CLOSING THE GAP:
INVESTING IN KNOWLEDGE FOR A BETTER CANADA
A brief submitted to
the House of Commons Standing Committee on Finance
the Association of Universities and Colleges of Canada
the Canadian Consortium for Research
the Humanities and Social Sciences Federation of Canada
the Canadian Graduate Council
l'Association canadienne-française pour l'avancement des sciences
The rapid pace of change is shaking the foundation of societies around the world. Canada is no exception. The forces at play present daunting challenges, as well as tremendous opportunities. Capitalizing on these opportunities requires the adoption of supportive economic, social and cultural policies which will enable Canadians to turn the forces of internationalization to their advantage.
"[If] we are faced with a world that creates, that exacerbates inequality, then the focus of government cannot only be to establish a net, it must establish, it must build, it must put in place a ladder..."
Hon. Paul Martin, The Public Good in the Age of Globalization, Congress of the Social Sciences and Humanities, University of Ottawa, 2 June 1998
To meet this challenge, the federal government initially focussed on getting its fiscal house in order. It has largely succeeded. The budget is balanced. Inflation is under control. Unemployment rates are improving. Canada's economic state is as sound as it has been in decades. Yet there is growing evidence that the rising tide is not lifting all boats. Unfettered market forces will not automatically lead to enhanced quality of life and well-being for all. In recognition of this reality, the federal government has made strategic investments to ensure that Canadians can prosper in the knowledge society. These recent investments include the funding provided for the Canadian Health Services Research Foundation, the Networks of Centres of Excellence, the Canada Foundation for Innovation, the Canadian Opportunities Strategy and the federal research granting councils.
Despite these investments, the difficulties the Canadian dollar has experienced over the past few months reveal that Canada is still vulnerable to international economic turbulence. Our reputation as a commodity or resource-based society exacerbates this vulnerability.
Investments in the education of people, in knowledge and innovation are our best strategy in terms of promoting enhanced economic productivity and social well-being of Canadians. Such investments are key to long-term growth and jobs. Yet, our anemic research effort (Figure 1) is the most telling indicator of the country's ambivalent commitment to transform itself into a knowledge-based society. However laudable and necessary the recent investments in research and knowledge infrastructure have been, they remain a partial solution. In particular, they have done little to narrow the gap that separates us from our main competitors, especially the United States.
Our inability to offer internationally competitive levels of funding is one of the key factors explaining our difficulties in attracting and retaining highly productive researchers. Depleted core funding means that universities are unable to nurture a research environment to sustain excellence in research and scholarship over the long term. Student endebtedness is discouraging many from pursuing graduate studies. Moreover, our human science research capacity is largely untapped. This may well explain why we are not reaping the full benefits of technological change and have not been particularly innovative on the social front. Success in a world in which knowledge and brain power are the main sources of comparative advantage requires that we make social and technological innovation the hallmark of our collective actions. These are the challenges we urge the federal government to confront in preparing the 1999 budget.
Canada's national system of innovation: weak foundation
Our national system of innovation is comprised of many partners, each having their own specific strengths and roles.
"Governments still have a primary role in promoting long-term economic and social investments in education and other generators of human capital. For universities, government leadership is required to provide focus, funds, and implementation of innovative programs. Direct funding initiatives should include greater support for fundamental research. This research is vital to innovation, growth, and jobs in the knowledge-based economy. This research drives technology-related and other disciplines. Yet in some countries -- and, unfortunately, Canada is one example -- governments are cutting back funding for basic research."
Dr. Claudine Simson, Vice-president, Global External Research and Intellectual Property, Nortel, address to the Association of Commonwealth Universities , Ottawa, August 18, 1998
Universities play a multi-faceted role. They have a critical and enlightenment function which is key to the health of our democracy. In terms of the innovation process, universities play a key role since they produce much of the knowledge that is subsequently turned into products, processes and policies. Even more importantly, universities produce the highly skilled people who drive innovation, which in turn fuels economic growth and job creation. The government sector has an important role to play by providing some of the research facilities that are not feasible economically for the private and university sectors.
