-world skills while moving through advanced tech-related topics. Employers highlight gains in productivity resulting from longer-term placements and deeper student engagement with projects.

Electrical Technician Program, Nova Scotia Community College

  • The challenge: Meet the demand for new skills as Nova Scotia’s government works to grow its onshore wind generation.

  • The innovation: With an investment from RBC Foundation as part of a larger $2-million commitment, NSCC is updating its Electrical Technician Program to include large-scale wind energy training, in alignment with labour market demand and provincial clean growth initiatives. The funds will support new course development and hands-on training materials.

Global Innovation Clusters, Innovation, Science and Economic Development Canada

  • The challenge: Solve complex problems and improve Canada’s productivity in key emerging industries.

  • The innovation: Better known as the “superclusters,” this program brings together businesses, academic institutions and nonprofits under five industry categories to drive growth and innovation, backed by shared government and industry funding. The program generated more than $1.6 billion in project spending by the federal government and industry partners between 2018 and 2023 and created nearly 24,000 full-time jobs.

Mitacs Research and Internship Partnerships

  • The challenge: Connect postsecondary research expertise and innovation to problems faced by businesses and bridge the skills translation gap for undergraduate and graduate students.

  • The innovation: Through several programs, this not-for-profit organization brings students and post-doctoral researchers together with private sector partners through internships and collaborative research projects focused on real-world challenges faced by the business. Mitacs also provides dedicated professional skills development for graduate students and postdocs. The program has resulted in an 11% increase in productivity for its more than 12,000 partners and $1.2 billion in R&D spending between 2018 and 2023, according to a Statistics Canada/Mitacs analysis.

For more, go to rbc.com/thegrowthproject.

Download the Report

Contributors:

RBC Thought Leadership

John Stackhouse, Senior Vice-President, Office of the CEO, RBC

Caprice Biasoni, Graphic Design Specialist

Shiplu Talukder, Digital Publishing Specialist

Business + Higher Education Roundtable

Val Walker, CEO

Matthew McKean, Chief R&D Officer

Andrew Bieler, Director of Partnerships & Experiential Learning

Carmela Busi, R&D Associate

External Contributor

Moira MacDonald, Writer & Copy Editor

1. OECD. Adult Education Level. Retrieved from: https://www.oecd.org/en/data/indicators/adult-education-level.html?oecdcontrol-4e20b448f7-var6=TRY

2. Statistics Canada (2023), From high school, into postsecondary education and on to the labour market.

3. RBC Economics (2024). Canada’s Growth Challenge: Why the economy is stuck in neutral.

4. Statistics Canada and RBC Economics Research.

5. OECD and RBC Economics Research.

6. Statistics Canada (2024). Postsecondary enrolments, by International Standard Classification of Education, institution type, Classification of Instructional Programs, STEM and BHASE groupings.

7. Usher, A., & Balfour, J. (2024). The State of Postsecondary Education in Canada, 2024. Toronto: Higher Education Strategy Associates.

8. Higher Education Quality Council of Ontario (2024). Understanding the Regulatory Landscape of Private Career Colleges.

9. Usher, A., & Balfour, J. (2024). The State of Postsecondary Education in Canada, 2024. Toronto: Higher Education Strategy Associates.

10. Ibid.

11. Valero, Anna & Van Reenen, John. (2018) The economic impact of universities: evidence from across the globe. Economics of Education Review.

12. OECD (2019), Benchmarking Higher Education System Performance, Higher Education, OECD Publishing,

13. Paris.

14. Côté, A., Dobbs, G. (2023) Canada’s Black Box of Higher Education Outcomes. Canadian Standards Association, Toronto.

15. OECD (2019), Benchmarking Higher Education System Performance, Higher Education, OECD Publishing,

16. Paris.

17. Business + Higher Education Roundtable (2022), Empowering People for Recovery and Growth: 2022 Skills Survey Report.

18. Usher, A., & Balfour, J. (2024). The State of Postsecondary Education in Canada, 2024. Toronto: Higher Education Strategy Associates.

19. Statistics Canada (2024), Postsecondary enrolments by field of study, registration status, program type, credential type and gender.

20. Hemelt, Steven W. et al, “Why is math cheaper than English? Understanding cost difference in higher education,” Working Paper 25314, National Bureau of Economic Research, November 2018

21. Usher, Alex, “The Shifting Cost-base of Ontario’s Higher Education System,” February 2020.

22. Côté, A., Dobbs, G. (2023) Canada’s Black Box of Higher Education Outcomes. Canadian Standards Association, Toronto.

23. Statistics Canada. Retrieved from Labour Force Survey.

24. Statistics Canada (2023). Unemployment and job vacancies by education, 2016 to 2022.

25. OECD/European Commission (2023), Indicators of Immigrant Integration 2023: Settling In, OECD Publishing, Paris

26. Ibid.

27. Statistics Canada. Retrieved from Labour Force Survey microdata.

28. Council of Canadian Academies (2021). Degrees of Success, Ottawa (ON). The Expert Panel on the Labour Market Transition of PhD Graduates.

29. Ibid.

30. Statistics Canada. Population projections for Canada, provinces and territories: interactive dashboard.

31. Office of the Auditor General of Ontario (2022). Special Report on Laurentian University.

32. Canadian Bureau for International Education (2024). The Student Voice – National Results of the 2023 CBIE International Student Survey, Report, CBIE, 2024.

33. Council of Canadian Academies (2015). Some Assembly Required: STEM Skills and Canada’s Economic Productivity. Ottawa (ON): The Expert Panel on STEMSkills for the Future, Council of Canadian Academies.

34. RBC (2018). Humans Wanted: How Canadian youth can thrive in the age of disruption.

35. Nature Index. (2023). 2022 Research Leaders.

36. OECD. Gross domestic spending on R&D.

37. Innovative Work-Integrated Learning: Smarter Skills Solutions for Canada’s SMEs, Business + Higher Education Roundtable, 2025.

38. Statistics Canada. Table 37-10-0249-01 Work-integrated learning participation during postsecondary

39. Ibid.

40. Business + Higher Education Roundtable (2025). Innovative Work-Integrated Learning: Smarter Skills Agenda.

41. Business + Higher Education Roundtable (2023). Upskilling and Reskilling: how employers are retraining and retaining Canada’s workforce.

42. Pichette, J. & Courts, R. (2024) Postsecondary-offered Microcredentials in Ontario: What Does

43. The Evidence Tell Us? Higher Education Quality Council of Ontario

44. Pichette, J., Watkins, E. K. (2018). Competency-based Education: Driving the Skills-measurement Agenda. Toronto: Higher Education Quality Council of Ontario.

45. Office of the Auditor General of Ontario (2022). Value for Money Audit: Financial Management in Ontario Universities.

46. Statista (2025). Share of people with tertiary education in OECD countries in 2022, by country.

47. Lee, Soo & Jung, Hyejoo. (2021). Higher Education in the National Research System in South Korea.

48. World Bank. Retrieved from https://data.worldbank.org/country

49. OECD Economic Surveys 2023: Israel.

50. Press, Gil. “In 2024, Israel became a Global Leader in Applied AI Innovation,” Forbes, Dec. 22, 2024.

51. European Commission (2024). Country Reports: Slovenia.

52. Ibid.

53. Government of Canada (2022). Innovation Superclusters Initiative: Economic analysis final report.

54. Mitacs (2024). Measuring the Economic Impact of Mitacs.

TL Title

tl-title

Canada has a growth problem. The economic momentum that propelled the country through the 20th century has faded in the 21st, and appears to have worsened since the pandemic. Higher interest rates have slowed per-capita output since 2019, but the problems run deeper than that. Our economy is now smaller than it was in 2019 when adjusted for inflation and immigration, and pretty much in the same place it was a decade ago. Globally, we’ve fallen behind most major economies since 2000. At the turn of the century, the economic output of the average Canadian was on par with Australia. Today, Australians are almost 10% more productive, while their economy has grown 50% per person faster than Canada’s over the quarter century. We’re further behind the United States. Canada is 30% less productive than the U.S. and closer to lower-income states like Alabama in terms of economic performance than tech-rich California or New York. The result: We’ve fallen from the 6th most productive economy in the Organisation for Economic Co-operation and Development in 1970 to the 18th as of 2022. Pretty much every Canadian has something at stake. The productivity gap with the U.S. stands at about $20,000 per person a year, putting Canadians’ wages roughly 8% below their U.S. counterparts. The gap has been even more taxing for capital. Anyone who invested $1,000 in Canada’s main stock index in 2000 would have $4,400 today; the same investment in the U.S. S&P 500 index would be worth $6000—a more than 35% difference. Our relatively low productivity —the amount of production and income generated per hour worked in the economy— has been held back by a shortfall in investment, especially outside real estate, construction and public services like hospitals. As a result, we’ve not been able to capitalize on the immigration boom that has added seven million people—most of them working-age and well-educated—since the turn of the century and offset the retirement wave of baby boomers. The deindustrialization of many parts of Canada has cut into the country’s overall prosperity. Manufacturing is half what it was to the economy in 2000, while mining has also shrunk. Oil and gas—once powerhouses of investment and growth—are showing signs of renewed strength, but investment levels remain far below what they were a decade ago. Agriculture has been a rare standout, as we’ll explore later in this report. A positive change in productivity could be the most significant factor in lifting economic growth, and the prosperity that goes with it. We have the natural and human resources that much of the world is looking for, and our access to major markets—Europe, Asia, and critically, the U.S.—is the envy of the world. With those strengths, Canada’s growth challenge can quickly become a growth opportunity, with significant benefits for Canadians. Simply closing the productivity gap with the U.S. would add roughly $20,000 of GDP per person per year.
Slowing Canadian GDP growth led by softening productivity gains
Average annual percent change, business sector (sum of bars equals per-year GDP growth)
Statistics Canada, RBC Economics
Boosting productivity is not simple, of course. Canada is a large, geographically diverse, resource-rich country with a dispersed population, and that creates unique infrastructure, regulatory and investment challenges. Administrative burdens across multiple levels of government have created inefficiencies and increased internal trade barriers. Infrastructure chokepoints and red tape make international trade more difficult than it should be. Even the mobility of skilled workers—hard enough given our geographic expanse—can be limited by the way provinces, industries and professional groups try to control labour supplies. Those issues all contribute to lower Canadian business investment and with that, lower growth. Moreover, in recent economic cycles, a growing share of savings and investment has flowed to real estate and construction, which, while needed and beneficial for many reasons, are both relatively inefficient and can hold back the overall productive growth of an economy. The same can be true for small businesses, which account for 98% of total businesses and historically have been less productive. Those businesses are foundational to the country and are part of many Canadian’ communities, but if they’re not growing and becoming more competitive, they can limit the overall economy’s potential. It wasn’t always this way. Canada’s productivity growth averaged 5% per year in the 1950s as wartime technologies were adapted for civilian use—powering virtually all GDP growth that decade. Productivity growth stayed strong (3.5% per year) in the 1960s as automation of the manufacturing sector continued, along with a boost from the 1965 Auto Pact between Canada and the U.S. that opened a new door to freer trade. That trajectory faded during the turbulent economic times of the 1970s and 1980s, although innovations like container shipping and expanding global trade led to further gains in growth and productivity in the 1990s. These challenges can seem daunting. But the solutions are also clear and attainable and don’t require many trade-offs. Growth-minded policies can benefit all parts of society including both investors and workers. Among the most compelling options for governments, businesses, unions and industry groups:
  • Cutting red tape and reducing internal trade barriers. This doesn’t have to mean lowering standards but rather improving consistency and rules across jurisdictions to make project approval times and costs more predictable.
  • Better utilization of immigrant skills. All population and workforce growth is going to come from immigration, and we need a better system to match education and skills with jobs.
  • Improving tax competitiveness. Canada’s tax competitiveness has been slipping. Our level of taxation overall is lower than other more productive economies, but broader reforms to reduce complexity and the cost of tax compliance could help to attract more investment.
  • Adopting new technologies. “Smarter” investments like artificial intelligence can help but adoption rates are low in Canada. Making it easier to invest in new technologies is critical to maintaining global competitiveness.
  • Capitalizing on a highly educated workforce. Canada’s highly educated workforce is uniquely positioned to benefit from a global shift to a more services-based economy. Canada needs to ensure investments in education are generating a return.
Every federal government over the last quarter-century, and many of the provinces have studied the challenges of competitiveness, growth and productivity. And they’ve each discovered, sometimes in hindsight, that there’s no simple policy playbook. This report examines some of the steps that can be taken to enhance growth, but one of the most powerful tools is not a tool at all; it’s a mindset. If Canadians developed a collective focus on the economy of the future—one that rewards innovation, celebrates competitiveness, invests in both people and technology, and efficiently delivers returns—the productivity puzzle may become easier to solve. And with it, growth will return.
  • Canada’s productivity vs. the U.S. has been sliding since 1980s
  • Natural resources lead Canada’s productivity gains vs. U.S.

