I originally wrote this memo for Build Canada, but it didn’t get run so I’m sharing it here in original form.
Key Message
Canada faces a critical challenge that threatens our economic future: the systematic loss of our highest-performing talent to the United States due to uncompetitive compensation.
This brain drain represents more than just individual career decisions – it is a structural weakness in our economy that, if left unaddressed, will continue to limit Canada’s potential for innovation and growth.
The solution requires a fundamental shift in how we compensate top talent, matching global standards to retain the individuals who drive exceptional outcomes.
Our Aim
Our objective is to transform Canada from a talent exporter to a talent magnet by achieving compensation parity with the United States for top performers across key sectors within five years. We seek to retain at least 75% of Canada’s highest-performing professionals, reversing the current trend where we lose up to 80% in certain fields.
As more top talent stays in Canada, they will build successful companies and institutions that can, in turn, offer competitive compensation to the next generation of leaders.
Summary
Canada is experiencing a critical talent exodus, particularly among its highest performers, due to a significant compensation gap with the United States. The data is stark: up to 90% of top performers in certain fields leave for the US, including 78% of top AI/ML graduates, 65% of top engineers, and 55% of distinguished business graduates. The compensation differential is substantial, with US positions offering 40-70% more than equivalent Canadian roles.
The root cause is straightforward: systematic under compensation of top talent in Canadian institutions. This gap manifests not just in base salary, but in total compensation including equity, benefits, and long-term wealth creation opportunities. The disparity is particularly pronounced in technical and finance roles, where the compensation gap can lead to significantly different trajectories in personal and professional progress over time.
The issue is not insurmountable, but requires fundamental changes in how Canadian institutions approach compensation. While Canada offers advantages in other areas, the compensation gap remains the primary driver of talent loss. Addressing this challenge requires both cultural shifts in how we value top talent and structural changes in compensation models, including competitive base salaries, equity ownership, and benefits packages that approach US levels.
Current Problem
As many as half of graduating computer science and artificial intelligence graduate students and PhDs move to the US shortly after graduating. But among the best of the best, it can be nearly all of them. Someone I know who attended a PhD in a particularly challenging and frontier stream of computer science at University of Toronto said that of their graduating class, 18 out of 20 graduates immediately moved to the US. If Canada were a company, 90% of our best performing hires would be leaving after onboarding.
The examples are not limited to frontier AI. In healthcare, while only 14% of Canadian medical residents do their residency in the US, of the top 10% by grades, the rate who move to the US for good is 35%. In line with my friend’s anecdote about his PhD program, while 40% of AI and machine learning grads went to the US, 78% of the top graduates went. In engineering the rate among the top 10% of graduates is 65%, compared to 25-30% on average depending on the engineering program. In business, 55% of those graduating with distinction worked in the US compared to 25% of the rest.
If as many as 80% of the most talented people in a given field move to the US (and stay there) within a few years of graduation, how do we expect to manifest the outcomes we want here in Canada? The symptom of the problem, that the most high potential and talented people are leaving in the greatest numbers, is clear. The problem itself, however, is even simpler. The most talented people in the Canadian economy are underpaid.
Top performing people in equivalent roles in the US can make 40-70% more than they do in Canada, in particular in technical and finance roles. Over time the earnings gap compounds as your career goes on. Why would the most talented people, capable of pushing their fields forward, settle for 40-70% less compensation? I shared a draft of this article with a friend asking that rhetorical question, and they replied ‘I think about moving to the US for better comp all the time’. Among top talent, market compensation is viewed as a significant sacrifice they make staying in Canada. We must address this gap.
The Solution
The solution to Canada’s talent retention crisis lies in addressing the stark compensation gap with the United States. Currently, top performers can earn 40-70% more in the US than in equivalent Canadian positions, particularly in technical and finance roles. This disparity is illustrated by real cases: a Canadian software engineer I know who joined Facebook in the San Francisco Bay Area doubled their compensation compared to opportunities in Canada. This gap compounds over time as people are promoted.
