TD Warns Skilled Talent Is Leaving
A new report from TD Economics warns that Canada is quietly losing highly skilled workers, entrepreneurs and STEM graduates to the United States. The report describes the trend as a “silent brain drain” driven by stronger compensation, better business opportunities and more attractive career paths south of the border.
BNN Bloomberg discussed the findings with Francis Fong, managing director at TD Economics and co-author of the report, who said Canada’s weak productivity growth, tax structure and limited business scale are all contributing to the problem.
A Familiar Problem In A New Context
Fong said the issue is not new for Canada. The country faced a similar brain drain in the 1990s, but the current moment is especially important because Canada is trying to diversify trade relationships while its economic competitiveness remains under pressure.
According to Fong, Canada’s productivity growth has been weak for several years. That matters because lower productivity limits wage growth, business expansion and the ability to retain top professionals in sectors such as technology, medicine, research and entrepreneurship.
Taxes Add To Competitiveness Concerns
One of the central issues highlighted in the report is Canada’s personal tax structure. In Ontario, British Columbia and Quebec, the highest marginal tax rate rises above 50%. In Alberta, it reaches 48%.
Fong noted that these top rates begin at income levels around 275,000 Canadian dollars or slightly higher. In the United States, similar top marginal rates in places such as California or New York often apply only at much higher income thresholds, sometimes closer to 700,000 or 1 million U.S. dollars.
Business Taxes Can Discourage Growth
The report also points to distortions in Canada’s business tax system. Fong said the gap between the lower small-business tax rate and the general corporate tax rate can discourage some firms from scaling beyond certain income or asset thresholds.
As companies grow, their marginal tax burden can rise sharply. That can push business owners toward tax-planning strategies designed to defer or reduce taxes, rather than focusing fully on expansion, hiring and productivity gains.
The U.S. Offers More Scale
Beyond taxes, the biggest attraction of the United States is opportunity. The U.S. market offers higher pay, deeper capital pools, larger companies and more globally competitive firms.
Fong said Canada must become much more competitive if it wants to retain top doctors, entrepreneurs, engineers, scientists and technology workers. The challenge is amplified by Canada’s smaller business ecosystem, higher regulatory burden and lower availability of venture capital and patient capital.
Productivity Remains The Core Challenge
Canada’s talent retention problem is closely tied to its productivity problem. Without stronger business investment and more companies capable of scaling globally, skilled workers may continue to seek opportunities in the U.S.
Fong said the federal government is aware of the issue and has shown renewed interest in encouraging firms to locate and remain in Canada. Infrastructure investment is one area of focus, but he said it is only one piece of a much larger puzzle.
Lower-Tax States Attract Canadians
The movement of Canadian talent is not limited to traditional high-tech hubs. Lower-tax, high-growth U.S. states such as Texas and Florida continue attracting entrepreneurs, professionals and investors.
Fong noted that similar migration patterns are happening inside the United States, with states such as California and New York losing people to lower-tax jurisdictions. Canada is part of that broader competition for talent, capital and business formation.
Retaining Talent Requires A Broader Strategy
The report suggests that keeping skilled workers in Canada will require more than small policy adjustments. It will require stronger productivity, a more competitive tax environment, deeper capital markets and better conditions for companies to grow domestically.
For Canada, the risk is not simply that individual workers leave. The greater concern is that entrepreneurs, innovators and high-growth firms may build their futures elsewhere, weakening the country’s long-term economic potential.