How we got here: Canada’s journey to low productivity

Some of the causes of Canada’s long-term slowdown in economic growth are well-known and clear. Let‘s start with an inefficient regulatory and administrative approval system at all levels of government, which has unintentionally increased internal barriers to trade and growth. Infrastructure chokepoints and red tape further make international trade more difficult than it should be. Those have contributed to lower Canadian business investment, and with that, an overweight of capital going to buildings and construction, which, while valuable to the economy, don’t do as much for growth as machinery and intellectual property do. Moreover, many policies have favoured small businesses over growth companies and large enterprises, which, in turn, limits our overall productivity growth.
Canadian businesses invest less Canadian businesses invest substantially less than in the U.S.—about half as much per worker in aggregate. That underperformance intensified following the 2008-09 global financial crisis and through the oil price collapse of 2015, and worsened following the pandemic as higher interest rates hit the Canadian economy harder than the U.S. In sum, the contribution to productivity growth from capital investment in Canada since the 2008/09 financial crisis has been less than half the average over the decade before. Added to this, weak recent investment trends suggest further underperformance in the decade ahead. Of course, part of the slowing in investment has been from a pullback in investment in the Canadian oil and gas sector that is tied more to the ongoing energy transition globally away from fossil fuels. But, businesses have also invested a substantially smaller share of GDP in the manufacturing sector in Canada than in the U.S. over the last decade. The issue does not appear to be a lack of available funding. Central banks have pushed interest rates higher, but businesses are still sitting on a large cash stockpile worth almost a third of GDP. Businesses have long argued that an inefficient project approvals backdrop is making investing in Canada relatively expensive.  Lack of investment also keeps Canadian businesses smaller (98% of businesses in Canada have fewer than 100 employees) and smaller businesses are typically, on average, less productive.
  • Canada vs. U.S. investment per worker ratios
  • Utilities and mining draw most investment both sides of the border
Regulation is a tax on investment and growth A patchwork of regulatory and administrative rules across different municipalities and provinces is complicated and unintentionally restricts trade within Canada. The International Monetary Fund has estimated that internal trade barriers (for example, regulatory differences across regions, paperwork requirements for businesses in multiple jurisdictions, and certification differences that limit labour mobility) cost the equivalent of a 20% average tariff between provinces. By comparison, the effective tariff rate collected on international imports from abroad in Canada is less than 1%1. In 2020, Canada ranked 188th out of 208 economies tracked by the World Bank on the number of days businesses spent dealing with construction permits for new projects. That is three times longer than time spent in the U.S. Red tape also makes it more expensive for companies to trade across international borders. Actual tariff rates on international trade in Canada are low, but Canada ranks poorly (51st globally) in the ease of trading across borders in large part due to high administrative costs associated with importing and exporting. Our tax system is losing its competitive edge A decade ago, Canada had the second lowest corporate tax rate among G7 economies. That gap has narrowed, particularly, after a sharp drop in U.S. corporate tax rates in 2018. Canadian corporate tax rates are still comparable to other advanced economies. But taking into account the tax on company dividends at the personal income tax level, the total tax on distributed profits from Canadian companies is the highest in the G7, according to the OECD. Added to this, governments in Canada have been running larger budget deficits after decades of fiscal responsibility. That raises the risk of further tax increases in the future, which increases uncertainty for businesses thinking about coming to and expanding in Canada. At the same time, while foreign direct investment in Canada has remained firm, investment by Canadians abroad has grown substantially, leading to a large net outflow of investment abroad. The investments abroad are valuable. Canada’s stock of net assets held abroad has increased to about $1.7 trillion (57% of GDP)—but they are adding to productivity growth outside of Canada, rather than within.
  • Canada’s net investment outflow to U.S. intensified after 2014
  • Canada’s corporate profit taxes are highest among developed nations
Infrastructure challenges—some natural, some self-created Canada has a small population spread across a large land area with abundant natural resources that need to be exported. That generates some unique challenges compared to other countries. The good news is Canada has a strong infrastructure overall, ranking at the top of the G7 in World Bank rankings. Transportation and warehousing are the few industries where Canadian business investment is a larger share of industry GDP than in the U.S. It is one of the industries where Canada’s productivity underperformance relative to the U.S. is the smallest. However, there remain significant bottlenecks where Canadian infrastructure significantly underperforms. The country’s turnaround times at ports are among the longest in the world, ranking 103rd out of 113 countries tracked by the World Bank in 2023 with a median of two and a half days. Canada also ranks poorly on “ease of exporting” in global rankings by the World Bank largely due to high document and paperwork costs.
Overweight in construction, light on intellectual property Productivity in Canada lags in most industries versus the U.S., but the Canadian economy is also overweight in construction, where productivity growth has been slower. Investment in residential structures accounts for twice the share of GDP in Canada (6%) than in the U.S. (3%). Businesses in Canada invest more in nonresidential structures and less in intellectual property products. Canada invests about 40% less (as a share of GDP) in intellectual property products (IPP) overall—with a larger weighting towards mining exploration activity. The manufacturing sector invests about just a quarter of what the U.S. invests in IPP relative to the industry’s GDP footprint. As a result, construction accounts for about twice the share of total hours worked in Canada (8%) as it does in the U.S. (4%). Construction is one of the industries that has struggled the most to boost productivity over time. Indeed, looking back decades, productivity in the Canadian construction sector as of 2022 was 54% above levels in 1961—which is just a fourth of the broader increase in business sector output per hour worked over that period.
  • How Canada’s productivity grew by sector over the last six decades
  • U.S. outpaces Canada in intellectual property investment in key sectors
A growing services sector isn’t helping productivity The reasons for Canada’s decades-long productivity challenge on the goods-producing side of the economy are well known, if not easily solved. The service sector (home to 80% of Canadian workers) must also be part of any solution to productivity challenges. It’s concerning that high levels of investment in human capital aren’t paying higher dividends in terms of productivity growth. Canada has a highly educated and skilled workforce that should be well-positioned to take advantage of the ongoing shift in the global economy from goods to service-producing industries. However, there hasn’t been a corresponding acceleration in productivity growth from the quality of labour as education outcomes have improved. The share of the Canadian workforce with completed post-secondary education has increased from 41% in 1990 to 70% in 2023, but growth in measured productivity from labour composition (skill upgrading as measured by increases in the experience and education composition of the workforce) has been running at about half its pace in the 1990s.
  • A more educated workforce isn’t resulting in higher productivity
A large and growing public sector is less productive Canada’s large public sector education and healthcare industries are much less productive than in the U.S. by 70% and 50%, respectively. and accounting for a fifth of the total economy productivity gap despite only accounting for 14% of the economy. However, it is also notoriously difficult to measure productivity in the public sector, where there are often no market transactions. Much of Canada’s underperformance in measured productivity in healthcare and education (essentially the market value of services over the number of hours worked) versus the U.S. disappears when broader outcomes of those systems are considered. Life expectancies in Canada are longer, and preventable deaths are lower. A larger share of the population over the age of 65 is in good health. And the Canadian healthcare system costs just over half as much as the U.S. on a per-capita basis to achieve those outcomes. In education, Canadian students (15 year-olds) rank close to the top of the OECD (and above the U.S.) in math, science, and reading scores. But that doesn’t mean there is no room for improvement. The public sector will need to get more productive to meet the needs of a rapidly growing population. While Canadian health outcomes rank better than measured productivity, the speed and availability of services have long been an issue. Satisfaction with health coverage has been slipping. Canada has a shortage of doctors and nurses, and a poor record of utilizing the skills of new arrivals, particularly, in the healthcare sector at a time when demands are increasing due to rapid population growth. In Canada, public-sector employment has accounted for more than a third of total job growth over the last decade.
Canadian agricultural output:
Lessons for the future
Agriculture isn’t always top of mind in conversations about technological innovation. But no industry in Canada has seen more disruptive technological advancement over the last century (or two) than food production. Those advances have led to massive productivity gains—even in recent decades. New techniques and products have increased crop yields. Advanced machinery has dramatically reduced the number of people needed to work the land. Forget about the tractors and combines of a generation ago—the technology in modern farm equipment more closely resembles that found in a spaceship. By our count, agricultural production per farm acre in 2016 was three and a half times the level in 1941. Per-worker production gains have been even stronger. Output per agricultural worker is about 12 times what it was in 1941.
Fewer farmers but multiple times more productive All of those productivity gains have led to dramatic structural changes. Farms have gotten much bigger. The average Canadian farm size in 2021 was about 800 acres—twice as big as an average farm 50 years ago and four times the average size in 1921. Larger machinery means fewer workers are needed. In 1921, about a third of Canadian jobs, or one million workers were in the agriculture industry. Today, agriculture accounts for about 1.5% of jobs or less than 300,000 workers. About 700,000 fewer people currently farm land, which is about 12% larger than it was a century ago.Automation—this is not our first rodeo There’s a lesson in agriculture for those who fear that automation could make large swaths of the current workforce obsolete. Historical trends in agriculture show us technology can be massively disruptive but also welfare-improving on the same scale. The prospect of losing almost a third of jobs to technological innovation in agriculture would have sounded terrifying in 1921. There have been negative consequences for rural communities that depended on all of those agricultural jobs. The flip side of that equation, though, is that all of those agricultural productivity improvements freed up almost a third of the workforce to focus on something other than food production. New industries developed, and people found other jobs. Advancements in medical research, a widely expanded social safety net, new innovations that have boosted output in other industries, all owe part of their success to the fact that farmers got really good at producing food.