Closing this compensation gap requires both cultural and structural changes. While some constraints are economic, others are self-imposed. For instance, we can choose to pay doctors more competitively – the fact that we don’t is a policy choice, not an immutable economic reality. Similarly, many of our most innovative companies receive funding from American investors who are willing to support competitive compensation to secure top talent. A small but growing number of Canadian investors already operate at this global maximum level, proving that competitive compensation is possible within our market.
We need to explore both cash and non cash increases to compensation to become competitive. Top talent should be offered opportunities to became a shareholder or partner in institutions that they contribute to. Better retirement and other benefits can also close the gap. It requires an attitude that the best people are worthy compensating at exceptional levels, which is as much a self imposed cultural barrier as it is economic.
Why This Matters
The impact of losing our highest performers extends far beyond individual departures. The productivity difference between top-performing knowledge workers and average ones explains much of the gap in exceptional outcomes between Canadian and American institutions. The most exceptional outcomes tend to result from exceptionally talented people working on them, and that follows from the incentives that are put in place.
When we lose 78% of our best AI researchers or 65% of our top engineers, we’re not just losing individuals and the taxes that they pay directly – we’re losing the catalysts for innovation, company creation, and economic growth. Where the top talent is, is where the growth and opportunity will soon follow. We need to address this ecosystem effect for the sake of the entire country. Talented people create enduring institutions which creates opportunity and tax revenue that can then be invested back into the country.
What It Will Take
To do this in practice may require working through hard questions of fairness, taxation, small thinking, and all the other symptoms of the core problem we are talking about in these memos. If we agree that there are significant problems with the status quo of economic progress, we should be willing to have the conversations like this to solve them.
Achieving compensation parity requires a comprehensive approach across private and public sectors. Companies must embrace new compensation models that include competitive base salaries, equity ownership, and benefits packages. This may require challenging existing assumptions about “appropriate” compensation levels, and working through complex questions of fairness and taxation. Success demands that industry leaders actively compete with US institutions on compensation, viewing it as an investment in Canada’s future.
How We’ll Do It
The question of how to solve the problem of chronically underpaying the most talented people has an obvious answer: those responsible for the compensation norms within institutions must adopt an attitude of being globally competitive. We don’t necessarily have to match US compensation dollar for dollar, because in Canada, several services that are funded privately in the US are funded publicly. But we have to match the overall value for money of the compensation offered, which means coming close to the overall total compensation offered by US opportunities. If the difference were 10-20% rather than 40-70%, it is likely that many people would choose to stay in Canada for various reasons.
Cultural norms, tax rates and pay practices in Canadian institutions all converge people’s compensation. There is too much economic equality among people within specific specialized roles, and not enough fairness that reflects the exceptional impact had by top talent on their fields. Top talent is able to generate significantly more impact than average talent across domains, and should be compensated accordingly. Canadian institutions could choose to be more competitive, but are held back by historical norms which do not reflect the current global market for talent. Unlike protected industries, people in democratic countries have freedom of movement, in particular people at the top of their fields. There is no way to implement protectionism when it comes to compensation, the market for talent is largely a free market, and the solution is incentives.
Implementation Plan
The path to competitive compensation requires coordinated action across multiple fronts. First, we must reform corporate compensation structures through tax incentives that reward companies offering globally competitive packages. This includes modernizing equity compensation frameworks to mirror successful US models and streamlining immigration processes for companies meeting compensation benchmarks.
Second, institutional reform must address public sector compensation, particularly in research and healthcare. A federal matching program could help private sector employers compete with US offers, while enhanced compensation transparency would drive market adjustments. These changes must be paired with reforms to financial infrastructure, including new investment vehicles for equity compensation and updated stock option taxation rules. It would require alignment between education, government and business.
What This Means For The Future
Successfully implementing these changes would transform Canada’s economic landscape. Instead of serving as a talent pipeline to Silicon Valley and Wall Street, our cities would become primary destinations for global talent. We would see the emergence of self-sustaining innovation hubs that are competitive at the global level, where successful exits create new investors and founders who understand the importance of competitive compensation. It all starts with compensating high potential talent.
This virtuous cycle would generate increased tax revenue from higher salaries, funding improved public services and infrastructure. Most importantly, more Canadian companies would reach global scale, creating a cascade of opportunity that benefits everyone.