Scott Stirrett's Blog

Canada’s urban-rural economic divide is a threat to our country

In Suzanne Collins’s The Hunger Games, a stark division exists between the Capitol’s opulence and the struggling districts, vividly portraying a world rife with both economic and political disparities. This metaphor is a cautionary tale for Canada, where a growing economic divide between urban and rural areas precipitates deep rifts.

In the past decade, Canada’s largest metropolitan areas – Montreal, Toronto, Vancouver, Ottawa-Gatineau, Calgary and Edmonton – have become increasingly prosperous. While these regions are home to 47 per cent of Canada’s population, they created approximately three-quarters of all new jobs between 2016 and 2020. In stark contrast, some rural and remote communities have not recovered employment from the 2008-2009 global recession. This economic disparity is more than a statistic; it’s a catalyst for a widening political divide, threatening the fabric of our country.

Rural inhabitants, who often face limited opportunities, can feel neglected by policymakers in urban centres. This sometimes leads to frustration and anger, which contributes to heightened political polarization.

Canada’s current political divides are largely based on the rural-urban split. In the 2019 Canadian federal election, the median population density for the 157 Liberal ridings was more than 38 times higher than that of the 121 Conservative ridings. Research by professors at the University of Calgary and Western University found that there is “clear evidence that Canadians are currently experiencing the most profound urban-rural divide in support for the major political parties in the country’s history.”

Instead of starting a new business, why not buy an existing one?

Facing a tidal wave of retirements, many Canadian small businesses risk vanishing unless a new generation of entrepreneurs steps up to carry their legacy forward.

Research by the Canadian Federation of Independent Business (CFIB) found that 76 per cent of small-business owners are planning to exit their businesses over the next decade, marking a potential transfer of over $2-trillion in business assets. If these firms are not sold, they risk going out of business, resulting in billions of dollars of economic losses and the destruction of countless jobs.

While there are thousands of organizations across the country focused on helping people launch new businesses, there is insufficient support for entrepreneurs looking to acquire existing businesses. Entrepreneurship Through Acquisition (ETA), a strategy where individuals or groups acquire and manage existing companies rather than starting new ventures from scratch, is an underappreciated path.

ETA not only saves businesses from potential closings, it stimulates economic growth by revitalizing existing businesses, injecting fresh ideas and capital. This approach not only accelerates wealth creation for individuals but also invigorates local economies through job creation and improved business practices.

Younger entrepreneurs, with their fresh ideas and tech-savviness, are especially well positioned to modernize existing businesses. Therefore, ETA is about more than just ensuring existing small businesses stay open; it’s also about catalyzing the Canadian economy through expanding existing firms. A study from Relay Investments, an American firm that invests in entrepreneurs who acquire firms, found that 88 per cent of firms purchased through ETA create jobs after being acquired, with 46 per cent of these firms more than doubling their head count.

Follow your passion is bad advice that wastes your time, energy and skills

Young Canadians were sold a lie. They were told by their parents, teachers and luminaries like Steve Jobs that if you follow what you love, everything else will work out.

In two surveys published earlier this year – each surveying hundreds of students at American universities – researchers from The University of Washington found that “follow your passion” was the most prevalent advice young people received when choosing their academic majors.

It’s easy to understand why most people think that’s good advice. Many successful people are also passionate about their careers. If you love what you do, you are more likely to persevere in the face of obstacles and to work hard. But ultimately, “follow your passion” is bad advice.

Why? For one, you may not have a definitive passion. Research demonstrates that people who view interests as fixed over time are less resilient than those who have a growth mindset and believe they can develop new interests. According to research by Dr. Paul A. O’Keefe, an assistant professor of psychology at Yale-NUS College, “someone with a fixed mindset of interest might begin their pursuit with lots of enthusiasm, but it might diminish once things get too challenging or tedious.”

The follow-your-passion ideology can also influence you to conform to societal expectations and stereotypes. The previously mentioned University of Washington researchers found that when asked to identify their passions, women and men tend to cite stereotypically feminine and masculine interests and behaviours. For instance, that might mean women refrain from studying traditionally male-majority academic domains such as physics and computer science. The things we are passionate about, our hobbies and academic interests, are often more a product of circumstance than something innate to our character.

Canada’s economic future is in jeopardy because we lack an entrepreneurial culture

The famed management consultant Peter Drucker once said that “culture eats strategy for breakfast.” While this saying originated in the corporate world, it also influences the fate of countries.