What needs to be done to improve productivity

Most of what should be done to address Canada’s productivity challenges is not controversial. The changes required are growth-positive policies that would benefit business owners and workers even if Canada were starting from the highest productivity levels in the world. That does not mean they are not easy to implement. But if they’re not addressed, Canada will enter the 2030s with an even greater economic challenge than we face today.
Lower interprovincial trade barriers and cut red tape
Lowering trade barriers within Canada doesn’t have to mean lower standards. It implies improving consistency and rules across jurisdictions to increase the speed and predictability of project approval times and lower potential holding costs for businesses planning new investments in Canada. In a lot of our conversations with businesses, an unpredictable project approval timeline is flagged as an issue that raises costs in Canada versus other regions like the U.S. Attempts have been made over decades to try and better harmonize the regulatory backdrop across the provinces. The latest was the 2017 Canadian Free Trade Agreement. But progress is slow and lists of exemptions to free trade across provinces are long. Not all of the challenges are interprovincial, either. Rules, regulations, and project approval times also vary across municipal governments. Other countries that have been able to reduce internal trade barriers have had success in boosting productivity levels. Australia also struggled with internal trade barriers but had more success eliminating them in the 1990s. Other factors at play in Australia included the emergence of China as a major global economic power. The result: Australia’s productivity levels swung from 8% below Canada’s in the early 1990s to 8% above Canada’s before the pandemic.
Better utilize immigrant skills
All population and workforce growth is going to come from immigration in the decade ahead, and Canada has a bad track record at utilizing the skills of new arrivals. Canada leads the G7 in attracting immigrants with newcomers now driving population growth. Those immigrants are, on average, better educated and younger than the domestic workforce and more likely to have majored in STEM-related fields (science, technology, engineering, and math) than their Canadian-born peers. But they are also more likely to work in jobs that don’t fully utilize those skills. Canada has had more success at utilizing the skills of new arrivals among international students who choose to stay in Canada. Labour market underutilization of immigrant skills versus the Canadian-born population largely disappears among immigrants that studied in Canada. But simply recognizing the credentials of foreign-trained professionals in fields like healthcare would also increase the productivity and earnings of those workers and help address the chronic undersupply of those workers in the labour market.
Focus again on tax competitiveness
Canada’s effective economy-wide tax rate doesn’t appear to be a problem. Of the 17 OECD economies that outrank Canada’s productivity, 13 have higher total tax burdens (all taxes, including corporate and personal, combined). But the way that tax revenues are collected also matters. Canada relies more heavily on income taxes and less on consumption taxes like the GST/HST compared to more productive economies. Tax rates on corporate profits (including taxes on dividend payments) are also high. The tax system is also overly complex with a long list of exceptions, deductions, credits, etc. They increase the costs of compliance, often without clear results in terms of increasing tax fairness across the income distribution. Policymakers should aim to make sure tax rules can be easily understood to encourage compliance, especially among those that are most in need of the benefits, i.e., new businesses and lower-income households. Proper assistance from the government with tax filing and document gathering should also be available and accessible to all with the help of digitization. The harmonization of the tax rules, tax bases and defined terms between the federal government and provinces can also be improved to increase efficiency. Canada could also consider the creation of an independent, impartial body or mechanism for regular tax policy and complexity reviews. Canada’s last thorough review of the tax system happened in 1967.
Invest in new technologies
“Smarter” investments like AI can help but adoption rates are low in Canada. New disruptive technologies also don’t always translate into productivity gains. Productivity gains have been slower in the decades following the widespread adoption of the Internet than in the 1990s, for example. However, the consequences of falling behind emerging trends can be significant, and Canadian businesses have been underinvesting in new technologies. Canada is already a leader in generating new ideas, but has been slower to adopt new technologies among businesses. Canada ranks fifth in the OECD in research and development at universities and only 22nd in those investments among businesses. The problem does not appear to be a lack of capital. The Canadian venture capital market is much smaller than in the U.S., but is easily the second largest in the G7. Improving the broader competitive backdrop and predictability of the policy environment can help. Canada ranks relatively high in R&D subsidies for small and medium-sized businesses, but much smaller for larger businesses, according to the OECD. Still, R&D tax incentives will only help in a predictable policy environment and projects often have long time horizons. Therefore, improving the efficiency and predictability of Canada’s complicated project approvals system and simplifying the tax system would benefit these investments. The OECD has also found that bankruptcy regimes that are less punishing to debtors can help spur investments and productivity growth. Canada ranks well on measures of ideas generation and perceived opportunities, but entrepreneurs have a high fear of failure.
Capitalize on Canadian strengths
Canada is uniquely positioned to capitalize on a global shift to a more services-based economy. Automation is shrinking the share of the workforce that is needed to produce goods globally, and that has meant that the services sector is growing. Canada’s highly educated workforce should benefit from that shift—with the largest share of university and college graduates in the G7. Some of the natural challenges to productivity growth in the goods-producing side of the economy, like the geographically dispersed population, are less of an issue in services, where high-value outputs can be exchanged electronically around the world almost instantly. Indeed, size and scale have long been a challenge for a dispersed population in Canada with a larger share of smaller and less productive businesses than in the U.S. But those challenges are smaller in the service sector where productivity levels are tied less to business size. The professional services sector has been among the fastest growing in recent years. It is a productive and high-wage industry, relies heavily on human capital versus machinery and equipment investments, and is less dependent on economies of scale. The average professional services business in Canada had six workers versus 29 in the manufacturing sector as of 2019. In Canada, the challenge has long been converting those positive education outcomes into increased income. We have long argued that a focus on skills over degrees, increasing emphasis on career planning in high school programs, and increasing the utilization of work-integrated learning placements (co-ops and internships) would help to better match the developments of skills in the economy with current and future labour market needs.
  • Trade barriers

Lower interprovincial trade barriers and cut red tape

Lowering trade barriers within Canada doesn’t have to mean lower standards. It implies improving consistency and rules across jurisdictions to increase the speed and predictability of project approval times and lower potential holding costs for businesses planning new investments in Canada. In a lot of our conversations with businesses, an unpredictable project approval timeline is flagged as an issue that raises costs in Canada versus other regions like the U.S.

Attempts have been made over decades to try and better harmonize the regulatory backdrop across the provinces. The latest was the 2017 Canadian Free Trade Agreement. But progress is slow and lists of exemptions to free trade across provinces are long. Not all of the challenges are interprovincial, either. Rules, regulations, and project approval times also vary across municipal governments.

Other countries that have been able to reduce internal trade barriers have had success in boosting productivity levels.

Australia also struggled with internal trade barriers but had more success eliminating them in the 1990s. Other factors at play in Australia included the emergence of China as a major global economic power. The result: Australia’s productivity levels swung from 8% below Canada’s in the early 1990s to 8% above Canada’s before the pandemic.

  • Immigrant skills

Better utilize immigrant skills

All population and workforce growth is going to come from immigration in the decade ahead, and Canada has a bad track record at utilizing the skills of new arrivals. Canada leads the G7 in attracting immigrants with newcomers now driving population growth.

Those immigrants are, on average, better educated and younger than the domestic workforce and more likely to have majored in STEM-related fields (science, technology, engineering, and math) than their Canadian-born peers. But they are also more likely to work in jobs that don’t fully utilize those skills.

Canada has had more success at utilizing the skills of new arrivals among international students who choose to stay in Canada. Labour market underutilization of immigrant skills versus the Canadian-born population largely disappears among immigrants that studied in Canada. But simply recognizing the credentials of foreign-trained professionals in fields like healthcare would also increase the productivity and earnings of those workers and help address the chronic undersupply of those workers in the labour market.

  • Tax competitiveness

Focus again on tax competitiveness

Canada’s effective economy-wide tax rate doesn’t appear to be a problem. Of the 17 OECD economies that outrank Canada’s productivity, 13 have higher total tax burdens (all taxes, including corporate and personal, combined).

But the way that tax revenues are collected also matters. Canada relies more heavily on income taxes and less on consumption taxes like the GST/HST compared to more productive economies. Tax rates on corporate profits (including taxes on dividend payments) are also high.

The tax system is also overly complex with a long list of exceptions, deductions, credits, etc. They increase the costs of compliance, often without clear results in terms of increasing tax fairness across the income distribution. Policymakers should aim to make sure tax rules can be easily understood to encourage compliance, especially among those that are most in need of the benefits, i.e., new businesses and lower-income households. Proper assistance from the government with tax filing and document gathering should also be available and accessible to all with the help of digitization.

The harmonization of the tax rules, tax bases and defined terms between the federal government and provinces can also be improved to increase efficiency. Canada could also consider the creation of an independent, impartial body or mechanism for regular tax policy and complexity reviews. Canada’s last thorough review of the tax system happened in 1967.

  • New technologies

Focus again on tax competitiveness

“Smarter” investments like AI can help but adoption rates are low in Canada. New disruptive technologies also don’t always translate into productivity gains. Productivity gains have been slower in the decades following the widespread adoption of the Internet than in the 1990s, for example. However, the consequences of falling behind emerging trends can be significant, and Canadian businesses have been underinvesting in new technologies.

Canada is already a leader in generating new ideas, but has been slower to adopt new technologies among businesses. Canada ranks fifth in the OECD in research and development at universities and only 22nd in those investments among businesses.

The problem does not appear to be a lack of capital. The Canadian venture capital market is much smaller than in the U.S., but is easily the second largest in the G7.

Improving the broader competitive backdrop and predictability of the policy environment can help. Canada ranks relatively high in R&D subsidies for small and medium-sized businesses, but much smaller for larger businesses, according to the OECD. Still, R&D tax incentives will only help in a predictable policy environment and projects often have long time horizons. Therefore, improving the efficiency and predictability of Canada’s complicated project approvals system and simplifying the tax system would benefit these investments.

  • Canadian strengths

Capitalize on Canadian strengths

Canada is uniquely positioned to capitalize on a global shift to a more services-based economy. Automation is shrinking the share of the workforce that is needed to produce goods globally, and that has meant that the services sector is growing.

Canada’s highly educated workforce should benefit from that shift—with the largest share of university and college graduates in the G7. Some of the natural challenges to productivity growth in the goods-producing side of the economy, like the geographically dispersed population, are less of an issue in services, where high-value outputs can be exchanged electronically around the world almost instantly.

Indeed, size and scale have long been a challenge for a dispersed population in Canada with a larger share of smaller and less productive businesses than in the U.S. But those challenges are smaller in the service sector where productivity levels are tied less to business size. The professional services sector has been among the fastest growing in recent years. It is a productive and high-wage industry, relies heavily on human capital versus machinery and equipment investments, and is less dependent on economies of scale. The average professional services business in Canada had six workers versus 29 in the manufacturing sector as of 2019.

In Canada, the challenge has long been converting those positive education outcomes into increased income. We have long argued that a focus on skills over degrees, increasing emphasis on career planning in high school programs, and increasing the utilization of work-integrated learning placements (co-ops and internships) would help to better match the developments of skills in the economy with current and future labour market needs.

Productivity will not fix itself

Canada’s productivity problems could take years, if not decades, to fix. But if action isn’t taken to address why people are working more and producing less—resulting in lower wages— then the growing discontent among workers and businesses could set the economy back even further than where we are today. The skyrocketing cost of living has put lagging productivity more in focus because lower wages play a big role in the affordability crisis. The challenge for Canada is how can the economy reverse decades of underinvestment by businesses, slow and low adoption of new technologies, and remove complex regulatory and tax hurdles. It also comes down to what are the tools and measures needed to get a highly educated workforce to fully utilize their skills. The massive gains in agricultural productivity over the last century show Canada has the capability to turn things around, as disruptive as it may be. There is a role for governments, businesses and industry groups to implement and support the transition to becoming more efficient. After all, if we don’t improve productivity in Canada, living standards will not improve.

Related Reading

Nova Scotia’s opportunity:

Capitalizing on the population boom

A Growing Problem:

How to align Canada’s immigration with the future economy

Humans Wanted:

How Canadian Youth Can Thrive in the Age of Disruption

For more, go to rbc.com/climate.

Download the Report

Download

Contributors:

Nathan Janzen, Senior Director Economic Research

Rajeshni Naidu-Ghelani, Managing Editor, Economics & Thought Leadership

Aidan Smith-Edgell, Research Associate, RBC Economics

Darren Chow, Director, Content Strategy and Creative Production

Caprice Biasoni, Graphic Design Specialist

  1. Federal custom duties collected as a share of total Canadian merchandise import values

TL Title

tl-title

Immigration in Canada has accounted for all the growth in the labour force for well over a decade, but it’s still not enough to significantly offset the impact of an aging demographic or substantially reduce the structural shortages in the jobs market. A big reason for this is that the skill sets that many immigrants bring to Canada and the study fields of international students do not match well with the anticipated longer-term structural needs of the economy. This impairs the prospects for newcomers and, more broadly, the economy. Right now, the immigration system may be focusing too much on the labour market’s short-term demands, filling holes in sectors where low-skilled occupations have been experiencing acute shortages since the pandemic.
This has led to a surge in non-permanent residents, a strain on housing and social services, and eroded public support for immigration. The federal government needs to update immigration policies to focus more strategically on immigrant outcomes and the long-term structural needs of the labour market, while keeping in mind the infrastructure capacity to accommodate newcomers. Addressing this will be key to maintaining economic prosperity over the long run, and Canada’s high quality of life. This report will look at how a combination of a mismatch in immigrants’ skills and the labour market’s long-term needs, along with pressure on the country’s infrastructure capacity is leading to negative economic outcomes.
  • Expanding immigration targets to address an aging demographic and meet short-term labour market needs has led to a widening gap between workers’ skills and the abilities needed to address long-term structural labour shortages.
  • Employment from temporary work permit holders including international students is concentrated in sectors with low-skilled occupations, which reduces the incentive for businesses to innovate and invest in labour-augmenting or -saving technology.
  • Canada’s two-step pathway to apply for permanent residency needs greater oversight to ensure the system isn’t being abused by educational institutions and applicants.
  • The stress on infrastructure and social services needs to be addressed to improve economic outcomes for immigrants and their surrounding communities.
  • Canada’s Comprehensive Ranking System needs to be updated to prioritize economic immigrants with higher predicted earnings.
Growing the ranks of working-age people who have higher earning potential will be crucial to help spread the costs of social support programs such as healthcare. But policymakers also need to meet the challenges of integrating a large and growing number of new immigrants over the medium term.

