Going, Going, Gone . . .

Part II- Life Really is Better South of the Border!
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Of the 133 individuals interviewed for this study that left Canada to work in the U.S.:

• (68%) indicate that their primary reason for moving was that the U.S. offered superior career opportunities and/or compensation!
• (94%) indicate that their expectations with regard to realizing these better opportunities have been met!
• (65%) indicate that they have influenced others to follow them to the U.S.!

These are disturbing results for Canada. The future of Canada is heavily dependent upon the intellectual capital of a highly skilled workforce. Worldwide shortages exist for these skilled workers and such overwhelming feedback that Canada is perceived as uncompetitive when compared to the U.S. must be of concern. As expressed by one respondent:

"Competitive is the key word. People leaving do not perceive Canada to be competitive – either for exciting work, career opportunities, jobs, money, taxes, business."

Part I of this report profiled the demographics of the individuals that have moved to work in the U.S.. Part II explores in more detail why people chose to move and whether they are satisfied with their decision to do so.

How did our Expats. find their first job in the U.S.?

Participants were asked to identify the various ways they had found out about their first job in the U.S. The most common responses were:

• 27% went looking on their own
• 23% heard about it from friends
• 16% found it on an internet job board (i.e. Monster Board, and the like)
• 12% were approached by their current employer to relocate to a U.S. branch or head office
• 11% were approached by a third-party recruiter or head-hunter and
• 6% were directly approached by a U.S. company

It is interesting that the majority of respondents found their jobs through active means (including looking on their own, from friends, or from a job board), rather than the more traditional passive ways such as being approached by one's current employer, by a U.S. company, or by a third-party recruiter. In short, most individuals took the initiative to look for their first job in the U.S..

These individuals were already dissatisfied or questioning what they could achieve in Canada and took the initiative to look for work in the U.S. Especially in the case of job boards, job seekers must usually indicate the country in which they are searching for employment, showing that they have already made the decision to at least consider looking in the U.S.

Hearing from friends, in particular, reinforces Canadian industry assertions that if a Canadian company loses one employee to a U.S. competitor, they are at risk of losing more, perhaps even the entire team to that U.S. company.

Figure 1: How Canadian Ex-pats found their U.S. jobs.

Do Canadian Ex-pats Influence Others to Join Them?

The role or influence of friends in a person's decision-making process to move to the U.S. was explored in more depth. Sixty-five percent (65%) of respondents claim to have influenced others to move to the U.S.

This varies with age: the older the age of a respondent, the more likely they were to have influenced others to move. The group least likely to have influenced others to move is those under 30; however, as they are also the group with the least experience living abroad they have had less time to exert influence or develop a network of colleagues. The same trend emerges with years of experience; those respondents with the most work experience were the most likely to have influenced others to move southward. As indicated in Part I of this report, 44% of respondents had more than five (5) years of experience when they moved to the U.S..

There is also somewhat of a correlation with education level: while 71% of university graduates influenced others to relocate, 83% of those holding doctorates had done so. Again, the popular perception that it is Canada's very best and brightest that are leaving is reinforced here.

There is also some evidence that financial incentives to encourage friends to move may be somewhat of a contributing factor. Many technology companies throughout North America use a method of recruitment called an Employee Referral program, in which they pay thousands of dollars for every referral an employee makes that results in a hire. It is a cost-effective method of recruitment for technology firms. This financial incentive provides additional impetus for convincing friends or former colleagues of the merits of moving to the U.S.. In the words of one individual

"I am making more than I ever thought I would. In addition I get $8,000 for every new recruit I bring to the company. I have contacted everyone I ever went to school with or worked with in Canada. I have financed a new car and completely paid off my student loan through these bonuses".

Of course, the same financial incentives are generally offered by Canadian companies, but compensation data available to PERSONNEL SYSTEMS from both countries indicate that such financial incentives in Canada are often not as lucrative as those available in the U.S..

Why did They Leave Canada?