Furthermore, government research is a fundamental source of non-proprietary knowledge in the private and university sectors alike. Government research also underpins the regulatory function of government, as well as its policies and programs designed to promote social and organizational innovation throughout society.
The litmus test of our innovative capacity occurs to a large extent in the numerous firms and organizations that comprise the private sector. This role requires that the private sector have a strong receptor capacity, which comes from being an active partner in research.
Innovation is a collective process resulting from the multiple interactions between different participants. It involves a complex web of activity ranging from research, both basic and applied, through the sharing and transfer of new knowledge and information among the various partners, to the development of new products, services, processes and policies.
Underlying this innovative process is research which involves the gathering and dissemination of information and understanding of our physical and social worlds. Research is the basic pillar of innovation. Unless the root system is nourished, innovative efforts will falter.
Much of the improvements in productivity result from advances in the stock of knowledge and the ability of people to make use of it. New ideas and highly trained people being the principal outcomes of university research, it makes an important contribution to economic growth and social well-being. It has been estimated through this contribution to productivity enhancement, university research accounts for over $15 billion of Canada's GDP and 150, 000 to 200, 000 jobs.
Canada's lack of investments in research is well-known and has been documented extensively (Figure 1). What is less appreciated is the extent to which this affects the university sector. It is often assumed that Canada's investments in university research compare favourably to our main competitors because the university sector performs a greater share of our research effort than in other industrialized countries. The reality is that our researchers do not have access to internationally competitive levels of support in large part due to under-investment on the part of the federal government.
The funding gap
The Canadian government supports university researchers at about half the level provided by its American counterpart.
In fact, Figure 2 reveals that the provinces and the private sector in Canada invest proportionately more than the comparable sectors in the U.S. But their higher contributions do not begin to make up for the under-investment by the federal government.
Two factors explain this funding gap. First, the American government is simply more generous in its support of university research. Also, it provides full cost funding of the research it sponsors whereas the Canadian government covers only the direct costs of research, leaving the universities to defray the indirect costs out of their operating budgets.
A further indication of the very large funding gap between Canada and the U.S. is the size of the average research grant awarded by each country's principal federal funding agencies. A recent study showed the average research grant awarded by the Medical Research Council of Canada in 1995 was slightly in excess of $73,500, whereas the equivalent National Institutes of Health grant (exclusive of indirect costs) is more than $223,900. A similar ratio of three to one exists in other fields of study. The average research grant from the Natural Sciences and Engineering Research Council of Canada in 1995 was about $35,500, and slightly less than $22,000 at the Social Sciences and Humanities Research Council of Canada. By comparison, the average research grant from the National Science Foundation was $116,700.
Moreover, our position relative to the U.S. will get worse before it gets better, unless something substantial is done soon in Canada. The American Congress is positioned to pass its fiscal year 1999 budget, which will likely include measures to begin doubling of the National Institutes of Health budget, while increasing the budget of the National Science Foundation by more than one-third.
These rates of increase are significantly higher than the increases announced for the Canadian granting councils in the 1998 federal budget, which were below current inflation levels.
Effects of the funding gap
The funding shortfalls for research in Canada manifest themselves in many ways.
Perhaps the greatest impact of our under-investment in university research will be on future generations. While the federal government has begun to address the problem of undergraduate debt loads, the Canada Millennium Scholarships Foundation will not help to alleviate the unmanageably high debt levels of graduate students. Universities do not have the means to fund graduate students adequately and thus their only sources of support are federal granting councils and limited provincial programs. The provincial programs are themselves unable to meet the demand. The result is a tremendous disincentive to pursue graduate studies, reducing the future supply of Canadian leading-edge researchers.
"The CFI is not only boosting the capability for innovative and productive research ..., it is also providing researchers with the tools to fully realize and develop their talent and creativity. But this is only the first step. By successfully achieving its mandate, the Foundation will widen the opportunities available to Canada's research community and, at the same time, increase the need for more research funds -- for operating support, staff and trainees -- to take full advantage of these opportunities." Investing in Innovation: A Strategic Budgetary Tool for Growth, Brief to the House of Commons Standing Committee on Finance, Canada Foundation for Innovation, August 28, 1998.
