May 7, 2018

Melody Ma, The Amazon Announcement, and Why this is Not Good for Vancouver

Melody Ma is a web developer, technologist, and active thought leader on urban issues in Vancouver.
Ma recently wrote a cogent think piece in the Vancouver Sun challenging some of the assumptions about the new 3,000 Amazon jobs that will be created when the American online retailer settles into downtown Vancouver, in the former home of the post office.
Ms. Ma notes that despite Mayor Robertson’s framing of this job influx as a big win, it may not be so. Amazon, she says, “will add more strain to the housing affordability situation, it will also strain our technology labour market, potentially negatively impacting the very sector that it is supposed to help.”
In a 2017 market study, the Vancouver Economic Commission found that there were three challenges to bringing good technology workers to Vancouver; from this study, Ma notes that:
“Vancouver’s homegrown technology firms, which are mostly startups to mid-sized firms, will not be able to compete with Amazon in the talent arena. The industry already relies on poaching due to a constricted talent pool. Unlike peers in the U.S., most Vancouver-based companies do not have access to the necessary financial capital to pay a premium for talent due to our small venture capital ecosystem. Amazon’s increased presence can potentially stunt the development and growth of existing local companies that do not have competitive access to skilled talent.”
“Even when a promising startup is spun off, the Vancouver technology sector has a culture of opting for quick exits like being acquired by a large U.S. firm rather than to take the longer and harder route of developing an anchor company, partly due to the lack of access to large and later-stage capital to scale. A recent example is Buddybuild, started by a team of ex-Amazon employees, which sold to Apple shortly after its launch. Another is Paypal’s latest acquisition of Vancouver-grown TIO Networks that led to ceasing of operations and closure of the office totalling hundreds of local jobs.”
Ma suggests that, for Vancouver to have a successful local technology sector, it still needs a few things:
“Resources, talent, and cultural change to encourage homegrown companies to develop into anchor companies. Otherwise, we risk becoming a back-office city reliant on foreign technology behemoths, while hindering our homegrown companies from reaching their full potentials.”
Read Ma’s opinion piece in full here.
11670553_web1_p-amazon-180330Images: Ms.604 & TrailTimes

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  1. Any take on tech that regards ‘poaching’ as a bad thing loses me immediately. Poaching is actively seeking to hire someone who already has a job. It is one of the main things that result in wages actually going up. Big companies in the Valley had ‘anti-poaching’ agreements (they lost a large class action over it) which suppressed wages for years.
    The very high wages that major tech firms pay these days are a result of having to fairly compete for valuable talent. If your business needs top talent for under market wages in order to survive you have a couple options that startups in the Valley have been using for years.
    1) Be a better place to work due to non-monetary factors
    2) Offer significant equity.
    If a business is unable or unwilling to offer these things, I’m not sure why workers should get paid less in order to help them succeed.
    Amazon’s growth here being bad for marginal tech businesses doesn’t mean it is bad for Vancouver, its tech sector, tech workers, or people in general.
    On the housing front the solution is really really simple: Build some more homes. Seriously this isn’t amorphous foreign money buying up housing for locals and leaving it empty. It is good high paying jobs for people who live here. The solution to that is the same as it ever was.
    Full disclosure: I work for a big American tech firm in Vancouver. I don’t speak for them.

    1. I think Amazon in particular is also likely to bring in a large proportion of these new employees from other countries. So it may actually help the talent pool, although of course this does mean extra strain on the housing market.
      I also work for a tech company (A small one though) and our VP of Engineering is actually quite optimistic about our future hiring efforts – we get a lot of applicants who are leaving Amazon (It feels like the turnover is quite high there) and they are all skilled people.
      I don’t think taking Amazon (And Microsoft, Apple, Tableau, Salesforce) out of the equation if going to fix the issue that is quite rightly identified in the article of the lack of funding sources outside of Silicon Valley. This is not unique to Vancouver though, a lot of smaller tech cities seem to suffer from this too. The centre of gravity for tech is very much in the Bay Area.

    2. I agree. I would add that IT jobs in Vancouver generally pay less than the same jobs in other cities. Paired with high housing prices, this is driving talent away from Vancouver. Hopefully, Amazon will help increase wages.

  2. I agree with David Brokenshire but I would temper it with this: To large American corporations, Vancouver has become not just a tech hub but also a flow-through immigration hub. Every year right now, the US government turns down 150,000 applications by US companies to bring in workers from other countries under the H1-B visa program. That’s a massive bottleneck. So the big companies start branches in countries like Canada which have much easier visa systems, hire thousands of people, train them for one year, and then transfer them to Silicon Valley or Seattle on the L1 visa program which has no lottery and no limits.
    Last year, for example, the Vancouver Sun published an article on our brave new tech hub and interviewed one young tech person who had been here just over a year. He said 95% of his co-hort had been transferred to Silicon Valley. Interestingly, he seemed not to know why.
    So why does this visa issue matter? Because if the whole point is to train workers to move elsewhere, then the jobs might be (semi)permanent but not the people. What kind of city do you build on people who are only going to be here a year? These workers might have money and they might bring up the wages of the local tech sector, but as they transfer on, the city gets continually depleted of its human and intellectual capital.