Expanding immigration targets

The push by the federal government to increase immigration to offset the impact of an aging demographic has been successful in strengthening the labour force in the near term. Canada’s population grew by a substantial 3.3% in the 12 months to July 2023—the highest rate in more than six decades. The rise was driven almost entirely by in-migration as the federal government raised immigration targets for permanent residents.
A steady stream of immigrants is needed as more than 500,000 Canadian baby boomers hit retirement age—65—annually. Natural population growth is falling to the point where by 2030, overall population growth is expected to be fueled entirely by immigration.

Meeting short-term labour market needs

The current approach has succeeded in providing a large supply of labour to the Canadian market, but the majority of roles filled have been concentrated in low-skilled occupations. The labour force surged 6.8% in the past three years—growth unseen since the early 2000s. More international students are earning money while studying than ever before. In 2000, about one in five had a job. Today, about half are working while studying. Employers were able to tap into a pool of an estimated 1.2 million temporary residents with work permits in fiscal 2022-23. The federal government also made available one-time 18-month extensions in 2023 to people working under post-graduation work permits (PGWP) to further address broad-based labour shortages.
However, not surprisingly, employment from temporary work permit holders is concentrated in sectors with low-skilled occupations that have been experiencing acute labour shortages such as accommodation and food services. That may serve the Canadian economy well for the moment, but there is a downside. It reduces the incentive for Canadian businesses to innovate and invest in labour-augmenting or -saving technology needed to deal with an aging demographic and keep the economy globally competitive.1 The current economic weakness may also have a significant impact on low-skilled occupations with non-permanent residents and recent immigrants likely to disproportionately bear the brunt of job losses.

Mismatch between skills and labour market needs

The longer-term benefits of the abundantly available labour are also not clear as shortages in multiple fields, primarily healthcare and skilled trades, remain significant despite the increase of workers. Almost half (46%) of projected structural labour shortages are in occupations that don’t require a university or college education. That indicates the skill sets that international students are studying do not match well with the anticipated longer-term structural needs of the jobs market.
International students at colleges and universities are overrepresented in business management and STEM fields and underrepresented in the skilled trades and healthcare. While some healthcare and skilled trade workers from other countries obtain temporary work permits and professional licenses, they represent a disproportionately small number of employed temporary residents.

The role of Canada’s ‘two-step’ immigration system

Canada’s immigration system is heavily reliant on its “two-step” immigration program that allows international students to eventually apply for permanent residency. In 2018, almost 60% of economic stream immigration applicants had Canadian work experience, indicating that the majority of permanent immigrants were drawn from the pool of temporary residents.ii Strains on infrastructure and the changing labour market suggest Canada needs to broaden the potential ways for newcomers to immigrate. Graduation from designated schools automatically qualifies international students for a PGWP, allowing them to gain valuable work experience and better qualify for permanent residency. The two-step pathway also suits post-secondary institutions, including many contending with a funding squeeze amid flat real provincial funding and declining or frozen domestic student tuition fees. Many universities and colleges rely on the higher tuition fees from international students to cover funding gaps—even though students from other countries represent less than a fifth of university enrolments in Canada. Still, they account for a third of tuition fees. There’s been a particular emphasis on cracking down on “puppy mill” schools—for-profit private career colleges and similar institutions that the government has deemed as not offering a legitimate student experience while churning out diplomas. Private colleges, some in partnership with public colleges, have increasingly targeted international students as a lucrative source of revenue. This has led to negative outcomes for students and their surrounding communities.

Strain on housing and social services

The stress on infrastructure and social services from the high number of immigrants needed to help shore up Canada’s population, and fill jobs is eroding crucial public support for immigration. Housing is a key challenge with demand disproportionately affecting Toronto, Vancouver and Montreal—high-priced markets with low housing supply.iii Policy measures have been introduced to accelerate home building including a federal GST rebate on new purpose-built rental construction, but the
massive scale of in-migration makes it extremely difficult for housing supply to keep up. The squeeze on social infrastructure is no different. Immigration is an important part of the solution for bringing in trained staff for jobs in social services, but even the best candidates often struggle to integrate seamlessly. Training and hiring additional educators, hospital staff, or community support workers also takes time.

Government response to the challenges

A series of changes and updates have been announced by the federal government in an attempt to reel in a ballooning non-permanent resident population and regain greater oversight into newcomers entering the labour market. In January, the federal government implemented a cap on the total study permits to be issued over two years—limiting it to 364,000—roughly half the number of permits issued in 2023. The government also implemented stricter financial requirements for foreign students applying, upping the minimum capital requirement from $10,000 to more than $20,000 to ensure students have enough of a cushion to support their needs while studying. Work visas for spouses of undergraduate international students will also no longer be issued, and students studying at private colleges will no longer be eligible for the PGWP in an attempt to address potential loopholes in the system. However, the government will have to go beyond these initial steps to update the immigration system in order to ensure both the economy and newcomers can once again prosper from the benefits of immigration. Policymakers should examine other streams of non-permanent residents—like the Temporary Foreign Worker and International Mobility Programs—where numbers have also ballooned. They must address housing shortages on and surrounding campuses and update the selection process for permanent residents by streamlining the number of pathways available to prioritize candidates with the highest predicted earnings.

Here are recommendations that could help keep the immigration system on track to meet the country’s needs

The current CRS, developed in 2015, has selection criteria focusing on factors that include language proficiency, age, and education level. Applicants are, periodically, invited to apply for permanent residency based on a set ranking score cutoff. Higher immigration targets have meant reaching deeper into the pool of applicants to meet those targets. The cutoff scores have been lowered in order for more permanent residents to be selected from the process.

The CRS should be updated and streamlined to prioritize economic immigrants with the highest level of predicted earnings. Focusing on higher-earning immigrants can help improve economic outcomes for newcomers as well as encourage businesses to innovate or make labour-augmenting investments to overcome the shortage of low-skilled workers.

Universities and colleges should do more to provide work opportunities and increase job readiness for international students. Federal policy needs to remove or alter the requirement that international students state they do not intend to remain in Canada after graduation. Prospective students must indicate they do not intend to stay beyond their study permit, even though programs like the PGWP are designed for them to do so. This would help post-secondary institutions better create school-work pathways for international students. In addition, education for employers on the rules and benefits of hiring international students needs to be improved.

More labour market and language experience during studying would help temporary residents gain permanent residency faster and improve their prospective post-immigration earnings. International students are currently excluded from many work-integrated learning opportunities.

Provinces should identify countries with qualified workers in healthcare, skilled trades, or other priority fields where direct immigration is the more practical route. Enhanced pre-arrival information, immigration processing, federal settlement services and provincial professional licensing support can help convince foreign workers to build a successful life in Canada.
Federal and provincial housing supply plans should be aligned with in-migration targets. Post-secondary institutions should be encouraged to build more housing—and provinces could grant them commensurate financial flexibility. Canada Mortgage and Housing Corp. could help collect and disseminate more information on the student housing market, which would assist in developing market standards that attract global private capital pools.
Provinces need to develop long-term funding plans for post-secondary institutions that include parameters around domestic student tuition fees, public funding, and international student expectations. Continued freezing of domestic student fees is not sustainable and doesn’t meet the needs of post-secondary education providers. Foreign students also cannot be the key funding source supporting rural and low-enrolment institutions. Provinces should evaluate future local student demand for these institutions, and either publicly fund them appropriately or explore alternate delivery models for post-secondary education in these regions.
Certification of qualifications or credentials from recognized institutions in given source countries can help streamline labour market integration, save resources, and ensure an easier transition for those coming to Canada. Credential recognition has been a long-standing issue for newcomers. For high-earning professional designations, the certification process of immigrant credentials can be lengthy and costly. There aren’t clear frameworks for other professions, and it is often left to employers to determine the suitability of a newcomer candidate. This can be a time-consuming process for employers and a barrier to finding meaningful employment for immigrants.

For more, go to rbc.com/thoughtleadership.

Download the Report

Download

Contributors:

Benjamin Richardson, Researcher

Cynthia Leach, Assistant Chief Economist

Rajeshni Naidu-Ghelani, Managing Editor

Related Reading

Course Correction:

How international students can help solve Canada’s labour crisis

Canadians on the move:

will a pandemic shakeup in migration trends hold?

New School Rules:

How International Students Could Ease Our Labour Crunch

  1. ihttps://www.rbc.com/en/wp-content/uploads/sites/4/2024/11/CLEF-058-2023.pdf
  2. iihttps://www150.statcan.gc.ca/n1/pub/11-626-x/11-626-x2020010-eng.htm
  3. iiihttps://www.rbc.com/en/wp-content/uploads/sites/4/2024/11/san2021-21.pdf

TL Title

tl-title

Key Points

  • 25% of Canada’s 4 million tradespeople will need to upgrade their skills within five years amid significant digital disruption.1
  • Canada will face a shortage of at least 10,000 workers in nationally recognized Red Seal trades over that period—a deficit that swells tenfold when 250 provincially regulated trades are included.2
  • The most severe shortages will be among trades critical to the coming infrastructure boom, including industrial mechanics, welders and boilermakers.
  • Demand for digital and “soft” skills like creativity and problem solving is expected to rise significantly in these critical trades.
  • Over 700,000 skilled tradespeople are expected to retire by 2028. Meanwhile, an outdated perception of the trades has hobbled recruitment efforts.
  • Women made up just 11% of new registrants for apprenticeship programs in 2019 and continue to represent less than 4% of workers in the most in-demand trades.3
  • Immigrants comprised 8.7% of apprentices despite accounting for more than 20% of the population.4
  • Canada is falling short of its goal to bring in 3,000 skilled tradespeople annually through immigration, admitting 2,365 such newcomers in 2019 through the Federal Skilled Trades Program.5
  • Educators, employers and policymakers will need to address chronic problems in the trades pipeline, tap into underused pools of talent, and address a widening digital skills gap amid rapid technological advances in the workplace.
 

Wanted: a bigger toolbox

Virtual-reality headsets show blueprints to workers as they walk through a construction site. A carpenter plots precise cuts down to the millimeter with the aid of computer-assisted design. A welder performs her job remotely with the help of a robot.

Technological change, accelerated by the pandemic, has transformed not only the tools available to tradespeople, but the skills needed to operate them. Today’s industrial mechanics, electricians and automotive service technicians must have the digital savvy to operate the electronic-testing equipment, 3D technology, and digital diagnostic tools becoming commonplace in the manufacturing and construction sectors. They will also have to brace for frequent retraining on evolving technologies.

Meanwhile, soft skills—critical thinking, curiosity, creativity, problem solving and communication—are more important than ever in an economy that demands collaboration across sectors. These skills will increase in importance as the Fourth Industrial Revolution unfolds. But they won’t replace traditional technical ability. A foundational understanding of metallurgy, for instance, will remain crucial to a welder programming a robotic arm.

Canada’s skilled tradespeople—the welders, machinists, electricians and plumbers that have long been the backbone of our economy—are more critical than ever. In this report, we identify the main challenges facing the sector—the underrepresentation of women and immigrants, the need to double down on digital training, and the ongoing stigmas surrounding trades careers—and how best to tackle them. The challenges are significant. So are the opportunities.

This RBC report was developed within our Humans Wanted research program. It is informed by a series of roundtables and interviews with skilled trades workers, employers, educators, and industry leaders beginning in early 2020. It leverages findings from an analysis of specific trades using the occupational database O*NET and conversations with various stakeholders, as well as Statistics Canada products.

 

Canada risks getting caught short

Even before the pandemic disrupted training programs and upended labour markets, Canada struggled to maintain a steady flow of skilled tradespeople. Attempts to attract young people, women and immigrants to the field have repeatedly fallen short, leaving many trades unable to replenish vacancies left by retiring workers. The Canadian Apprenticeship Forum estimates Canada will face a gap of more than 60,000 registered apprentices by 2025, after new registrations plunged 37% last year.6

See the timeline of skilled trades history in the Appendix.