NSERC and SSHRC have both recognized the urgency of addressing this issue. They have used a significant proportion of the additional resources they received in 1998 to increase the value and number of graduate fellowships.
Evidence of an under-utilized university research capacity can be seen in the pent-up demand released by the recent Canada Foundation for Innovation and Networks of Centres of Excellence competitions. Universities from across the country submitted requests for more than $1.2 billion in the first competitions of the foundation, whose total grants budget is around $900 million. Similarly, innovative researchers and their partners submitted 72 proposals to the Phase 3 competition of the Networks of Centres of Excellence program, despite that only two or three new networks were being funded. This represents a vast amount of unused capacity, not just within the university sector but within the partner sectors as well.
More evidence can be found in the decreasing number of international linkages of Canadian researchers and the lack of Canadian participation in major international research initiatives. Financial restraint measures have virtually eliminated the international research linkages and Canadian researchers are increasingly perceived as "free-riders", with little more than good-will to offer their foreign counterparts. Since Canada accounts for the creation of only three percent of the world's knowledge production, our researchers must be connected to global networks of knowledge and know-how in order to harness the cutting-edge ideas the world has to offer, to build on them and to put them to work for the benefit of all Canadians.
The results of these funding shortfalls also show themselves in the difficulty Canadian universities and other research organizations are having in attracting and retaining world-class personnel. A very mobile segment of the population, these individuals will seek challenging and rewarding career opportunities first and foremost. Often, this means moving to the U.S., where the research infrastructure is not only leading-edge but also better resourced in terms of technical support personnel and operational assistance.
Why do researchers leave Canada? The case of gene therapy expert Robert Hawley illustrates why researchers decide to leave the country. In a Toronto Star article, Dr. Hawley indicated that uncertainty over research funding was the primary reason he decided to look elsewhere. He received an offer he couldn't refuse from the American Red Cross, and now estimates that his new program will get five times more funding than what he received in Canada. The American Red Cross has also committed to spending millions in start-up costs associated with creating a new state-of-the-art lab for Dr. Hawley. To convince Dr. Hawley to make the move, the American Red Cross also offered a job to his wife who is a published researcher in her right. Referring to the doubling of his salary, Dr. Hawley said: "That really wasn't my motivation (for the move) but to be frank, I can't complain." Toronto Star, August 5, 1998.
The Canadian government's message to the current and upcoming generations of researchers is ambiguous at best. Meanwhile, the signal being sent in the United States is that a commitment to scientific research is the key to the nation's future prosperity and that the federal government has a fundamental role in ensuring that it happens.
These are the messages top-flight researchers around the world are hearing -- especially Canadian researchers, most of whom struggle to find sources of funding for their research programs, laboratory assistants, graduate students and research infrastructure.
Declining core support of universities
The message -- that Canada is a place where challenging research careers are difficult to pursue -- is reinforced by the continuing decline in core or operating support of universities.
Total support for higher education has slipped significantly over the past 15 years. During the 1980s, which were characterized by government fiscal restraint, university enrolment growth outstripped government support by a wide margin. Universities sought ways to enhance their efficiency and increase their linkages with other sectors as a means of deferring some of the resultant cost burden. These measures could not make up for the lack of government investment. Unfortunately, this situation has gotten worse.
Over the past five years, universities have experienced a deepening of financial restraint as core support for universities was
"The CFI is not only boosting the capability for innovative and productive research ..., it is also providing researchers with the tools to fully realize and develop their talent and creativity. But this is only the first step. By successfully achieving its mandate, the Foundation will widen the opportunities available to Canada's research community and, at the same time, increase the need for more research funds -- for operating support, staff and trainees -- to take full advantage of these opportunities.", Brief to the House of Commons Standing Committee on Finance, Canada Foundation for Innovation, August 28, 1998.
