Good afternoon, Mr. Chair.
Can everybody hear me okay? Excellent. I see lots of nodding heads. I'm getting used to that on Zoom.
Thank you so much for the opportunity to present today and talk about the importance of budget 2022. I know there's a lot of content to get through.
I'm appearing on behalf of the Council of Canadian Innovators. We are a national business council representing 150 of Canada's headquartered fastest growing tech companies. Our members are headquartered, as I mentioned, here in Canada and employ north of 52,000 workers across the country. We're market leaders in the sectors of health care, clean tech, financial technologies, cybersecurity and more.
Addressing Canada's postpandemic talent crisis and improving Canada's innovation outputs in research, development and commercialization are the two priorities from our pre-budget submission that I will speak to today.
First, I'd like to brief you on the pressures facing domestic technology companies—and this talent issue is pervasive, I think, probably across all sectors, but specifically for the tech sector today—in their pursuit of attracting and retaining highly skilled talent to fuel the growth of their companies.
From governments to businesses to community organizations, so many of us have embraced new digital tools in the past two years. Today, more than ever, Canadians shop, bank, study and connect online, and this increased demand for digital services has helped fuel an economic rebound in the ICT space after the dark early months of the pandemic. A recent report from the ICTC estimated that by 2025 Canada's digital economy will employ 2.26 million Canadians—that's 11% of all employment in the country—but this will require an additional 250,000 jobs to be created over the next three years.
The good news is that CCI's members and Canadian scale-up companies are committed to creating many of those new jobs, but they face a serious talent supply issue. Nearly every conversation I have with our members tends to deal with workforce issues in some way. Scale-up companies can't just maintain their workforce; they actually need to grow it, and grow it rapidly. Adding the best and the brightest talent remains a constant priority.
Further, a recent survey of our membership found that most companies plan to increase their workforce by 20% this year. That's an additional 10,000 workers added to our workforce in Canada by this year's end.
For years, the shortage of skilled talent has been a driving concern for the council, but the recent shift to remote work has only exacerbated this problem. Canada's skilled workers are now part of a global labour market, where geography is no longer important. Our domestic innovators are finding themselves in fierce competition with global companies that can offer significantly higher salaries for the same crop of high-skilled workers. This is driving up wage inflation across our companies, with some finding that wage expectations have increased by 25% in the last year.
To meet the talent needs of our country's fastest growing companies, we need to increase the generation, attraction and retention of skilled workers for Canadian firms. We have many recommendations on how to address these challenges, including improvements to our immigration system and investments into upskilling and retaining programs. I look forward to engaging with you on these ideas today.
I'd also like to bring to your attention Canada's SR and ED program and its need for reform to help spur innovation and generate a greater return on investment for Canada. This tax credit is the cornerstone of Canada's innovation funding, and it's used by an overwhelming majority of CCI members, and more.
We have been calling for SR and ED reform for years. During last year's federal election, we were encouraged to see that leading political parties heard our calls and included plans to reform SR and ED in their platforms. But we continue to be concerned that as the government promotes an innovation agenda, the SR and ED program does not allow costs related to the development and protection of IP to be eligible for the tax credit. Intellectual property is arguably the most valuable commodity in the innovation economy, and SR and ED badly lacks an IP focus.
In our budget submission, we also ask the government to stop giving SR and ED incentives to foreign companies that take their IP outside of Canada. The SR and ED tax incentive, particularly the refundable portion, delivers material and long-term value to Canada only if the IP flowing from the investment stays here. Without an IP strategy for SR and ED, Canada is doing philanthropy, not innovation. We also need to see the deployment of other tools to protect ideas as they commercialize, such as patent boxes.
I appreciate the opportunity to be here today to present on behalf of our innovators. I do hope you'll take the time to read CCI's full budget submission. I also urge you to get to know the innovative companies in your own ridings—I have checked many of yours, and they do exist there—and understand the challenges that are facing them in their pursuit of scale. Without a strong base of these homegrown, high-growth companies in Canada, we will not be able to generate the economic growth and public wealth necessary to pay for the public services that Canadians depend on.
Thank you. I look forward to your questions.