As Ottawa and the provinces contemplate the most ambitious economic rebuild in generations, including a stimulus-fueled infrastructure renewal and green projects, Canada will feel the pain of these shortages more acutely. In the next five years, the country will confront a shortfall of at least 10,000 skilled tradespeople just in the 56 high-demand Red Seal trades7—and the deficit could be 10 times bigger when the 250 provincially regulated trades are included. Shortages will be particularly severe among industrial mechanics, boilermakers and welders. And that’s before taking into account uncertainty over how many workers and apprentices will return to pre-pandemic programs and jobs.

“We are short about 15 plumbers right now and we’ve had to say no to some contracts. That’s never happened before. It’s like a chess game to move all the employees from one job to another.”

—Denis Beauchamp, Chair of Corporation des maîtres mécaniciens en tuyauterie du Québec



Specific challenges will vary across provinces. Following heavy job cuts in the hard-hit energy sector, Alberta has experienced a steep decline in registrations for skilled trades. New apprenticeship registrations fell to the lowest level in a decade in 2019—with significant drops in 20 of 21 major trades. An economic recovery in Alberta, combined with an increase in post-pandemic infrastructure and green spending, is expected to mean more demand for trades. Even without these new pressures, ongoing demand from oil and gas and residential construction threatens to leave Alberta shorthanded. By contrast, Quebec and Ontario saw increased registrations in 2019, though severe shortfalls persist in individual trades and within specific sub-regions.

An aging workforce could worsen the crunch. More than 700,000 workers in the skilled trades are expected to retire by 2028.8 In manufacturing alone, one-quarter of the workforce is aged 55 or older, and less than 10% of workers are under the age of 25.9 What’s more, the trades themselves are undergoing a significant shift to digital technologies. These innovations have empowered many to perform their jobs more efficiently and with greater accuracy. However, they have also created new urgency for upskilling, with about one-quarter of the 4 million people working in the trades expected to require retraining in the next five years, according to our analysis of Statistics Canada’s labour force survey and data on occupations most likely to transform.

“There are skills shortages, but it’s not just shortages to replace existing skills. The level of skill requirements is going to continue to increase. And particularly as there are big disruptions in technology and disruptions in business.”

—Jayson Myers, CEO, Next Generation Manufacturing Canada



 

Demand for digital skills rising in trades critical to economic rebuild

As technology becomes more embedded in our economy and workplaces, tradespeople will need to pivot—employing soft skills and embracing a mindset of constant learning.

We analyzed four of the most in-demand trades in the current economy, and found the digital know-how necessary to thrive in these fields will continue to increase significantly in the years to come. This transition will heighten the pressure on educators to keep evolving their programs, and on tradespeople to continue upgrading their skills.

Share of work activity by occupation and period, %

Source: O*NET, Occupational Database, RBC Economics

 

Recruiting the workforce of the future

Closing the gap between the supply of skilled tradespeople and growing demand will mean addressing core challenges, including recruiting from underrepresented groups and battling outdated biases. And that’s on top of preparing the next generation of tradespeople for a more digital future.

Boosting recruitment efforts

The first chokepoint in the skills pipeline comes long before a would-be tradesperson registers as an apprentice. Many tradespeople discovered their vocations in shop class, where they first held welding rods or operated lathes. This early exposure is especially important in the recruitment of underrepresented groups who may not otherwise get the chance to discover an interest or aptitude in a trade, industry groups say.

With more than 700,000 skilled tradespeople set to retire by 2028, the need to tap into new pools of talent is urgent. Though the share of women entering male-dominated trades has increased over the last decade, it was still only 5% of apprenticeship registrations in 2019. Meanwhile, immigrants make up more than 21% of the Canadian population, but accounted for just 8.7% of apprentices in 2018.10 Despite setting a goal to bring in 3,000 skilled tradespeople annually through immigration, Canada admitted just 2,365 such newcomers in 2019 through the Federal Skilled Trades Program.11 In some trades still facing severe shortages in the market (such as carpenters) Canada limited the number of eligible tradespeople to just 100.

Indigenous Canadians make up a greater proportion of apprentices than their share of the population. And as the fastest-growing cohort of Canadian youth—their numbers are expanding four times faster than the non-Indigenous population—they have the potential to be an even bigger presence in the skilled trades workforce of the future. The median ages of carpenters, cooks, auto technicians, truck and bus mechanics, transport truck drivers, welders and heavy-equipment operators all rose between 1996 and 2016, and are all above the age of 35.12

The CWB Welding Foundation, a Canadian not-for-profit, is among the organizations attempting to build bridges to these groups. It has invested over $3.5 million in secondary school welding labs and hosted trades camps designed specifically for women, newcomers and Indigenous people.13

Battling outdated stigmas

Beyond a lack of exposure, the trades have long battled a perception problem. The stereotype of skilled trades as “blue-collar” jobs involving heavy, dirty physical work best suited to students who lack the aptitude for “white-collar” careers persists. This is despite health and safety standards that limit the amount of lifting required in many trades and average salaries that often exceed other professions. The median income for pipefitters and heavy-duty equipment technicians with four years’ certification surpassed $100,000 in 2018; electricians earned between $80,000 and $90,000.14 What’s more, intellectual aptitude is frequently identified as a critical requirement for the trades—particularly as technological transformation makes a lifelong upgrading of skills necessary.

“I’m giving a $2 million machine to this person, please don’t let it be the person in the back of the classroom. I’m still working on fixing that perception because it is a problem for us as an industry and as a country in this area.”

—Shaun Scott, Director of Organizational Development at Linamar Corp.



Recession-proofing the training ground

Apprenticeship programs—the dominant educational pathway for tradespeople—typically see apprentices spend 80% to 90% of their time in the field learning from qualified journeypersons. The practice ends up tying education to the short-term performance of the economy. A survey by the Canadian Apprenticeship Forum found the rate of unemployment for apprentices rose to 29% during the pandemic, from 9% previously.15 Coursework was also suspended, prompting some to consider leaving their apprenticeships altogether (23% of respondents to CAF’s survey weighed this option).

A silver lining of the crisis is that it led many institutions to move their coursework onto virtual platforms earlier or more extensively than they’d planned. Though most educators say in-person training can’t be completely replaced, the experience during the pandemic has pushed others to embrace the potential in virtual options. The Flexibility and Innovation in Apprenticeship Technical Training (FIATT)—a federal pilot program that ran from 2015 to 2018—offered mobile learning labs and online tools for apprentices to ease the challenges of meeting coursework requirements. Apprentices reviewing the program said it reduced loss of income, allowed them to learn at their own pace and miss less work as they completed their requirements.16

Greater use of virtual training and digital tools could be a game-changer for trades education, enabling employers to evaluate skills and apprentices to more efficiently obtain their certifications and continue on their path through economic downturns.

“The pandemic definitely accelerated things. A lot of our coursework was already online, including videos and some actual programs where you can try them digitally. So in some ways, when the pandemic hit, we were quite fortunate in that we were able to kind of switch straight into gear.”

—Sarah-Jayne Roe, Acting Chair, Trades Development and Special Projects, Camosun College



Keeping up with rapidly changing technology

As the rate of technological change accelerates, there’s a risk it will outpace the curricula of apprenticeship programs. Rapid change has also increased the need for continuous upskilling among current journeypersons. The shift in Alberta’s energy sector toward more green technologies, for instance, will require tradespeople previously employed in the oil patch to adapt. A similar transition will be needed in the auto sector amid the transition to zero-emission vehicles.

“Whether you’re developing an oil facility or you’re out there building a solar farm or a wind farm, it’s still tradespeople doing that work. And a lot of the fundamental work they are doing in those cases is similar but there are differences…They’ll have to adapt to keep themselves resilient in a renewable economy.”

—Jim Szautner, Dean of the Schools of Manufacturing and Automation and the School of Transportation at the Southern Alberta Institute of Technology



Some businesses are supplementing the education provided by schools. Large companies like Linamar in Ontario have developed programs in collaboration with local colleges to ensure students are equipped with the latest skills needed on the shop floor. Meanwhile, in anticipation of a broad shift to electric and battery powered cars, organizations like the Automotive Parts Manufacturers Association (APMA) are developing shared industry-wide digital learning platforms to minimize the cost of upskilling employees at smaller firms.

Meet the players

...

Peter Voss

Cambridge, Ontario President and CEO, Shimco

Few would see the shim as a form of advanced technology. But Peter Voss has turned what was once a mere wedge of wood intended to level surfaces into a custom-engineered device for the aerospace and defense industries. His company’s shims are in Boeing and Airbus planes, and will soon be equipped with sensors to collect data on the pressure, vibration and temperature of moving parts. There’s just one problem: finding the machinists to make it all happen.

Voss, who employs 38 people, says the trade is in such demand that he lost six out of 10 machinists in the last year alone. The shortage isn’t new. Five years ago, faced with a dearth of local tradespeople, Voss began bringing in machinists from India on a temporary basis. This pipeline of workers has been critical to his company—which churns out 4,000 different parts each year. Recruiting, however, is limited by government restrictions that cap the number of temporary foreign employees a business can hire at 10% of its workforce. With the pandemic worsening shortages of many skilled trades, Voss is bracing for even tougher conditions. “Everybody is scrambling for people,” he said.

...

Nicole LeClair

Greater Toronto Area, Ontario Welding engineering technologist and Professor, Sheridan and Mohawk Colleges

When Nicole LeClair stepped into her first welding class in 1998, she was one of just two women in a group of 65 students. Since then, she’s watched the field transform with the use of robotic arms and other technology. She now teaches welding at Sheridan and Mohawk Colleges, where recruiting more women, new immigrants and young people into the field is part of her mission. The biggest barrier she faces in getting kids to give welding a try is often their parents, she says.

“They see the trades as a necessary evil for them,” she said. “But their goal is to make their kid a white-collar professional.” During recruiting trips to high schools, LeClair spends time dispelling myths of welding as grimy, low-tech work. Today’s welders work in clean rooms and nuclear plants and produce lifesaving devices like laser-welded pacemakers. Metal inert gas welding, now the most common form, sees welders program robotic arms to make precise movements. Technology has changed things for educators too, with the introduction of virtual welding machines. The machines were useful during the pandemic, LeClair says. But she’s skeptical about them as a replacement for in-field learning. “For me it’s just kind of like saying, ‘oh, I learned how to drive a car virtually, I’m ready for my road test,’” she said.

...

Courtney Chard

Toronto, Ontario Licensed welder and steamfitter

Courtney Chard is a second-generation welder and steamfitter, having followed her father into the field. Though her parents supported her career goals, trades didn’t “feel like an option for girls” when she was in high school. Chard got used to being the only woman on jobs and faced discrimination at times. She’s now a strong advocate for women in the workplace, and for promoting the trades to girls. Her eight-year-old daughter is an ambassador for “KickAss Careers,” a non-profit organization promoting careers in skilled trades and technology.

After 20 years of welding, Chard says conditions for women have improved. Employers and unions do more to support women through pregnancy and motherhood. Support groups for women in trades have multiplied, and more tradespeople have stepped up as mentors for young women entering the field. She was recently on a job with a carpenter, sheet metal worker and electrician—all of whom were women. “Things are better now, but more needs to be done,” she said.

...

Mike Bocsik

Victoria, British Columbia Instructor, Automotive Service Technician Apprentice and Foundation, Camosun College

Embrace change. That’s the central message Camosun College instructor Mike Bocsik tries to drive home with his students. In the last 10 years, he’s watched cars equipped with a single computer evolve to include up to 30, all communicating with each other. Technicians who once focused on traditional engine mechanics now service in-vehicle Wifi networks, GPS monitors and Bluetooth systems. And the change never stops: automakers introduce something new every quarter, Bocsik says.

But even Bocsik is awed by what the transition to battery-electric vehicles will mean for his profession. As automakers race to transform their product lines, service technicians will need to repair drive trains, braking systems and high-voltage electrification systems unlike those they learned about in school. Amid a global shift to clean transportation, they’ll also need to service battery-powered buses and hybrid engines on ferries. Backed by provincial funding, Bocsik’s employer will introduce an EV service program in the fall. Other institutions are devising similar courses. Still, Bocsik worries the system won’t be able to produce enough technicians to meet the demand. “They need to know now,” he said. “You either know how to work on this stuff, or you don’t work.”

Meet the players

...
...
...
...