An entrepreneurial culture, which encourages people to identify and act upon opportunities to create value for others, is essential to improving a country’s quality of life. Entrepreneurial behaviour creates economic growth and innovation, which enhances our capacity to tackle challenges such as an aging population and climate change. But Canada’s insufficiently entrepreneurial culture poses an existential risk to our country’s future.

Countries rise and fall based on their economic vitality and entrepreneurial spirit. At the turn of the 20th century, Argentina was significantly wealthier per capita than Canada, and Singapore was substantially poorer. Now, 125 years later, Singapore is a marvel of innovation and Argentina is an economic basket case.

While some data, such as the Global Entrepreneurship Monitor, show that Canada’s level of entrepreneurship is increasing, much more evidence suggests that we are backsliding. Canada scores poorly in surveys that measure entrepreneurial values, especially the acceptance of competition and teaching children to be independent.

That’s partly because of Canada’s good fortune in terms of natural resources, stability and ready access to the American market, which influence Canadians to have a culture of complacency. Necessity is the mother of invention, and our lack of necessity has made us risk averse. We need an entrepreneurial culture that recognizes there are also tremendous risks in not taking risks.

Canadians now lead citizens of other G7 countries in citing “fear of failure” as a roadblock to becoming an entrepreneur. Canada’s affordability crisis, in which housing, transportation and food are becoming much more expensive while incomes are stagnant, constrains a whole generation from taking entrepreneurial risks. It is therefore no surprise the share of Canadian business owners under the age of 50 decreased from 53 per cent in 2004 to 38 per cent today. This has enormous economic consequences.

In an era of extreme heat, cooling should be required in Canadian homes

Canadians are dying from extreme heat. A British Columbia coroner’s panel found there were 619 heat-related deaths during the 2021 B.C. heat dome, with 98 per cent of the victims dying indoors, mostly in homes with inadequate cooling systems. Many more Canadians will die from extreme heat if action is not taken to protect the most vulnerable.

It is estimated that if greenhouse gas emissions continue to increase at the same rate, many Canadian cities will see at least four times as many days with temperatures above 30 C between 2051 and 2080 when compared with today.

Rising temperatures have significant public-health implications. For example, prolonged exposure to extreme heat can lead to dehydration, fatigue and a spectrum of heat-related illnesses (HRI), including heat stroke. By mid-century, the cost of HRI in Canada will likely be more than $3 billion a year.

Exposure to extreme heat also has significant negative repercussions on Canadians’ labour productivity and economic competitiveness. A study from the Atlantic Council observes that “workers in hot conditions are more prone to mistakes and reduced decision-making capacity, which can have impacts as minor as needing to redraft a document or as severe as causing injury or death.”

In the paper Heat-proofing Community Housing, which I co-authored with Aliza Moledina, Émily Soulières, Jessie Gill, Leslie Muñoz and Trevor Tessier, we found that extreme heat is increasingly prevalent in many areas of Canada, significantly impacting the suitability and livability of our housing.

Policy makers should guarantee all Canadians have the right to indoor cooling, which is not synonymous with access to air conditioning, through updating building codes to establish a maximum indoor air temperature, incentivizing the retrofit of buildings and encouraging urban design practices that mitigate the urban heat island effect.

Teaching debate skills will strengthen democracy

Increasing political and ideological polarization poses a significant threat to Canadian democracy and society. From climate change to a looming global recession, Canada faces immense challenges, which require thoughtful and nuanced discussions. Too often issues of national importance devolve into shouting matches and personal attacks.

Young Canadians need to be taught how to have healthy debates, which focus on the substantive arguments, involve active listening, and encourage both sides to acknowledge some validity to their opponents’ arguments.

Participating in debate guides us to carefully consider others’ viewpoints, to adjust our thinking when new information comes to light, and to shy away from demonizing folks who hold differing views. The world is a messy place and rarely are individuals “good” or “evil.”

Teaching young Canadians debate skills could have significant long-term benefits for our democracy. Over time, more Canadians would expect leaders to argue with evidence and arguments, and likewise, more leaders would contribute to healthy debates.

I believe one of the most effective ways to mitigate the threat of political polarization is through training young Canadians via debate-centred instruction (DCI), a methodology modelled after competitive debate that helps students develop essential skills such as critical thinking, communications and teamwork. Unfortunately, most educators do not use DCI in their classrooms and few students have access to participate in competitive debate.

