Thank you very much, Madam Chair and committee, for the invitation to speak to you today.
I'm a professor of economics. I've been studying talent and innovation for almost two decades, and I speak to you as an individual and as a Canadian who deeply cares about our country.
If you'll allow me, I want to mostly focus on the big picture. I hope my remarks can help provide some context to discussions around science, talent and publicly funded research.
Let me start with the bad news. It's no secret that Canada has a large and growing innovation and productivity gap, though the extent of it might be surprising. Fifty years ago, we had the second-highest labour productivity among the G7. Today, we have the second-lowest, ahead only of Japan.
OECD data also shows that we are now last among G7 countries, tied with Italy, for the fewest triadic patents as a share of GDP. Other measures of innovation tell a similar story, whether it's high-tech exports, advanced manufacturing or tech start-ups.
I'm concerned, because it's only a matter of time before these deficits are reflected in the wages and standard of living of Canadians. The question is, why is our performance so poor?
Well, it's particularly puzzling if we consider that Canada has many of the building blocks necessary to be a successful innovator. The most crucial of these building blocks are precisely the things that this committee is tasked with studying: basic science, an educated workforce and public R and D.
Much of the testimony that this committee has been hearing is that Canada needs to invest more in these things. I don't disagree. These are Canada's strengths, and we need to continue to foster them, but it's important to understand that simply doubling down on our strengths is not going to address our innovation gap. This gap exists because we're failing to translate basic research and invention into valuable innovations.
An illustrative example of this is artificial intelligence. Canadian researchers—people like Geoff Hinton—developed many of the key breakthroughs in machine learning, but the commercial benefits were largely captured by foreign entities.
I teach my students to think of the innovative process as a pipeline. To get good outputs—things like new products, patents, high-tech exports, advanced manufacturing and tech start-ups—we need quality inputs, excellence in basic science, public R and D and an educated workforce, hence the importance of this committee.
However, to get good outputs, we must also fix the pipeline itself, because, frankly, it's broken. Canada's private sector is simply not capitalizing on our strengths in basic science, invention and talent. One indication of this is Canada's low levels of business R and D as a percentage of GDP, where we're last among the G7. We're also the only G7 country that has seen a decline in business R and D intensity since the start of the millennium. It seems that we invent and others commercialize our discoveries.
I want to emphasize that there's no single magic bullet to address this challenge. Our colleges and universities must put an increased focus on entrepreneurship and commercialization, and our government must emphasize firm growth, but fundamentally, tackling this challenge is going to require a holistic rethink of our innovation policy.
We must continue to invest in and improve the things we are doing well: science, public R and D and education. I'm heartened by the work of this committee, but we must also invest in and reform things like intellectual property, R and D tax credits, skilled immigration, venture capital, competition policy and others. If the goal is to build a more prosperous Canadian economy, then investments in basic science and education must be coupled with broader innovation policy reforms.
That's the main context of what I wanted to share today, but since talent is one of the key topics of interest, allow me to also share three very quick points on that front, which are based on some of my own research.
Number one, strong STEM education is key. Some of our research suggests that, not surprisingly, STEM-educated graduates tend to disproportionately contribute to technological innovation, so the more STEM graduates we have, the better.
Number two, the brain drain is real. According to data from the World Intellectual Property Organization, Canada is the third-biggest net loser of inventors due to migration, behind only China and India, and there's a scale thing there too.
Number three, skilled immigration is no panacea. Our research suggests that our STEM-educated immigrants are not having the same impact on innovation as similar immigrants in the U.S., in part because they're not finding employment in STEM. We did, however, find some evidence that our international student immigrants are doing better, and we're launching a study to examine this further.
Thank you for the opportunity to appear before you today. I'd be happy to take any questions and expand on any of these points.