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Brain drain debate continues.

How can the federal government help Canadian businesses keep their corporate leaders?

There seems to be a consistent theme in the battle of Prime Minister Jean chretien & Statistics Canada Vs Corporate Canada: Canada is losing its best minds. The Conference Board of Canada, in its report, Are We Losing Our Minds?, has said our top thinkers are being drawn away by a complementary bundle of better jobs, Lower taxes and higher incomes.

Flying in the face of assurances from Jean Chretien, Statistics Canada and others, the alarmist drum beat continues: a southern-focused brain drain is tapping into Canada, drawing off our brain trust, like so much sacred water, to sunnier climes south of the 49th.

Chretien continues to assert that Canada's brightest are staying at home and that the "drain" is pure fabrication, a tactic by businesses looking to boost their share of tax cuts.

Sure, maybe the PM's feelings are a bit close to home. After all, Chretien may have been influenced by the fact that his own brother Michel, respected long-time medical researcher and director/CEO of Ottawa's Loeb Health Research Institute, recently won the national Medal of Honour from the health research foundation of Canada's research-based pharmaceutical companies. If that isn't a case of homespun talent staying put, what is?

Regardless, a new salvo in the battle has been launched by the Fraser Institute with its 1999 fall survey of senior investment managers. The survey of top executives, who together oversee more than $175 billion in assets under administration, claims a whopping 94% believe that the brain drain, defined in the survey as the emigration to other countries of skilled, educated Canadians, is a major problem.

The Fraser Institute's solution? Not surprisingly, a reduction in personal income tax and capital gains taxes.

It's interesting to note that Canada is not the only country with a brain drain controversy. New Zealand (often compared to Canada when issues of handling debt arise) is also in the midst of a crisis where thousands of university students, saddled with enormous loan debts, skip the country to settle 1,600 km away in Australia. These "fugitives" from what the New Zealand media have dubbed "stealth taxes," go on to help boost the economic strength of the Aussies.

But what of the Canucks? Can we keep our great minds at home? The Globe and Mail's Daniel Newman points out that "brains" aren't the only thing we're losing -- we're also suffering from a Great Tenor Drain, where famous Canadian singers are being lured away. Now that's a song-and-dance that's in step with the times.

According to Jason Clemens, director of fiscal studies for the Fraser Institute, both tax reduction and tax reform need improvement. "The first and foremost is a flat tax for corporations and individuals. And we need comprehensive tax reform. The highest tax rates kick in at $60,000 whereas in the U.S. they kick in at $250,000."

Few people have come to the defence of the feds. For example, there is Mel Hurtig, political activist and publisher. In his his new book, Pay the Rent or Feed the Kids, about poverty in Canada, Hurtig argues that there are a number of widespread Canadian myths started, nurtured and perpetuated by the neo-conservative right, about economic growth in this country. For instance, the lie about tax cuts being a Canadian priority, says Hurtig. In fact, they're not, says the publisher. The main concerns are social programs and health care. And brain drain? According to Hurtig, we lost more great minds to the U.S. half a century ago.

Still, the concerns are there: while 'mass hysteria' might be a little strong, a sense of urgency is coursing through many observers. A fortnight's review of letters to the Ottawa Citizen underscore the concern, citing everything from the 150 categories of workers who, thanks to Free Trade, can now cross the border to work, to just plain anger over Chretien's seeming indifference.

"My son was one of probably hundreds to take advantage of this [free trade job category] opportunity," Francis Warren was quoted as saying in the Citizen. "He took a job in Washington with a three-year renewable contract at three times his best previous salary and every benefit you can imagine. He would like to work in Canada. Do we expect him to come back? Maybe to retire."

The strongest brain drain rallying cry has come from Nortel Networks CEO John Roth, a proponent of the low-corporate tax, low-personal tax approach. The tech industry's Pied Piper has drawn others into the fray, who fall in step behind the CEO who leads a company that employs 22,000 workers and generates a good chunk of wealth (moving the company from market capitalization of $22 billion U.S. to $100 billion in the space of two years) and spin-off benefits for the Canadian business community.

Roth recently reminded the Ivey Business Journal of the need to make Canada a place where incentives can help business keep their corporate leaders. Maybe Roth has a point, for of 400 leaders at Nortel, only 28 remain in Canada.

And the Ottawa Citizen also quoted Carleton University professor Ian Lee, an expert in strategic management and international business as saying that, in Canada, we are "'shooting ourselves in the foot... in the name of trying to protect ourselves, we've created a business environment that companies perceive as less and less hospitable to doing business. They are thus more and more motivated to relocate outside Canada to expand."'

Contrarily, the Citizen also reported in an interview with former Lucent Technologies Canada Corp. executive Jim Schram, who was drawn to the company's U.S. base and is now ensconced in Annapolis, Maryland, that stock options, financing and access to decision-makers are all reasons for heading southward. According to Schram, lower taxes are an 'incidental' rather than a significant advantage -- and certainly not a major draw.

Regardless, the brain drain is a truly quintessential Canadian issue that is starting to drive itself.

In an endpoint, the Fraser Institute's Clemens cautions that we must see the issue in terms of not just jobs, but quality jobs, with the very best workers in the system being drawn away.

"We're really talking about the cream of the crop of Canadian workers," says Clemens. "These are people that we have invested in through our education system. One of the areas that we're losing in is business managers. And if we're losing our best managers, who's left to manage our business?"

And the beat goes on.

John Cooper is a freelance writer based in Whitby, Ont. (905) 430-1922
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Author:Cooper, John
Publication:CMA Management
Date:Jan 1, 2000
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