Among the main reasons for conducting these interviews was not only to ascertain who was leaving but as importantly, what were the motivators for individuals working in technology areas to choose to move to the U.S.. Perhaps such information can assist industry and governments in formulating action plans that will encourage individuals to make the other choice - namely stay and work in Canada.

Motivations for making the choice to move to the U.S. were explored from a number of different perspectives:

Foremost Reason for Leaving

Respondents were asked to identify their over-arching reason for leaving Canada to work in the U.S. Responses were dominated by financial and career considerations. Sixty-eight percent (68%) of respondents feel that the same career opportunities and/or earning power are not available in Canada when compared to the U.S.

"They offered twice the salary of any offers in Canada + stock options (about to go public)+ working with great people and great technology - why should I stay in Canada that offered nothing close to comparable?"

"My decision was most heavily swayed by the financial opportunity. I was underpaid as a software engineer in BC: my spouse and I, on two incomes, were stuck in a financial rut, our debts growing. Now, on only one income, we finally have a positive net worth"

"Unlike many of my friends I started working in Canada when finished university. After awhile though I realized that they were earning way more (I mean way more) than me and were doing more interesting work. I moved to where the money and challenge was"

Probing was then carried out to a finer level with respondents asked to divide their motivators into 'business reasons' and 'personal reasons'. Within each of these groupings they were then asked to rank their choices:

Business Reasons for Leaving

Seventy-nine percent (79%) of respondents ranked 'Access to leading-edge technologies and people' as the first, second, or third most influential factor on their decision to move to the U.S.. This was followed very closely by 'Scope in the position offered', which influenced seventy-six percent (76%) of respondents.

Relatively few respondents (17%) ranked the perceived 'better access to venture capital funding' as the first, second, or third most important reason they left Canada; this may have to do with the survey respondent database being made up of mostly employees rather than entrepreneurial business owners.

"I found a company that has a great reputation, is a leader in the field, a perfect working environment, and the job challenges me everyday (and they wanted to employ me, always a bonus)"

"Have had opportunity to work with a calibre of individual that never would have been possible in Canada - able to conduct research that would not have been funded in Canada"

"Involved in projects and people that I never dreamed would be possible - it is just plain exciting!"

Personal Reasons for Leaving

As for personal reasons for heading South, 'more favourable personal income tax treatment' was ranked first, second or third by eighty-three (83%) of participants. This was followed closely by lifestyle and climate preferences, in the top three influences of 77% of the respondents. Not surprisingly, climate played a significant role for those moving to California, the Southwest, and the South-eastern United States.

Again, almost half of respondents chose a friend or partner moving to the U.S. as first, second, or third ranked personal reason for moving. Some respondents were eager to leave Canada's political environment, and a few wanted improved access to services such as education or health care.

Note: Respondents from the Biotechnology field, although consistent with the overall trends already discussed, also indicate that high motivators for moving are the lack of equivalent levels of research funds in Canada, coupled with few equivalent job opportunities and decidedly less compensation than in the U.S.

"Tax rates are better in the U.S. than in Canada. I can take home a lot more money in the U.S. than in Canada even if the cost of living is comparable (which is the case if you compare Seattle to Vancouver)"

"Not much to explain. I earn more... get to keep more..."

"I have never lived in a place with more summer than winter"

"Money, Money, Money!"

Although "compensation or money" was not offered as a specific choice under either 'business or personal' motivators, it was indicated as a huge draw by expatriates interviewed.

The money consideration really has two elements: salary and taxation. A study undertaken last year1 by PERSONNEL SYSTEMS found that not only are U.S. Technology salaries higher in own-currency dollar value than Canadian salaries, but when taxes and cost of living differentials are factored in, the disposable income that is available to a technology worker in U.S. technology centres is far higher than that available to similar workers in Canadian technology centres.