International students deserve to be treated as more than just a revenue stream

Canada should be the global leader in international education. Millions of people around the world want to study in Canada because of our leading educational institutions, social stability, and high quality of life.

The number of international students living in Canada has surged over the past decade, to 621,000 in 2021 from 239,000 in 2011. Unfortunately, the infrastructure to support them has not kept pace with this rapid growth. Many international students struggle to access adequate support for their careers, health care, and housing.

International students contribute approximately $21-billion a year to the Canadian economy, paying tuition and student fees that are up to five times higher than those paid by Canadian students. Governments and postsecondary institutions need to view international students as more than cash cows and make real investments to ensure that they have a high-quality experience while studying here. Doing so is both morally right and in our national interest. Inaction will damage Canada’s reputation and reduce the number of individuals interested in immigrating and contributing to our country.

In 2021, Canada welcomed the largest number of immigrants in its history, with more than 400,000 people becoming new Canadian permanent residents. Without immigration, Canada’s rapidly aging population will result in a shrinking workforce, reducing Canada’s economic growth and prosperity.

International students are a significant and growing source of permanent immigrants to Canada. One of every three international students working towards a bachelor’s degree in Canada becomes a landed immigrant within 10 years. Between 2000 and 2019, the share of newly admitted economic immigrants who have Canadian study experience increased to 38 per cent from 6 per cent. Having international students choose to settle in Canada is an essential strategy for achieving the federal government’s ambitious immigration goals.

Over the past decade, Canadian postsecondary institutions have become increasingly reliant on tuition revenue from international students. In the 2017-18 academic year, this group paid approximately 40 per cent of the tuition fees earned by Canadian universities. Without international students, many Canadian postsecondary institutions would face dire economic circumstances.

A common misconception is that most international students are wealthy, but that does not reflect reality for most of these students. A recent survey found that 80 per cent of international students in Canada are “concerned” or “very concerned” about their ability to pay for their education.

Art and Artist Entrepreneurship in Canada’s Future Economy

Canada’s artists are appreciated around the world. From renowned visual artists, such as Kent Monkman, Emily Carr, and Tom Thomson, to famous pop musicians, such as Drake, Justin Bieber, and The Weeknd, Canadian creativity is celebrated around the world.

At the same time, Canadian artists are much more likely than the average Canadian worker to live in poverty. Action is urgently needed to further support artists’ career development and there is the opportunity to enhance the impact of Canadian artists through supporting their development of entrepreneurial skills. Investing in artists to become more entrepreneurial will improve their living conditions, foster a more innovative society, and contribute to Canadian economic growth.

The Challenge:

Despite some success, most Canadian artists are struggling. According to Statistics Canada, Canadian artists make a whopping 44% less than the average Canadian worker. A report from The Brookfield Institute of Entrepreneurship + Innovation indicates that “self-employed creative workers generally see dramatic fluctuations in their income from year to year, as many operate on a project-by-project basis and depend on multiple funding streams.” Because of the nature of this work, many Canadian artists lack access to social benefits, such as insurance and pension plans, parental and adoption leave, income maintenance such as sick leave, and paid vacation time. Consequently, numerous artists struggle to meet their basic needs and face housing and food insecurity challenges amongst others.

Like Canadian society-at-large, there are equity, diversity, and inclusion challenges in the arts sector. Artists include musicians, authors, producers, visual artists, artisans and craftspeople, actors and comedians, dancers, and composers. According to the 2016 census, Indigenous women artists had a median income of $17,800, racialized women artists earned $17,900, and immigrants earned $20,800. This compared to an income of $24,300 for non-Indigenous, non-racialized, and non-immigrant Canadian artists. Artists from marginalized communities face particularly significant obstacles to achieving their basic needs.

The Opportunity:

We need to enhance Canada’s economic and cultural potential by better supporting artists to develop entrepreneurial skills. Canadian artists are more likely to be entrepreneurs than the general Canadian population. According to the 2016 Canadian census, 52% of artists are self-employed compared to 12% of the overall workforce. Therefore, it is especially important for artists’ career development that they have adequate entrepreneurial skills.

“Entrepreneurial” is too often a buzzword left undefined. At Venture for Canada, we conducted significant research and found that The Entrepreneurial Competence Framework is arguably the most thorough existing resource for defining entrepreneurial skills. It defines being entrepreneurial as “identifying and acting upon opportunities to create value for others” and distills entrepreneurial skills into 15 competencies. Examples of entrepreneurial skills include coping with uncertainty, creativity, and working with others.