Investing in Innovation: A Strategic Budgetary Tool for Growth
reduced by some $1 billion. These recent cuts translate into a 23 percent real loss of funding, equivalent to $1,500 on a per student basis. In fact, funding has dropped from an average of $6,600 per student in 1993 to only $5,100 now.
Again, this situation is especially acute when compared with the funding of the higher education system in the U.S. Figure 3 shows that Canadian universities have fared extremely poorly when compared to their American counterparts.
The current financial state of Canadian universities is untenable. They face ever-increasing demands with declining funds. It is no wonder that they experience difficulty attracting and retaining researchers of international calibre who are lured by the greener pastures of the better-funded, better-equipped U.S. universities.
Innovation -- more than a technological fix
To promote economic growth and the well-being of Canadians, we must look beyond the customary approach to innovation that focuses solely on technology-based innovation.
"I believe that globalization can be and in fact should be a positive force, one that creates prosperity in places where it could not otherwise hope to exist. But one would have to be blind not to see that globalization also exacerbates the disparity between a small class of winners and the rest of us. The great nations of the 21st century will be those that recognize the need, the absolute necessity, of solving the conundrum of enhanced growth, on the one hand, and increasing disparities in the other. This chasm of inequality threatens to turn us into a society of have and have nots." Hon. Paul Martin, The Public Good in the Age of Globalization, Congress of the Social Sciences and Humanities, University of Ottawa, 2 June 1998
Many of the problems facing organizations, governments and individuals are non-technical matters requiring a different type of innovation. Examples of such problems abound:
health care restructuring and the new emphasis on home care;
the changing workplace as it adapts to new technologies;
problems with youth crime, child poverty and the pressures on the family;
the world-wide competitiveness of Canadian industries;
new modes of delivering education and training as educational institutions take advantage of the Internet; and,
the innumerable moral and ethical questions arising from our increased understanding of some of nature's most fundamental processes.
Unfortunately, solutions are not coming as quickly as might be expected. Canada now needs to match its innovation efforts on the technological front with a comparable effort on the social, organizational and policy fronts.
Only through the exploitation of the knowledge produced by social scientists and humanists will we develop more effective approaches to organizational learning and redesign, cultural change, quality and process improvement, new product and service development, and the creation and integration of new technologies. This knowledge cannot be imported. Studies conducted abroad can suggest fruitful avenues of investigation for Canada but their conclusions can rarely be applied to the specific social, cultural and economic situation of this country.
Promoting social and organizational innovation as much as technical innovation requires that the federal government correct its chronic under-investment in social sciences and humanities research.
The scholarly resources available in our human science research community represent a large pool of untapped brainpower. A lack of resources has demoralized students and faculty alike, as they have seen SSHRC's success rates decrease steadily over the years. Today, approximately 85 percent of researchers and 95 percent of graduate students in the social sciences and humanities disciplines have no hope of getting funding from SSHRC. We must tap into this large potential reserve of knowledge, thereby harnessing the forces of globalization for the benefit of all Canadians.
Strategic investments in SSHRC will not only help individual Canadians cope with a changing society, but will help the government to formulate better policies related to social, economic and cultural issues. This will help make Canada a wealthier, healthier and more cohesive country.
Canada's health care system is currently severely challenged. Many are advocating more resources to fund institutions through increases to transfer payments to the provinces. Others see the solution in the emergence of a better coordinated health care system. Still others are demanding improved accountability for the resources currently deployed.
These solutions fail to acknowledge that one of the principal contributors to quality health care in Canada has been research and its applications. Research is part of the solution because it can shed light on what can be done to improve the health of Canadians and how best to do it.
A novel approach to health research is being developed under the leadership of the Medical Research Council. Called the Canadian Institutes for Health Research (CIHR), this approach would create virtual organizations to link, coordinate and support health research across Canada. Designed to bring about an integrated national research effort, the CIHR will address the full spectrum of health concerns from fundamental research on the determinants of health and the causes of diseases to the organization, management and delivery of comprehensive health services so as to increase efficiency and to reduce backlogs and waiting times.
