Teleworking has made employers realize that they can hire professionals remotely beyond the usual borders. Quebec is no exception to this phenomenon, which does nothing to alleviate the province’s labor shortage. Third and last article on this new paradigm of the labor market: when taxation loses in exchange.
The lockdown caused by the COVID-19 pandemic has forced many employers to embrace telecommuting. The phenomenon was so important that rush hour disappeared for a few months around Montreal. Meanwhile internationally, a different kind of teleworking has taken hold.
“Our human resources platform allows us to hire anywhere in around fifty countries,” says Frédéric Lalonde, founder and president of Hopper. “There are also a few employees in Kenya. With teleworking, we are able to hire fewer people in Quebec, where it is currently very difficult to do so, and to find professionals elsewhere in the world. “
Hopper is one of the most prominent young companies of the day in Quebec technology companies. His business has doubled its revenue in the past three months and has likely seen its value jump as a result. Last spring, during his last fundraising campaign, Hopper was valued at $ 4.6 billion Canadian.
Obviously, to support this growth, Hopper is hiring heavily. But few in Quebec. “And we’re not the only ones,” says Lalonde. “What we are seeing right now is a post-pandemic job market where there are no more borders. And governments that are not ready for it will lose a huge amount of tax and infrastructure revenue. “
A negative tax impact
In a globalized labor market, Canadian companies in the technology sector are penalized compared to foreign competition, especially from the United States. Not only because of the relative weakness of the Canadian currency, which limits their ability to offer good wages, but also because historically, Canadian technology companies are generally less valuable than their American counterparts.
This is even truer for Canadian companies listed on the Toronto Stock Exchange. As the economists Stéfane Marion and Matthieu Arseneau of the National Bank observed at the end of October, the average value of the shares of the TSX, the main index of the Toronto stock exchange, is at a multiple of fifteen times the expected profits. As for the S&P 500, the flagship index of the New York Stock Exchange, this multiple is twenty times the expected profits.
In other words, a company listed on the US Stock Exchange and having exactly the same characteristics as a company listed on the TSX is likely to be worth 25% more. It is much the same with private financing, where start-ups collect the capital that allows them to ensure their initial growth.
Less money in the pockets equals fewer hires, which means less ability to develop the products that drive business growth. Fewer hires also mean less wages paid in Canada and therefore less taxes and tax revenues for governments.
That’s not all, adds Frédéric Lalonde. “The Limoilou or Boucherville employee who works from home will not go to the office in Quebec or Montreal. He doesn’t take the bus. He doesn’t eat at a restaurant. It no longer participates in the local economy. The whole economic model before the pandemic needs to be reviewed. “
Local businesses
In Quebec, the provincial government says it is well aware of the situation. The Minister of Labor, Employment and Social Solidarity, Jean Boulet, told the To have to that he was “attentive to the phenomenon of cross-border remote work” and to the brake that this situation places on the growth of Quebec companies, especially those from the technological sector.
However, the government is silent on its intentions in this regard. As with everything related to the labor market, Quebec promises that the answers will be found in its mini-budget which will be presented later in November.
The expectations are high. The possible solutions proposed by entrepreneurs, investors and business people who are closely watching this new division of the labor market go in all directions: favor the creation of businesses in Quebec, increase immigration thresholds , create in-company training programs to ensure staff retention.
There still seems to be a consensus on the importance of favoring local companies rather than companies from outside. The scarcity of labor is such that the programs that attract foreign employers who report no income in Canada or Quebec are now considered superfluous.
This is the observation made earlier this fall by the heads of 175 young Canadian technology companies. “Canada must succeed in digital transformation and seize the opportunities it brings, otherwise we will fall behind and we will become poorer,” they concluded in a letter to the federal government.
The same is true at the provincial level. “This will probably be the most serious issue of the next five years,” predicts Frédéric Lalonde.