Peter Voss

Cambridge, Ontario President and CEO, Shimco

Few would see the shim as a form of advanced technology. But Peter Voss has turned what was once a mere wedge of wood intended to level surfaces into a custom-engineered device for the aerospace and defense industries. His company’s shims are in Boeing and Airbus planes, and will soon be equipped with sensors to collect data on the pressure, vibration and temperature of moving parts. There’s just one problem: finding the machinists to make it all happen.

Voss, who employs 38 people, says the trade is in such demand that he lost six out of 10 machinists in the last year alone. The shortage isn’t new. Five years ago, faced with a dearth of local tradespeople, Voss began bringing in machinists from India on a temporary basis. This pipeline of workers has been critical to his company—which churns out 4,000 different parts each year. Recruiting, however, is limited by government restrictions that cap the number of temporary foreign employees a business can hire at 10% of its workforce. With the pandemic worsening shortages of many skilled trades, Voss is bracing for even tougher conditions. “Everybody is scrambling for people,” he said.

Nicole LeClair

Greater Toronto Area, Ontario Welding engineering technologist and Professor, Sheridan and Mohawk Colleges

When Nicole LeClair stepped into her first welding class in 1998, she was one of just two women in a group of 65 students. Since then, she’s watched the field transform with the use of robotic arms and other technology. She now teaches welding at Sheridan and Mohawk Colleges, where recruiting more women, new immigrants and young people into the field is part of her mission. The biggest barrier she faces in getting kids to give welding a try is often their parents, she says.

“They see the trades as a necessary evil for them,” she said. “But their goal is to make their kid a white-collar professional.” During recruiting trips to high schools, LeClair spends time dispelling myths of welding as grimy, low-tech work. Today’s welders work in clean rooms and nuclear plants and produce lifesaving devices like laser-welded pacemakers. Metal inert gas welding, now the most common form, sees welders program robotic arms to make precise movements. Technology has changed things for educators too, with the introduction of virtual welding machines. The machines were useful during the pandemic, LeClair says. But she’s skeptical about them as a replacement for in-field learning. “For me it’s just kind of like saying, ‘oh, I learned how to drive a car virtually, I’m ready for my road test,’” she said.

Courtney Chard

Toronto, Ontario Licensed welder and steamfitter

Courtney Chard is a second-generation welder and steamfitter, having followed her father into the field. Though her parents supported her career goals, trades didn’t “feel like an option for girls” when she was in high school. Chard got used to being the only woman on jobs and faced discrimination at times. She’s now a strong advocate for women in the workplace, and for promoting the trades to girls. Her eight-year-old daughter is an ambassador for “KickAss Careers,” a non-profit organization promoting careers in skilled trades and technology.

After 20 years of welding, Chard says conditions for women have improved. Employers and unions do more to support women through pregnancy and motherhood. Support groups for women in trades have multiplied, and more tradespeople have stepped up as mentors for young women entering the field. She was recently on a job with a carpenter, sheet metal worker and electrician—all of whom were women. “Things are better now, but more needs to be done,” she said.

Mike Bocsik

Victoria, British Columbia Instructor, Automotive Service Technician Apprentice and Foundation, Camosun College

Embrace change. That’s the central message Camosun College instructor Mike Bocsik tries to drive home with his students. In the last 10 years, he’s watched cars equipped with a single computer evolve to include up to 30, all communicating with each other. Technicians who once focused on traditional engine mechanics now service in-vehicle Wifi networks, GPS monitors and Bluetooth systems. And the change never stops: automakers introduce something new every quarter, Bocsik says.

But even Bocsik is awed by what the transition to battery-electric vehicles will mean for his profession. As automakers race to transform their product lines, service technicians will need to repair drive trains, braking systems and high-voltage electrification systems unlike those they learned about in school. Amid a global shift to clean transportation, they’ll also need to service battery-powered buses and hybrid engines on ferries. Backed by provincial funding, Bocsik’s employer will introduce an EV service program in the fall. Other institutions are devising similar courses. Still, Bocsik worries the system won’t be able to produce enough technicians to meet the demand. “They need to know now,” he said. “You either know how to work on this stuff, or you don’t work.”

 

Sharpening the tools for the post-pandemic era

Canada’s potential to thrive in a greener, more innovative and technologically advanced post-pandemic economy depends on its skilled tradespeople. Recruiting and equipping them to succeed in this new landscape will depend on the cooperation of industry, educators and policymakers.

Some ideas:

  • Federal and provincial governments should increase funding to promote the trades in primary and secondary schools as well-paying, valued, and intellectually challenging careers. Exposure to trades should be incorporated into school curricula. For instance, trades problem solving could be integrated into primary and secondary level science, technology, engineering, arts and math courses (STEAM).
  • Industry, academia, and government must work more closely together to ensure curricula keep pace with technological change in the workplace. Industry, in particular, must play a larger role in informing standard-setters and ensuring they are responsive to change.
  • Policymakers can support women in the trades by offering expanded childcare options. Governments should examine the use of gender quotas to ensure greater representation of women in publicly funded infrastructure projects.
  • The federal government and Immigration, Refugees and Citizenship Canada should close the gap between the target and actual intake of immigrants in the skilled trades by more aggressively promoting Canadian trades in source countries. They must counter the stigma of trades as “lesser-than” in these countries and among newcomers, and ensure immigration caps on individual trades are responsive to the market.
  • Employers should explore the use of “payback clauses,” so they can invest in apprenticeships and upskill without fear of employees immediately leaving once the training is complete.
  • Provincial regulatory authorities should develop pilot programs to ease the transition of skills between trades, explore ways to apply existing skills to new technologies and industries, and facilitate transfer of know-how from retiring tradespeople to new workers.
  • Interprovincial recognition of skilled trades should be expanded beyond Red Seal trades to enable greater mobility of labour.

The history of the trades is closely tied to Canada’s economic fortunes

1. RBC Economics; Frey & Osborne, The future of employment: How susceptible are jobs to computerization?, 2016 2. PRISM Economics; Canadian Apprenticeship Forum, 2021 National Labour Market Information Report, https://caf-fca.org/wp-content/uploads/2021/05/CAF_Report_LMI-2021_EN_National_-FINAL-1.pdf 3. Statistics Canada (RAIS), https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3710002301 4. Canadian Apprenticeship Forum, https://caf-fca.org/wp-content/uploads/2018/06/Apprenticeship-in-Canada_2018.pdf 5. Immigration, Refugee, and Citizenship Canada, 2019, https://open.canada.ca/data/en/dataset?_organization_limit=0&organization=cic 6. PRISM Economics; Canadian Apprenticeship Forum, 2021 National Labour Market Information Report, https://caf-fca.org/wp-content/uploads/2021/05/CAF_Report_LMI-2021_EN_National_-FINAL-1.pdf 7. Ibid 8. Government of Canada, Employment and Social Development Canada news release, August 2021, https://www.canada.ca/en/employment-social-development/news/2021/08/apprenticeship-serviceutip-cfp-launch-ibew-local-804-utip-news-release.html 9. Statistics Canada, 2016 Census of Canada 10. Canadian Apprenticeship Forum, https://caf-fca.org/wp-content/uploads/2018/06/Apprenticeship-in-Canada_2018.pdf 11. Immigration, Refugee, and Citizenship Canada, 2019, https://open.canada.ca/data/en/dataset?_organization_limit=0&organization=cic 12. Statistics Canada, 2016 Census of Canada 13. CWB Welding Foundation, https://www.cwbweldingfoundation.org/programs/capital-equipment-and-consumables-fund 14. Statistics Canada, The Daily, December 2018, https://www150.statcan.gc.ca/n1/daily-quotidien/181205/dq181205b-eng.htm 15. Canadian Apprenticeship Forum, 2021 National Labour Market Information Report, https://caf-fca.org/wp-content/uploads/2021/05/CAF_Report_LMI-2021_EN_National_-FINAL-1.pdf 16. Canadian Apprenticeship Forum, FIATT Project Evaluation Report, 2018, https://caf-fca.org/wp-content/uploads/2019/01/CAF-FIATT-Report_EN_F.pdf

Download the Report

Download
About the Authors

Naomi Powell edits and writes pieces for RBC Economics and Thought Leadership. Prior to joining RBC, she worked as a business journalist in Canada and Europe, most recently reporting on international trade and economics for the Financial Post.

Ben Richardson researches pieces for RBC Economics and Thought Leadership. Prior to joining RBC, he obtained a Master’s degree from the University of Toronto and worked in Washington, D.C., at the Woodrow Wilson Center, researching topics concerning Canada-U.S. relations.

 

TL Title

tl-title

As part of RBC Thought Leadership’s deep dive into the Creative economy, Disruptors podcast hosts John Stackhouse and Trinh Theresa Do talked to Ajay Agrawal, the founder of the University of Toronto’s Creative Destruction Lab (CDL), about the importance of goal-setting, how to recognize success and why everyone has the potential to be part of the creative process.

 

Ajay, tell us about the goals you had in mind when you created CDL?

The term “creative destruction” was lifted from a book by Joseph Schumpeter. The idea was that entrepreneurs have an important role to play in reimagining how to produce the goods and services for human flourishing. Universities are magical places. People get to do research and explore how nature works in all kinds of fields. But much of the research ends up in technical peer-reviewed journals that few people read. So the idea was, “What can we do to liberate those insights in ways that can benefit humanity?”

How do you see creativity and destruction working together?

Schumpeter referred to entrepreneurs as a “perennial gale of creative destruction.” Without entrepreneurs, capitalism would lead to a small number of very large firms that would grow and grow and collapse in on themselves because they became ossified. Entrepreneurs bring creativity. They think about how to solve problems differently, more efficiently, with more ingenuity.

How do you teach creativity in a business school?

People think of creativity and innovation as a virtue. In other words, the more innovation, the better. But innovation is a cost, creativity is costly. We start with, “What’s the objective and what’s the most efficient way we can achieve that goal?” That sounds really easy, and it’s surprisingly hard. Many organizations tell me about their innovation programs and I’ll say, “What’s the goal? How do you know if you succeed?” You’d be surprised how many can’t answer the question.

Is that because creativity is difficult to measure?

Yes—if you don’t have a goal. Universities are really important institutions because they’re an environment for people to be creative and innovate with no application in mind. Curiosity-driven research is very important for an overall research ecosystem. But to bring that into a commercial setting, it’s really important to have a goal so you can give creativity some direction.

How do you define creativity?

The process of developing solutions to problems that are better than the existing solutions.

Is creativity different in tech companies than in other businesses?

The businesses that I work with are usually very small and often pre-revenue. They don’t have all the bureaucracy a larger organization has. The creativity in these small firms is in the latitude they have to explore a very wide search space, often without a lot of bureaucratic limitations.

How can a large organization embed more creativity into its culture?

There are three key things. Step one, set a really well-defined target or goal. Step two is to give people the resources they need to explore solutions to the goal. Sometimes people need some time. If they’re expected to keep doing their full-time jobs, it’s hard to have the mental space they need to explore areas outside of their initial domain of expertise. Also, some financial resources—not a lot. Being lean often creates a better environment for innovation because they have to think about how to solve the problem without buying their way to the solution.

The third thing is a way to recognize success along the way. At CDL they have check-in meetings every eight weeks. You can’t set a goal and not have lots of little intermediate milestones because people would just get lost in trying to achieve the final goal.

Is there a difference between creativity and innovation?

I think of creativity as a process and innovation as an outcome. Coming up with the clever types of solutions to build that innovation, we think of that as the creative process.

Can goals be limiting to creativity?

Goals can be a great energizer to creativity, because the minute you set constraints, the creative mind gets to work on “How do I achieve the goal, conditional on these constraints?'”

How has the crisis challenged different approaches to creativity?

The primary distinction has been not being able to work shoulder to shoulder with people, and a lot of creativity requires collaboration. We used to have a lot of great solo inventors, the Leonardo da Vincis, Renaissance people who were polymaths. But as fields have become more complex, to really understand the frontier of the field, you need to collaborate across multiple people who are experts in different areas. It’s very hard to be an expert across multiple fields now. In COVID, the biggest thing has been learning to do all this collaboration online.

What are some of the secrets to collaborating virtually?

Collaboration, particularly among really smart people, can often lead to frictions. They have a competitive spirit and they have very strong opinions because they’ve developed a lot of self-confidence in becoming experts. Online communication can be very efficient, but you can lose a lot of the camaraderie-building that happens in person.