In fact, the CIHR will enable us to capitalize on the expertise we have developed in fields of study beyond the bio-medical sciences. These include the natural sciences and engineering where the contribution of such fields as chemistry and bio-medical engineering and information technologies will be key to the success of the CIHR.
The social sciences and humanities are also crucial partners as the social and ethical dimensions of health and health care become key considerations. Il will be important, for example, that all institutes address the ethical dimensions of their work. Moreover, the social determinants of health cannot be ignored. It is well-known that the single, most reliable indicator of an individual's health status is his or her socio-economic status -- in effect, the wealthier individuals are, the better their health. Sadly, high-quality research opportunities in this area are being passed over for lack of funding. The situation has become so acute that some of our leading social researchers in the fields of the social determinants of health and health services are seeing their careers stagnate or are seeking career opportunities outside Canada.
The federal government has come some way toward preparing Canada for the globalized knowledge society. It has done so through targeted investments in knowledge, education and innovation. Yet investments in the country's innovative potential are still insufficient. Our capacity to produce new knowledge and to support leading-edge researchers is not keeping pace with that of other industrialized societies, notably our neighbours to the south.
"We will concentrate our spending in those few areas which will enhance long-term productivity and create economic growth, more jobs and higher incomes and a higher standard of living. ... We can only have strong growth and rising living standards if we also invest in the social and economic infrastructure of our people. The future belongs to societies whose economies are sound, whose population is healthy, whose children are well-prepared, and who invest in knowledge, innovation and education." Notes for an address by Prime Minister Jean Chrétien on the occasion of the 69th Annual General Meeting of the Canadian Chamber of Commerce, September 13, 1998, Saint John, New Brunswick
Canada must sustain and improve on current measures if we are to succeed in turning the forces of globalization to our advantage.
The federal government cannot ignore the issue of core funding of universities. Our coalition of students, researchers from all fields and university administrators
strongly supports a staged increase in the Canada Health and Social Transfer as part of a package of strategic investments to strengthen higher education and to enhance innovation and equality of opportunity.
These investments are enabling investments and necessary complements to strategic investments in direct of support of university research. They cannot and should not come at the expense of the latter.
We urge the federal government to make significant additional investments in university research over the next five years to ensure that university researchers have access to internationally competitive levels of support. More specifically, we recommend that the federal government:
correct its under-investment in social sciences and humanities research by doubling the budget of SSHRC. This will enable the council to make the targeted investments needed to close the knowledge gaps in key policy areas, promote focused graduate training in new settings and nurture the research base;
commit to a multi-year plan to invest significant resources in the Canadian Institutes for Health Research. The CIHR proposal is an innovative approach to funding health research across a broad spectrum of disciplines;
progressively increase the budget of NSERC by 50% to help the council respond to the new research opportunities opened by the CFI and ease the transition to a knowledge-based society by supplying a steady stream of new ideas and training the highly skilled people required to complete this transition; and
double current investments in the Networks of Centres of Excellence program.
The full range of activities which comprise our national system of innovation needs to be strengthened. By the same token, all of the major partners must be healthy if the system is to function effectively and efficiently. Our submission has focused on the university sector. Nonetheless, we take this opportunity to express our concerns about the capacity of our federal partners to contribute to the smooth operation of the innovation system. In particular:
we urge the government to review its intramural scientific activities to determine whether the ability to meet mandates has been excessively compromised and to explore possibilities for improved performance through structural changes and other means.
The primary objective of our recommendations is to prepare Canada and all Canadians for a globally competitive economy and information-age society. Indeed, rising to the challenges confronting Canada's society and system of innovation requires significant, strategic investments in the university research enterprise.
"We believe it is essential to uphold the integral role of government in supporting basic research, as industry continues to focus on R& D with specific product-directed goals. The large economic returns from investments in basic research show it to be an extremely productive use of the taxpayer's money." America's Basic Research Prosperity Through Discovery, a policy statement by the Research and Policy Committee of the Committee for Economic Development, 1998, New York, N.Y.
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