      1. We probably can’t. My wife worked for a company named Ledalite. It was a Canadian homegrown success story. It was started in a garage in Richmond, and became a world leader in leading edge lighting technology. After twenty odd years, they were doing I would guess tens of millions per year in business, with manufacturing in Langley to this day, and Washington state.
        At that point, the founders were well into middle age, they had grown the business from nothing, and they were a minnow in a pond with more than a few sharks. I imagine that the large corporations simply said talk to us if you ever feel like selling. The final chapter in a Canadian business success story is to sell out to an American giant. We are fit for extracting raw materials, but it seems not much else. The old Canadian problem.
        Today that company is known as Philips Ledalite, still a world leader in its segment.

    1. Yeah that is something Facebook and Twitter both said they were doing when they set up their offices here. Definitely less beneficial then actually having long term jobs here.

    2. If US companies are just hiring flow-through employees, then Melody Ma doesn’t have to worry about poaching.
      Anyway, if Canadian companies cannot compete with US companies for employees, then doesn’t that simply mean there’s something fundamentally wrong with their business model? They’re not running charities for goodness sake. These are usually aggressive business entrepreneurs. If startups in Seattle can compete with Amazon in their own backyard to hire employees, then why can’t Vancouver startups?
      Imagine being a local tech employee (or, even an architect or planner) and hearing that your company execs are lobbying to lower your wages and limit your career opportunities. Just seems so wrong to me. Imagine if she’s your boss and now you know she’s underpaying you! And, knowing that instead of feeling like she should compete to keep you, her mindset is that she’s entitled to you. Yikes.
      If our job and housing market can’t even handle 3000 new people moving here, how’re we going to handle the 1,000,000 that Gregor keeps saying are coming? Are they all supposed to be baristas?

      1. That’s one million in the region, not the city. Still, that’s a good reason to upzone the residential lots that detached homes sit on to help stabilize prices amidst the pressures.

  3. Companies like Amazon moving here is exactly what we want as a region. Large well paying companies which drive up our otherwise terrible mean salaries.
    This would be a step in the right direction for helping affordability, well paying jobs rather than overleveraged “investors” are exactly the type of problem you want to have.
    The key difference between Vancouver and SF or Seattle is that we already have the bubble without the wage growth. Vancouver is also lacking the slow rate of urban residential development that SF or Seattle have generally had.
    In short, well paying jobs don’t result in displacement so long as we continue to build housing.

  4. The last time BC had to accept transfer payments from Canada (rather than paying into them) was in 2004-06 during a major upheaval in softwood lumber exports to the U.S. But if you look at this historically, BC has been a net contributor to transfer payments over the last 40 years, with the exception of six separate years.
    Today, technology companies employ about 110,000 people with another ~50,000 related jobs to service them. That is more than today’s oil & gas, forestry and mining industries combined. Clearly, BC and Metro Vancouver are doing something right on this file. And natural resources are becoming less important.
    Melody Ma has a point about tech startups selling before they properly mature to the big fish swimming in international waters. The are a few exceptions like RIM and Nortel, but we know what happened to them too. This is an old, familiar problem; the hewers of wood and pumpers of oil mentality still has a hard grip on economic outlooks and tends to stultify creativity and the development of a mature knowledge economy.
    Canada has tonnes of talent, education and innovative energy, but the age-old problem of creating tech businesses that not only stick with it and resist the temptations of much larger economies, but also develop lots of flexibility to change with new technology, needs to be overcome.
    Part of the sets of solutions, as espoused by pundits like Doug Saunders and in op-ed pieces in the Globe’s Report on Business, include government policy that helps new tech start-ups stick with it through R&D and commercialization, and to foster a larger domestic economy to sell products to.
    This is related to the fact that Canada is an urban nation, even more so than the U.S. The six largest cities deliver half the nation’s annual wealth. Tech companies thrive in cities. Ma touches on housing, and it’s important to provide more homes at affordable prices. But that is only one crucial element that constellates a city. Much more can be done to improve the efficacy of our cities, namely build more transit, apply zoning creatively (e.g. tech zones with lower tax rates …), encourage more immigration while tightening up the rules, using the vast economic power of cities collectively on a national basis (e.g. bulk purchase discounts in transit, public vehicle fleets, etc.), reduce overall per capita energy use and carbon footprints through conservation and by urbanizing the suburbs, and so forth.
    In terms of diversifying Canada’s economy and challenging our cities to become better, new tech companies should be welcomed with an understanding that there will be growing pains as we shift from natural resources to human resources.

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