In the before-times, you would go for lunch and have some downtime and that would create some lubrication to help you deal with the frictions when you get back to work. So we try and create times that feel a little bit more like a lunch break.

Is creativity innate in certain people, or something that can be developed by anyone?

Everybody has the potential to play a role in the creative process. That said, it’s not a free ride. Every role requires developing the muscle to play that role. So anybody can play soccer, maybe not at an elite level, but you can play. But even if you have a predisposition to be a defensive player, you still have to develop the muscle, the skill set to play that role.

This interview was edited and condensed for clarity.

 

TL Title

tl-title

As part of RBC Thought Leadership’s deep dive into the Creative economy, Disruptors podcast host Trinh Theresa Do talked to Josie Fung, executive director of I-Think, a non-profit organization based at the Rotman School of Management in Toronto. I-Think partners with educators to foster creative problem-solving skills in students.

 

How would you define creativity?

What we’ve seen, having worked with hundreds of thousands of students, is that creativity is about having insights, seeing something that someone hasn’t seen before and doing something with it.

Does it have to be relevant to the ultimate stakeholder?

Absolutely. Creativity is often driven by a need that is unmet. For your creativity or idea to have value, you have to meet that need.

Integrative thinking is a guiding methodology for I-Think. What is it?

Integrative thinking is this idea developed by [former Rotman dean] Roger Martin. When we have to make a tough decision, we’re often stuck between two ideas. A or B? Integrative thinking says instead of choosing, we’re going to create a new idea out of elements of those two ideas. On a practical level, there is no one way to do things and our job is to be constantly searching for new ways to approach problems.

How has Canada’s education system historically treated creativity?

When I was growing up, you went to art class to be creative. But now I think education is seeing that students are amazingly creative and our job isn’t to make them more creative. It’s to keep their creativity alive. About 10 years ago, Ontario came out with play-based kindergarten. That was a big signal to the system. We’re starting with kindergarten, but how do you infuse it throughout the system?

There are still people who see a divide between creative and noncreative fields. What do you think is stopping them from accepting that creativity can be useful everywhere?

Many of us went to school believing our job was to find the one right answer. And if you don’t get that right answer, you’re just wrong. Inherently, if you really want to be creative, you have to be unafraid that there are many possible answers that haven’t been discovered yet.

So as educators, what should they do to remove that fear?

One of the key ingredients for great creativity is diversity, meaning different people, different viewpoints. The second thing is how do we stop focusing on evaluation as the marker of success? What I hear from students is that by the time they get to our course, ‘I have this opportunity to see things in a totally new light. But I’ve never been asked to do that before.’ They keep asking us what the right answer should look like. But when I’m giving them a real world problem that doesn’t have an answer, there’s no right answer.

How do we get their voices more involved in those discussions?

It’s about creating spaces where we’re giving those real world problems that students can solve. It turns out that students have just as good ideas as the rest of us, the rest of us being adults. Sometimes even better.

How do we maintain that in these students when they enter the workforce and may be given even more constraints?

What we’ve seen is creativity actually thrives on constraints. When we started our work with I-Think we thought that if we gave students open reign on creating ideas, that would be the way forward. By giving a few more constraints, it actually helped channel their creativity.

Is that is that the problem in the corporate world? The lack of constraints?

The challenge of the corporate world is that we have this unwritten social contract that the things we are, are the ways they have to be. In this pandemic, for example, we have this conversation that is on one side ‘we should never return to the way things were before.’ And on the other side, ‘we want things to be as they were before.’ Could we not ask ourselves, what have we learned in this last year?It’s been hard. It’s been tough, but what have we learned?

We have to remember in the corporate environment is that there is no creativity department. And sometimes when there’s no creativity department, it feels like that’s no one’s job, but actually it’s everybody’s job. How do we think about every single job as being a creative job?

Where do you think Canada ranks among the most creative nations?

I think Canada’s up there. But we have some choices ahead. What makes us really successful is our diversity. We have in a given classroom, sometimes as many as 21 different languages being spoken. Just imagine the number of experiences these students have, the perspectives they’ve drawn from their families. The more we can bring that around the table, the more we have the opportunity to create new and amazing ideas.

What does that future Canada look like?

Future Canada is a place where there’s a hub of innovation. And instead of thinking about tech and innovation hubs localized in one geography, it’s a nation of creativity. It’s a nation that generates all sorts of ideas, that fuels the world.

So what is needed to enable every single job to be a creative job?

It starts with our leaders asking the question of ‘am I hiring people because I want them to do a specific task?’ Are we a world of just asking people to do tasks and, check things off a list? Or are we hiring people and supporting people so they’re solving the biggest problems in the world?

What do you think is preventing some leaders today from doing that?

Quite honestly, I think sometimes our incentive programs are flawed because we’re expecting people to generate outcomes on a very short term basis, whether that’s from the expectations of the street or because of how our incentive plans are built.

And do you think classrooms have a role to play in changing those incentive structures?

I think young people do a great job of is asking those questions. And the key is how do we have people listen to them? Because there’s so much of richness and value in what students have to say.

This interview was edited and condensed for clarity.

TL Title

tl-title

We spent months talking to experts about why creativity is a competitive advantage. Throughout this report, you’ll hear from them directly.


The new “it” skill

Welcome to the Soaring ‘20s, where creativity is the new “it” skill.

As Canada emerges from the COVID-19 crisis and enters a “two-dose summer,” we’re coming back together in workplaces, coffee shops and restaurant patios. There’s a palpable excitement in the air, and an opportunity: to harness this energy to rethink and rebuild in a new era of creativity.

The pandemic transformed the economy and disrupted every aspect of our lives. It also unleashed a remarkable wave of creativity.

If you peeked into the windows of Winnipeg’s Chaeban Ice Cream during the lockdown, you might have spotted owner Joseph Chaeban finally pursuing his childhood dream of making cheese. He’s now selling his artisanal creations to local restaurants, bakeries and grocery stores.

When sports stadiums went quiet, teenage entrepreneur Elias Andersen launched a new generation of audio technology from Thornbury, Ontario. Hear Me Cheer takes microphones in fans’ mobile devices and creates a real-time crowd atmosphere that’s been used in college football games and Major League Soccer.

Creativity is rising to the top, and not just in the usual places, like the arts or science and technology. We’re already seeing that between the first quarter of 2020 and the first quarter of 2021, employers began asking for more creative competencies in job postings, like critical thinking (up 37%) and flexibility (up 20%). The spike is particularly notable in healthcare, education, and sales and service—fields that were deeply impacted, and likely forever changed, by the pandemic.


“There is no commerce without creativity.”

—Daniel Lamarre, CEO of Cirque du Soleil



Every corner of our economy, from construction to retail, should be seen as a place for creativity to grow. If you think some sectors are too traditional to change—reconsider. Just look at how the agriculture sector has responded to the uncertainties of climate change, global trade spats and labour shortages: with vertical farming, where food grows in warehouses near city centres.

Now that people are once again gathering and mingling—the jet-fuel of creativity—this next decade is a prime time for creativity to flourish. The pandemic has shifted power to individuals, who can take advantage of an increasingly decentralized economy to work, shop, watch and learn from anywhere. Large cities, secondary centres and online platforms are suddenly on equal footing. There’s never been a better time to take a new idea and run with it.

Read more from our conversation with Richard Florida.

The world was already on the cusp of a new creative era when the pandemic erupted. The key elements of the Fourth Industrial Revolution—automation and digitization—sparked an unprecedented opportunity to create. Individuals were free to take more risks, and businesses were more open to diverse ways of thinking and doing. Virtual reality, self-driving cars and remote surgery—all once the domain of science-fiction—were shepherded into reality.


LinkedIn data from more than 600 million professionals and 20 million jobs revealed creativity was the skill most in demand in 2019 and 2020.

Through our research, we are increasingly convinced that creativity is going to be a critical skill through the 2020s, as we re-emerge, re-build and re-invent, delivering ideas at a rate never seen before right across Canada.

The pandemic showed us that business doesn’t always proceed as usual. At the organizational level, firms are experiencing significant turnover. People are returning to different workplaces: either new ones, or ones that have radically changed since March 2020. It’s a unique moment in time, and it could slip away.

In this report, we talk with some of the most creative thinkers in Canada—business leaders, entrepreneurs, educators and artists—about Canada’s creative potential. We explore the growing demand for creative skills in key sectors of Canada’s economy, how different creative types deliver value—often in unexpected ways—and what actions should be taken to translate our country’s creativity into economic growth over the next decade.

There’s no time to waste, as we seek to solve some of the greatest challenges of our time: rebuilding downtowns, reimagining the delivery of healthcare and education, and tackling the climate crisis.

In Humans Wanted, a landmark 2018 report by RBC Thought Leadership and Economics, we examined how technology was disrupting the Canadian workforce, and identified the skills required for the jobs of the future.

The rise of artificial intelligence and automation mean routine and repetitive work is the most at-risk of disappearing, and even work in unexpected fields will be transformed. Our research showed the most highly valued skills are those not easily replicated by a machine—higher-function, cognitive activities from active listening to critical thinking and complex problem solving. Demand for these human, creative skills will only grow stronger.

 

Crisis drives creativity

This won’t be the first time crisis drives creativity. It’s a pattern that emerges when we look at the arc of human history.

Some of the greatest leaps in human achievement immediately followed periods of devastating crisis, after mass disruption opened the door to new leaders and new ideas. One example: the Renaissance after the Black Death. Another: the Roaring ’20s, after the First World War and the Spanish flu pandemic. Amid the crisis, people gained a better understanding of the most pressing issues that needed addressing. In the aftermath, those who had adapted to the changed circumstances had the opportunity to introduce new ways of doing things to an audience willing to listen.

Crisis drives creativity

Throughout history, pandemics have thrown society into crisis, disrupting the old way of doing things. Rather than returning to the status quo, the post-pandemic age is characterized by a radical rethink and a shift in power and resources.

 

Creativity = novelty + value

We’ve shown how creativity can thrive after crisis, and why the conditions are right for it to kick-start Canada’s COVID recovery. The next challenge is to better understand what creativity is, and how to nurture it in young people and across our country’s workforce.

Creativity, in our framework, delivers both novelty and value.

Creativity is an amalgam of skills and abilities that allows us to conceive novel and useful ideas. We’ve seen that through the pandemic, whether it’s healthcare workers or teachers or creative artists, all connecting with people in difficult circumstances, in different and ultimately creative ways.

When learning moved online, Ontario grade three French teacher Steve Massa decided to get creative to keep his students engaged from their kitchen tables. He launched a YouTube channel under the name Monsieur Steve, and took students on virtual field trips around Toronto and as far away as Thunder Bay, incorporating costumes and puppets and his pet cat all in the name of making French grammar fun.


“We have a great need for imagination and creativity to solve the grand challenges—whether these are social problems or healthcare or new technologies. We need creative minds and creative actors to make the world a better place.”

—Dr. Sara Diamond, President Emerita of OCAD University



While we often associate creativity with individuals, organizations, cities and even countries can be creative too. In action, it can mean taking a process from one industry and adapting it to another, like when the U.S. Army studied the logistical and planning methods of the Barnum & Bailey Circus. It can also take the form of coming up with new and practical uses for existing products, like when Nike co-founder Bill Bowerman used a waffle iron to mold a new urethane sole for running shoes.

Increasingly, creativity is acknowledged as a critical economic variable: a competency that can make an individual stand out in his or her field, or that enables a company to dominate, or even create, an industry. If exercised on a larger scale, it can give a society or economy outsized impact on the broader world.

Creativity is bolstered by certain mindsets, and an openness to new perspectives is one of the most important. There is a clear opportunity here for Canada, a country of immigrants, to step up to the plate and get creative.

If we can harness that kind of ambition as a country, Canada—the energy power—could become a creative energy power with ideas that fuel the world.

Most Canadian youth feel confident in their creative skills, but not as much as they do for other 21st century skills.

A survey of 15,000 RBC Future Launch participants found two-thirds (65%) of 15- to 29-year-olds have a high degree of confidence in their creative skills for the workplace. The groundwork for even more creativity is there: they are more comfortable thinking critically (74%), collaborating (73%) and problem solving (70%) than being creative.