For example, data from PERSONNEL SYSTEMS' compINSIGHT High Techâ Salary Surveys indicates that a Senior Software Developer in Austin, Texas will make nearly $80,000 U.S. in total cash compensation on average (base salary plus variable cash compensation such as bonuses). By contrast, the same Developer in Vancouver would earn just over $74,000 Cdn. compINSIGHT High Techâ surveys over 340 high technology jobs in Canada and the U.S.

Aside from salary, the lack of state personal income taxes in Texas and the lower cost of living contribute to a huge disparity in disposable income levels between the two cities. In Austin, the Software Developer who owns a home can expect to keep 46% of salary as disposable income, compared to a mere 13% disposable income for the Software Developer in Vancouver.¹

Although this example is one of the highest, the differential rarely dipped below 20% when comparing technology centres in the two countries. This particular example is also of interest because approximately twenty percent (20%) of respondents moved to the South-western U.S. and as such, this is very relevant information.

Have Their Expectations Been Met?

The above outlines the motivators, perceptions and expectations that individuals possessed when they made the decision to move to the U.S.. Given many of the anecdotal horror stories coming out of Silicon Valley concerning quality of life issues, it was felt to be important to delve into whether their expectations have been realized - has perception become reality?

Their comments:

"The weather is beautiful in Florida, cost of living is lower, and I have a high-paying job"

"The job was as promised but there are far better opportunities than with the company I joined"

"My Salary after taxes has more than tripled and the opportunities and technologies are astounding!"

"The U.S. has provided all the personal adventure that I sought."

"I got a bigger, nicer house, and we have a better shot at a comfortable retirement, not counting the climate allows us to practice our favourite sports, and activities almost year around"

"All I could have asked for – have learned more in last few months than I would have ever imagined! Everything moves at lightening speed – what a turn on!"

"I am earning more than I could have imagined – if I wanted I could retire by age 40! Get 2-3 offers a week from other employers (none from Canada by the way)"

Those who have not had their expectations met made comments such as: the U.S. is simply not as nice a place to live as Canada, that the cost of living is high and quality of life is low in Silicon Valley, and one derisive comment that "the United States is one gigantic Wal-mart."

Clearly it could be argued that it is not a surprise that such high satisfaction levels are reported – those that are not satisfied have likely already returned to Canada. Although this is perhaps true, such a high level of satisfaction indicates that individuals clearly believe that they have access to significantly better opportunities and earning power in the U.S. compared to what they could achieve in Canada.

This is even a more interesting finding in relation to commonly held perceptions in Canada as to issues that are believed to be deterrents to individuals moving to the U.S.. These issues include things such as an inability of spouses to find employment thereby preventing married individuals from moving. It has also been assumed that married individuals with children are less likely to move due to concerns over crime and quality of education. However, twenty-six percent (26%) of study respondents are married and a further 14% are married with children. In addition, of spouses that were employed in Canada prior to moving, approximately fifty-seven percent (57%) were able to also find employment in the U.S.. Clearly these issues are not major deterrents to people's decision to move.

Conclusion

Reasons for leaving Canada and satisfaction with the decision varies across age, gender, province of origin, and state of residence. What is clear however is that it is not only our recent young graduates who are leaving. It is the older, more experienced and valuable individuals who have left, are happy with their decision – and may little reason to return.

Part III of this report will look at what, if anything could convince these workers to return to Canada and report on their suggestions with regard to what actions Canadian governments and industry can take to stem the tide and ensure Canada is competitive in its ability to retain and attract skilled workers.

Methodology

Names of potential interviewees were solicited from technology company clients of PERSONNEL SYSTEMS through its compensation survey participants and other industry partners. Companies were asked to urge individuals that they knew had moved to the U.S. to complete the interview. Clearly these were often employees that these companies had lost to the U.S. Those completing interviews were also asked to identify other Canadians that they knew were working in the U.S. Using a special web-based interview technology, individuals were able to respond to the interview in an anonymous fashion. Validation of responses was ensured through requiring individuals to give detailed reasons for their responses.

For further information, contact:

1. Personnel Systems, "The Lure of the U.S. High Technology Job," 1999.

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