Canada is rapidly undergoing a two-tier labor market in the tech industry.

The tech industry has already created a two-tier labor market in the US, according to studies, and a recent report from TD Economics shows that Canada is rapidly undergoing the same phenomenon. 

The report, published August, 2019, explains how jobs are concentrated within five major Canadian cities that have benefited greatly from the sector. 

TD Economics concludes that the disparity could lead to wage and employment inequality within smaller cities that don’t have vibrant tech sectors.

Toronto, Montreal, Vancouver, Ottawa and Calgary make up about 70% of all digital services employment in Canada, the report says.

Beata Caranci, chief economist at TD Economics, told CBC that if pure market forces direct the job market then Canada runs the risk of following the path of the U.S., with the gap between the haves and have nots merely increasing.

According to the report, the issue with high-skilled workers being concentrated in a handful of cities is that it puts smaller cities at risk of having weaker housing markets, lower tax collection, and reduced infrastructure utilization. 

The report examined employment growth within four major Canadian cities between 2001 and 2017. It found that Toronto, Montreal, Vancouver, and Calgary accounted for 39% of all employment prior to the financial crisis which increased to 42% after the crisis. 

Nevertheless, in smaller cities the share of employment dropped from 42% to below 39% during the same timeframe.

Bucking the trend

There were nevertheless surprises among the cities seeing growth from tech. Kitchener-Waterloo-Cambridge (KWC), for example, which the report described as a “rising tech superstar city,” has seen employment growth of about 20% since 2010. 

The report said that digital services in the region grew by almost 130% between 2010 and 2018. 

In an interview with CBC, Tony LaMantia, president and chief executive of the Waterloo Economic Development Corporation (EDC), said that his organization has helped boost growth by supporting companies who are looking to relocate or expand. 

“A number of companies are expanding westward,” LaMantia said. “It’s about the market opportunity that’s presented here, the cost structure, but most importantly the talent.”

LaMantia specifically pointed to the two major universities in the region, University of Waterloo and Wilfrid Laurier University, which contribute to the larger talent pool. 

The TD Economics report makes the following recommendations to help avoid regional inequality increasing:

• Making computer literacy courses obligatory for students as early as Junior Kindergarten.
• Strengthening partnerships between tech firms and schools to ensure students acquire skills that are currently in demand in the industry.
• Offering government guarantees and programs matching venture capital funding to companies in smaller cities.
• Having infrastructure networks in smaller cities to encourage economic development.