Notably, young women have a high degree of confidence to “brainstorm in groups” (74%) compared to young men (64%). Youth not in education or employment (40%) have the lowest comfort in “thinking outside the box.”

This show us that injecting creativity into education specifically would have an outsized impact on the rest of Canada’s key sectors.

Read more from our conversation with Josie Fung.

 

A creative boom in Canada’s labour market

Nothing looks quite the same after COVID-19, and that includes the job market. According to our analysis, 21% of Canadians work in roles that require high creative-thinking skills. But that’s now ticking upward, as our appetite for creativity grows.

We’re seeing a greater demand for skills and tools that feed creativity across the labour market. Between the first quarter of 2020 and the first quarter of 2021, employers asked for more creative competencies in job postings, including:

  • Critical thinking, up 37%
  • Flexibility, up 20%
  • Teamwork, up 18%
  • Ability to learn, up 15%
  • Continuous improvement, up 12%
  • Problem solving, up 9%
  • Strategic thinking, up 8%

Three Canadian sectors in particular are demanding more creativity among new hires: healthcare, education, and sales and service. These sectors have been among the most affected by COVID and are undergoing large-scale transformations that will need creative workers at their core.

  • Healthcare: Job postings among health occupations are up 36% since February 2020, as demand has spiked for frontline workers and those who can help coordinate Canada’s public health response. Job postings that list creative skills are up 125%, as roles such as healthcare managers (up 79% in Q1 2021) and health diagnostics (up 67% in Q3 2020) need more problem solving, critical thinking and strategic planning to counter the spread of COVID-19.

  • Education: Job postings in the education field are up 39% since February 2020. Those requiring creative skills spiked by 50% in September 2020 and again by 30% in January 2021, reflecting educators’ need for fresh ideas as new restrictions took hold and online learning expanded. Demand for school administrators has jumped (up 167% in Q1 2021), while education policy and program development roles have grown (up 11% in Q3 2020), with needs for adaptability and continuous improvement driving demand for creative candidates.

  • Sales and service: Retail job postings overall tumbled during lockdown periods. However, postings explicitly seeking creativity in sales and service increased during these periods, by 14% in April 2020 and 20% in January 2021. Businesses appear to have sought out these skills to help develop new shopping and service models during disruption. Doing things differently was reflected in high growth jobs, including services supervisors (up 24% in Q3 2020) and retail and wholesale buyers (up 18% in Q1 2021), seeking more originality, analytical skills and those with the ability to learn.

In the short term, this means people with high creative skills will enjoy greater mobility and choice of roles. Over the longer term, more Canadians will develop creative skills as workplaces give higher priority to original ideas and critical thought.

Creativity will increasingly be a competitive advantage for individuals, for firms, and even for the country as a whole.

 

Tomorrow’s creative leaders

There’s only one Elon Musk—and that’s quite all right.

When we think of creative individuals, we often conjure up historic visionaries and inventors, but creativity lives in all of us. It just takes on different forms: in the studio, the laboratory, the classroom and the boardroom.

Through our research, we’ve identified four broad creative archetypes that play different but crucial roles in our society.

...

The Visionary

This is the Elon Musk category. The Visionary imagines new markets and is willing to take huge risks to bring about change in the world. They build loyal followings, even beyond their own industry, influencing consumer tastes and preferences. The way electric cars have sped from obscurity, to cool, to the dominant trend in the auto industry? That’s the Visionary touch.

...

The Instigator

This is the sector-specific superhero. The Instigator is able to identify gaps, combine ideas and see opportunities others do not. They can create wholly new products or service offerings, disrupting the sector where they operate. One such example: Canadian tech titan Michele Romanow, whose startup Clearco disrupted the lending market and is now the world’s biggest ecommerce investor.

...

The Thinker

Drill down a little deeper, and within every workplace, you’ll find the Thinker. This is someone who stands out for their critical thinking, and their adeptness at identifying challenges and coming up with novel ways to address them. In the 1990s, University of Pennsylvania biochemist Katalin Karikó devoted herself to an obscure field: mRNA research. Decades later, her discoveries led to the groundbreaking Moderna and Pfizer vaccines, and turned the tide on COVID.

...

The Hustler

Need someone to see a new idea through to execution? Call a Hustler. They’re critical to analyzing what is possible, and strategically tweaking the lofty ideas and strategies of the Visionaries and the Instigators. Without the action-oriented Hustler, many ideas might never see the light of day. Apple co-founder Steve Jobs is the Visionary behind the iPhone, but the awe-inspiring camera functions in every new model? Those are thanks to Apple’s 600 camera-hardware technology experts.


“Creativity rests on encouraging yourself to think freely outside of the box, and then working diligently to distill, iterate and ultimately prototype, depending on what the process is.”

—Janet Morrison, President of Sheridan College



 

How to cultivate creativity

Creativity has always been important, but it matters now, maybe more than ever, as Canada looks beyond the pandemic and into some exciting and scary decades ahead, that will test us as a nation.

Over the last few months, we talked to some of Canada’s most creative people about how they cultivate creativity and what others can learn about maximizing creative potential in individuals and organizations.

Here are four key takeaways:

1. Creativity can be nurtured

Creativity comes naturally to some. It can also be nurtured and developed.

Gil Moore, drummer of the rock band Triumph and founder of Metalworks Institute, differentiated between virtuosos—those who have “explosive growth in their talent and a natural repository of creative juice that just flows”—and the rest of us who have to actually work at it through repetition and gaining skills.

Read more from our conversation with Gil Moore.

Creativity is known to thrive in the world-famous animation program at Oakville, Ontario’s Sheridan College, but its president, Janet Morrison, is quick to point out the value of teaching creativity across all disciplines. In the college’s business program, students learn creative problem solving: how to clarify the situation, generate ideas, develop and iterate solutions, and implement plans.

Josie Fung, who is tasked with building “future-ready problem solvers” as the executive director of I-THINK at the Rotman School of Management in Toronto, suggested giving students real-world problems to solve, and then the space to do so.

When Parks Canada asked high schoolers at Toronto’s John Polanyi Collegiate Institute to help solve a problem—how to get more people to come to Rouge National Park—the students skipped over ideas like a poster or ad campaign. Instead, they reframed the question, to think about the role of the park in society. This opened up so many more possibilities. They thought: what if the park could be a place for a drug rehabilitation centre? What if it could be a place for mental health therapy? Four years later, Rouge Park struck up a partnership with Blue Door, a nonprofit that provides emergency housing for those experiencing homelessness and crisis, to provide affordable housing using Parks Canada land.

2. Create a culture that embraces the freedom to fail

Shopify—Canada’s most valuable company—embraces failure. You read that right.

“We have built an environment that allows for risk taking, that allows for curiosity and resourcefulness, that allows for reactions,” said Brittany Forsyth, former Chief Talent Officer.

That kind of environment is key, Forsyth said, because creativity isn’t about a lightbulb moment. It’s about coming up with lots of ideas, challenging assumptions and connecting dots, until it unlocks something new: the killer idea that separates you from the competition.


“We give permission to do these key things such as experiment, fail, grow. It’s OK to say you were wrong yesterday and you’re right today, to change your mind.”

—Brittany Forsyth, Shopify’s former Chief Talent Officer

Read more from our conversation with Brittany Forsyth.

If you look at Cirque du Soleil, ideas can come from every corner of the organization. You need to give employees the space and encouragement to share them.

“We have 5,000 pairs of eyes and ears and we encourage our people to always feed us with something they discovered,” said Daniel Lamarre, the Quebec-based company’s CEO. “Sometimes it might be by reading a book, seeing a new movie and hearing a new piece of music or just seeing something on YouTube or on social media that could be attractive to us.”

Pro tip: Companies can encourage employees to try new things by shaking up the work day, or incorporating such expectations into employee performance goals. Shopify uses “hack days,” where everyone stops what they’re doing and spends three days on a project of their choice, usually coming up with programs or solutions around a specific theme. Over at Google, Gmail was famously created as part of the company’s 20% rule, which allows employees to spend 20% of their time exploring projects that may not deliver immediate dividends but could become big opportunities in the future.

3. Creativity thrives on strategic constraints

It might sound counterintuitive, but limits can actually spur creativity.

“We thought that if we gave students open rein on creating ideas, that would be the way forward,” said Fung, speaking of her work with I-THINK. “And actually, what we heard is that by giving a little more structure, by giving a few more constraints, it actually helped channel their creativity.”

Creative people are comfortable with ambiguity but are also compelled to make sense of it and add their own structure, according to Tom Waller, Chief Science Officer at Vancouver-based Lululemon.

“We very much look for people that are able to sit in ambiguity and go, ‘Hmm, I’m on a blank sheet of paper here, but I’m just going to start doodling if nothing else. And, oh! This doodle turned into something,’” Waller said.

Read more from our conversation with Tom Waller.

Pro tip: There’s actually a simple three-step way to set up those constraints to drive creativity, according to Ajay Agrawal, head of the University of Toronto’s Creative Destruction Lab. Step one is to establish well-defined goals: what is the problem you’re trying to solve? Step two is ensuring that people have the resources they need, such as time and money, to explore potential solutions. And step three is to recognize and measure success along the way.

4. Creativity is a team sport

The creative engines of the past relied on solo inventors. Leonardo da Vinci, for instance, and other Renaissance thinkers who were polymaths with expertise across multiple areas.

That’s no longer the case, Agrawal said.

“As fields become more and more complex, in order to really understand the frontier of the field, you need to collaborate across multiple people who are experts in different areas.”


“I find that everybody has the potential to play a role in the creative process. It might be a different role, but there is a role for everybody in the creative process.”

—Ajay Agrawal, head of the University of Toronto’s Creative Destruction Lab

Read more from our conversation with Ajay Agrawal.

This brings us back to our point about creative archetypes: you may have a Visionary or Instigator championing the idea, but you’ll also need a Hustler. The key is to identify what roles are required to produce the best outcomes, and how leaders can help develop the right people and skills for those roles. It may mean casting a wide net to find people from diverse backgrounds and ways of life who are able to contribute their experiences and knowledge. Or thinking about what partnerships can be developed with firms in other sectors, and what opportunities can be generated by reaching out to community organizations.

 

An age of ideas

As we charge forward into the 2020s, Canada faces some epic challenges. The pandemic highlighted all that is not well within our borders: the broken structure of our long-term care homes, the disproportionate childcare burden on women, racial health and economic disparities, and the challenges of coordinating a country-wide response to an emergency. We cannot look away now. Instead, with fresh eyes, we must embrace the new possibilities that have opened up on a mass scale, including telehealth, remote education, and flexible work arrangements—and the new talent that we could draw in. We are in the early stages of a creative transformation of our economy and society. The COVID crisis, like those that have come before it, shattered our assumptions about how the world works and forced society to embrace experiments and reorganize in a new way. By promoting creativity as a key skill within our schools and workplaces in the post-pandemic world, we can shift into an exciting Age of Ideas that tackles Canada’s most pressing problems.

The Creativity Economy

For more insights on how Canada can weave creativity into its culture, listen to our special two-part series of the Disruptors podcast.

Listen and subscribe to the Disruptors podcast:

  


About the Authors

Trinh Theresa Do (she goes by Theresa) is responsible for strategy development on the Thought Leadership & Economics team, with occasional forays into podcasting, research, and writing. Previously, she was a strategy advisor to senior management and executives at RBC’s Personal & Commercial Banking business. Prior to joining RBC, Theresa was a national political journalist at CBC News and co-founded a nonprofit that promoted civic engagement through technology innovation.

Sonya Bell joined RBC’s Thought Leadership and Economics team as a Senior Manager, Content Delivery in 2018, coming from Queen’s Park where she was a senior writer to the former Premier of Ontario. Previously, Sonya worked in journalism as a producer at CBC and as a federal political reporter for iPolitics. Between Parliament Hill and Queen’s Park, she spent two seasons as a comedy writer on This Hour Has 22 Minutes.

Andrew Schrumm is a former lead researcher on RBC’s Thought Leadership team, where he examined how Canada can enter the 2020s as a diverse, innovative, and sustainable nation. He managed RBC’s future skills research project on skills-based job mobility, life-long learning, and the potential of automation in our economy.