Diverse, talented city a laggard on innovation
Published On Mon Aug 17 2009. Kevin Stolarick Research director. Rotman School of Management’s Martin Prosperity Institute. David Smith Project Leader, Rotman School of Management
Having celebrated its 175th birthday this year, the City of Toronto is undergoing significant structural changes that will force it to adapt from a manufacturing-based economy into a creativity-driven, knowledge economy. These changes are forcing government, businesses and individuals to reconsider priorities and rise to new challenges.
Changes are not only occurring in the urban centre, but in a much larger, integrated region of 5.1 million people, known as the Toronto Census Metropolitan Area (CMA).
Stretching from Clarington in the east to Milton in the west and part of Simcoe and Dufferin counties in the north, this collection of municipalities forms the 10th-largest metropolitan region by population and the 12th-largest economy by GDP in North America.
As Ontario’s and Canada’s largest region, it is a multicultural place in which to live and work and a major gateway to the global economy.
Its mixture of civic, corporate and natural assets makes the Toronto CMA a diverse region – but not a leader among the group of competitive peer regions it was measured against. These peers include Montreal, Boston, New York, Chicago, Vancouver and Los Angeles.
We used the 3Ts of economic development – technology, talent and tolerance – to judge the performance of Toronto relative to other jurisdictions and their future socio-economic prosperity.
This lens gives primacy to the attraction and retention of creative capital. The concept of creative capital differs from human capital in that it identifies the creative class as key to economic growth and focuses on the underlying factors that determine its location.
The creative class is defined as people in occupations paid to think. Regions that attract and retain this group of workers are best positioned to succeed in the future. Increased levels of creativity as measured by our creativity index tend to add to both average total income and the GDP per capita of the region.
With the concentration of talent and the multitude of perspectives that come with people being able to carve out their own space in a new community (tolerance), come new technologies and innovations that support continued growth (technology).
Each of the 3Ts plays an important role in the ability of regions to attract the creative class, which includes technology, arts and culture, and professional, education and health occupations.
As a group, the creative class comprises 34.3 per cent of Toronto’s labour force, or approximately 950,000 people. This is the third-highest share among the peer regions, trailing only Boston (40.6 per cent) and New York (34.5 per cent). In addition, Toronto is better educated, ranking third in talent among its peers.
The city ranks first in gaining more talented individuals, both from its post-secondary system and from foreign jurisdictions, than it is losing. Providing that it keeps this positive momentum by continuing to attract and retain, Toronto will not remain in the middle of its peer group on the talent index (per cent of population 25 years or older with at least an undergraduate degree) for long.
Despite this abundant supply of talent, the Toronto region is not as innovative as it could be. There are clearly impediments and systemic issues preventing the talented individuals and firms in the region from commercializing their ideas.
Toronto has had the worst year-over-year growth in patents of all the peer regions; on average, patent production has fallen 8.3 per cent per year during the five years prior to 2006.
The analysis suggests that institutions in the Toronto CMA must learn from regions such as Boston and Seattle, which appear to have removed some barriers to commercialization. Federal, provincial and municipal governments must work together to provide the proper incentives for this vital activity.
Finally, Toronto is the most diverse city among its peer regions, with visible minorities accounting for 42 per cent of the population. And 46 per cent of the population was born outside Canada. These numbers give Toronto a competitive advantage in diversity that it must learn to harness more effectively.
Regions such as Toronto that have a history of openness and diversity become a more attractive destination for individuals abroad looking to maximize their individual welfare. But one of the more troubling aspects for Toronto is the growing segregation of cultural groups in and around the city.
We share the concerns of our colleagues at the University of Toronto Cities Centre whose recent report, The Three Cities within Toronto, showed that the city’s core is becoming gentrified, with visible minorities moving to the fringes along major transportation arteries.
As we move into the creative age, Toronto must continue to build on its strengths – its multicultural and talented workforce – and leverage these to become more innovative.
The stronger the Toronto CMA can perform on each of the 3Ts, the more creative and prosperous it will be.
This analysis is part of the Ontario in the Creative Age series, a project conducted for the Ontario government. Find it online at martinprosperity.org/research-and-publications/publication/ontario-in-the-creative-age-project.