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Canada's Tech Boom, Factory Slump Risk Creating Rich And Poor Cities: Report

Daniel Tencer
Steelworks on the shore of Lake Ontario in Hamilton, Ont.

Canada risks segregating into rich and poor cities as the economy shifts towards high tech and away from manufacturing, a report from TD Bank warns.

The report, titled “The Digital Divide Between Canadian Cities,” notes that high-paid tech jobs in Canada have been concentrated in just five cities: Toronto, Montreal, Vancouver, Ottawa and Calgary, which together have 70 per cent of digital services jobs.

Meanwhile, in Canada’s smaller cities, the manufacturing base has been eroding for years, particularly since 2010, the report found. Those relatively high-paid factory jobs are being replaced by lower-paid retail jobs.

Watch: How Canada’s high house prices are impacting jobs. Story continues below.

 

Toronto has been creating more tech jobs than Silicon Valley recently, and Montreal, Vancouver, Ottawa and Calgary are all among the top centres for tech hiring in North America.

But the downside of this concentrated boom is that Canada risks becoming economically segregated like the United States, where a small number of tech-oriented cities have booming job and housing markets, while other cities struggle with economic decline, the report’s authors warned.

“The poster children of this impact include the likes of New York, Washington, San Francisco and San Jose, which have captured the spoils of employers at the expense of cities like Detroit, Cleveland and Kansas City,” they wrote.

‘City skills trap’

People are finding themselves in a “city skills trap,” said Beata Caranci, the chief economist at TD Bank and co-author of the report ― sort of like a poverty trap but geographically defined.

People who want to move to one of the “winner” cities face a higher cost of living “and that makes it harder to advance financially and professionally,” Caranci said.

Meanwhile, the people who stay in declining cities “don’t have the means to get to another level because they get trapped in these areas that don’t offer opportunities beyond lower skilled jobs,” Caranci said in an interview with HuffPost Canada.

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To avoid the U.S.’s fate, Canadian cities have to identify their strengths and play to them, Caranci said.

She gave the example of Kitchener-Waterloo-Cambridge, which has become an internationally recognized tech powerhouse, initially thanks to the success of BlackBerry, but more importantly, because it has two universities with a solid reputation in STEM (science, technology, engineering and mathematics).

Other Canadian cities may not have those advantages, so they have to find their own niches, Caranci said.

For some places, it may be as simple as being near one of the “superstar” cities, and selling yourself as an accessible, more affordable alternative to that city.

Hitching the fate of declining cities to the tech superstars is more realistic in Canada than in the U.S., the report noted, as 60 per cent of Canadians live within 200 km of a tech hub, compared to 26 per cent of Americans.

“The net can be cast widely in Canada with targeted strategies,” the report concluded.