There’s a correlation between being artistic and being entrepreneurial, with many leading entrepreneurs having backgrounds as artists. For instance, two of Airbnb’s co-founders are graduates of The Rhode Island School of Design. Research from The Royal Melbourne Institute of Technology found that artists and entrepreneurs “exhibit higher self-perception of risk tolerance, creativity, openness to experience, and intrinsic motivation compared to other professionals.” A report by venture capital firm Kleiner Perkins found that 20% of privately held technology companies with a valuation over $1 billion had a co-founder who came from an arts or design background.

The world needs more compassion, not empathy

It is a truth universally acknowledged: Everyone needs to be more empathetic.

Prominent leaders extol the benefits of empathy, with former U.S. president Barack Obama saying, “When you choose to broaden your ambit of concern and empathize with the plight of others, whether they are close friends or distant strangers – it becomes harder not to act, harder not to help.” It is no surprise that the 2021 Empathy in Business Survey conducted by EY found that 90 per cent of workers believe that empathetic leadership leads to higher job satisfaction.

Being empathetic is about trying to understand what another person is going through and putting yourself “in their shoes.” Paul Bloom, a psychologist at Yale University, describes empathy as stepping into someone’s mind to experience their feelings.

While empathy refers to your ability to take the perspective and feel the emotions of another person, compassion is when those feelings and thoughts include the desire to help. In practical terms, an empathetic response to your friend getting in a car accident is to visualize what it feels like for them, whereas a compassionate response is about asking your friend how they are feeling and how you can be of support. To be empathetic is to say, “I understand what you’ve been going through. I’ve been there.” To be compassionate is to say, “I can understand your distress and want to help.”

Empathy can have many downsides. First and foremost, people who are suffering often don’t necessarily want your empathy. Putting yourself in someone else’s shoes assumes that you know what another person is feeling. Someone who is grieving wants a compassionate friend, rather than a friend who simply mirrors the same suffering. Feeling empathy can make the empathizer feel less alone, while adding little value to the person going through a tough time. Being empathetic is more selfish than most people assume.

Empathy can also make you more biased. Leadership and mindfulness expert Rasmus Hougaard writes that “empathy is the brain’s wired tendency to identify with those who are close to us – close in proximity, close in familiarity or close in kinship. And when we empathize with those close to us, those who are not close or are different seem threatening.” For instance, demagogic world leaders are experts at manipulating empathy. Demagogues leverage their citizens’ empathy for their loved ones and desire for security to create antipathy against those from different cultures.

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Canada’s ballooning mortgage debts could put a dangerous dent in entrepreneurship

Canada is a world leader in real estate price inflation. Since 2000, Canada’s housing prices increased in real terms by 168 per cent, compared with price growth of 55 per cent in the United States. Canada’s national housing agency predicts that home prices could surge by a further 14 per cent over the next year.

Canadians are spending so much on housing that they have limited ability to spend elsewhere. According to a recent report from National Bank of Canada, the typical homebuyer in Toronto spends 56 per cent of their income on mortgage payments. In Vancouver, it’s 64 per cent; in Hamilton, it’s 34 per cent; and in Victoria, it’s 58 per cent. During the pandemic, real estate prices increased rapidly in small towns and rural communities, meaning even more Canadians are struggling with housing affordability.

Many Canadians are aware of how our sky-high real estate prices negatively affect young people and exacerbate income inequality. Less frequently discussed, however, is that larger mortgage debts result in fewer people pursuing entrepreneurship.

A study from the Bank of England found that “mortgage debt diminishes the likelihood of entrepreneurship by amplifying risk aversion,” and that this “may hinder economic activities and adversely affect the general economy.”

Moreover, high housing costs can reduce your liquid savings, meaning you have less resources to invest in launching a new business. The report observed that an increase of £32,000 ($55,000) in mortgage debt reduced the probability of an individual pursuing entrepreneurship in Britain by between 10 per cent and 12 per cent.

Some may argue that surging home values spurs entrepreneurship by augmenting the net worth of existing homeowners. However, the Bank of England study observes that a rise in home values does not necessarily increase homeowners’ likelihood of pursuing entrepreneurship.

Having your wealth concentrated in real estate exposes you to a housing market crash, thereby enhancing your financial risk and decreasing your probability of pursuing entrepreneurship. Even if homeowners were more likely to pursue entrepreneurship, 37 per cent of Canadian families don’t own their homes and do not benefit from the rise in real estate prices.