Ottawa tech wages 35% below U.S.
‘Prosperity gap’ highlights low productivity of Ontario companies, report says
The Ottawa Citizen
By Andrew Mayeda
Information-technology workers in Ottawa-Gatineau earn 35 per cent less than their American counterparts, a government-affiliated study of Ontario wages shows.
If there’s any consolation for workers here, it’s that the IT wage gap is even bigger for the province as a whole—54 per cent—according to the Institute for Competitiveness and Prosperity.
Across the 41 industry clusters surveyed, Ontario wages lagged U.S. wages by 23 per cent, the Toronto-based institute found in a working paper released yesterday.
The results highlight the low productivity of Ontario companies, which do not face the same intense competition or receive the same level of research support as in the United States, the report concludes.
It notes that gross domestic product per capita is $4,118 lower in Ontario than the median performance of U.S. peer states and Quebec. The institute calls this the “prosperity gap.”
“It is so much the story of Ontario and the story of Canada. We do well at the basics,” said Jim Milway, executive director of the institute, a nonprofit organization created by the Ontario government to monitor productivity and competitiveness.
“We’ve got a great system for educating kids up to Grade 12, but then we stop funding at the university and college levels like the Americans do. Or our firms invest in capital to a point but they’re about 10 per cent short of the Americans,” he said. “We just keep coming up short in what we invest in for future prosperity.”
Ontario needs to generate more sophisticated networks of industry-university collaboration and venture capital to spur innovation, Mr. Milway said.
The Toronto-based institute compared the wages of Ontario workers with those in the 14 largest U.S. states, as well as Quebec. Wages were adjusted for differences in purchasing power.
It tracked 41 “traded clusters,” meaning industries that typically concentrate in a certain geographic area and sell beyond their immediate region. Hamilton’s steel industry and Toronto’s financial services sector are good examples.
The institute found the wage gap with the U.S. was especially pronounced in high-wage clusters like information technology and financial services, where Ontario wages trailed by 37 per cent.
In lower-wage sectors, by contrast, Ontario wages were close to or even exceeded those of U.S. workers. In textiles, for example, Ontario wages were six per cent higher.
“At the leading edge of competitiveness we are significantly behind our peer group of U.S. states,” said Roger Martin, chairman of the institute and dean of the University of Toronto’s Rotman School of Management, in a release.
Ottawa technology experts weren’t surprised by the findings.
“This is nothing new. Salaries have always been an issue in that industry,” said Jonathan Calof, associate professor at the University of Ottawa’s School of Management.
Luckily for Ottawa, the city often measures up well in overall quality of life, he noted.
“When the use of advanced technology is lower, productivity is lower, which means compensation is lower,” said Bill Lawson, associate professor at Carleton University’s Sprott School of Business.
Mike Darch, of the Ottawa Centre for Research and Innovation, said the report’s recommendations describe the work the centre is trying to do.
“To a large degree, it confirms the city of Ottawa and OCRI’s approach,” said Mr. Darch, executive director of the centre’s Ottawa Global Marketing program. “We’ve been telling companies, whether it’s Nortel or Cognos or the smaller firms, you’re not competing against the guy next door, you’re competing against the world.”
For about 20 years, OCRI has been working to bring together businesses, government and research institutions to build a globally competitive knowledge-based economy.
Those ties have improved significantly in the last decade, but much work remains to be done, said Mr. Darch. “We don’t have the new business formation or wealth generation of Silicon Valley, but it’s something we have to aspire to.”
The report “gives us the ammunition to go to the Ontario and federal government and tell them, ‘We’re on the right track, so let’s support IT and other industries under intense competition,’ “ he added.
Despite the results, Mr. Milway praised OCRI’s efforts.
“They’re a perfect example of what localities should be doing,” he said.
The institute, which is supported through the Ministry of Economic Development and Trade, will release its third annual report in the fall.
