The Canadian, Federal Budget 2018 emphasizes innovation, but is this to the detriment of its title aims: Equality and Growth?
In the 2018 Federal Budget Plan, you will find that the words “innovation,” “innovative,” “innovators” and “innovate” appear approximately 260 times outside of their use in tables and diagrams. This is just under once per page in the 367-page document. “Innovation” and its variants are not only used in conjunction with research and development (R&D) in the Budget Plan – they appear in the document to describe everything; from cybersecurity to protecting the environment, to endeavours to improve First Nations communities.
In this article we discuss the use of the term “innovation” and its use to refer to equality, job growth and the Canadian economy.
The Definition of the Term “Innovation”
The Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data, 3rd Edition,1 which was written by the Organisation for Economic Co-operation and Development (OECD), defines four types of innovation:
Product innovation: A good or service that is new or significantly improved. This includes significant improvements in technical specifications, components and materials, software in the product, user friendliness or other functional characteristics.
Process innovation: A new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.
Marketing innovation: A new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.
Organisational innovation: A new organisational method in business practices, workplace organisation or external relations.2
A much vaguer definition is provided by the Merriam-Webster Dictionary, which states that “innovation” is “the introduction of something new,” and “a new idea, method, or device.” 3
The Term “Innovation” in the Budget 2018
Organizational Innovation
A new organisational method in business practices, workplace organisation or external relations.4
The government uses the term “innovation,” most prominently in the organizational innovation context to discuss general improvements to business practices and workplace organization.
In the government’s plans to promote the hiring of women in firms, “innovate” and “innovative” appear in the following examples:
For Canadian businesses, hiring, promoting and retaining more women does more than boost the bottom line. Women bring unique perspectives and new ideas to their work, helping companies to innovate and solve problems in new ways.5
This legislation will draw on models in Ontario and Quebec but will take an innovative approach to ensure that on average women and men in federally regulated sectors receive the same pay for work of equal value.6
The Canadian Human Rights Act was passed in 1977 and protected pay equality to ensure gender did not affect rates of pay,7 and so, the idea of government policy overseeing pay equality is not innovative; however, the budget calls for firms to report on their rates of pay across genders, and seeks to introduce processes to assess pay equality. As these policies have not previously been implemented in Canada, they can be described as innovative.8
In addition to its focus on gender equality, the budget also states that “innovation is changing how we live and work, bringing with it new realities for Canadian workers;” 9 however, the budget plan gives no examples of the innovation mentioned.
The following examples also hint at organizational innovation:
The Government recognizes that innovative approaches are needed to take advantage of emerging opportunities, technologies and trends and ensure that middle class Canadians benefit from economic growth.10
Budget 2018 also proposes new initiatives to make business regulations more efficient and less costly, and seeks to promote greater awareness and use by Canadian entrepreneurs of intellectual property, important assets that can fuel the growth of innovative businesses in the modern economy.11
The initiatives described in the budget focus on streamlining Canada’s government agencies developed to promote innovation, providing funding, and creating more agencies to develop the skillsets of Canadians.12
Process Innovation
A new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.13
In the budget, the government also focuses on process innovation. The processes highlighted in the budget centre around providing funding to improve how Canada’s innovation programs are delivered:
To better support Canada’s innovators, Budget 2018 proposes to provide $2.6 billion in incremental support over five years. In addition to new funding, Budget 2018 announces measures that will transform Canada’s innovation programs—making them easier to access and to use, and expanding support for Canadian companies that want to scale up and sell their innovations in the global marketplace.14
As recommended by the Advisory Council on Economic Growth, Budget 2017’s Innovation and Skills Plan announced a review of all innovation programs that serve the business community, in an effort to make the services provided more responsive to client needs, more efficient and better able to promote business growth.15
These quotes refer to the introduction of further reform to “business innovation programs,” intended to make the programs “[easier] to navigate and will respond to the challenges and opportunities facing Canadian businesses today and into the future.” 16 In order to do so, the government proposes that there will be a “reduction in the total number of business innovation programs by up to two-thirds;” a dramatic change in the technique of how innovation funding has previously been delivered.
Product Innovation
A good or service that is new or significantly improved. This includes significant improvements in technical specifications, components and materials, software in the product, user friendliness or other functional characteristics.17
In addition to Organizational and Process Innovation, the government’s budget also features how it would encourage Product Innovation by overhauling Canada’s exports:
To help Canadian firms unlock growth opportunities through exports, the [Canadian Trade Commissioner Service (TCS)] will undergo transformative enhancements to simplify the client experience, modernize tools and offer innovative services.18
This quote refers to the announcement that the government intend to reform the digital tools used by export businesses and industries, and provide more accessible, user-friendly support for businesses hoping to export their products.19
Equality, Innovation, and Job Growth in the Budget 2018
Job Growth
While the OECD definitions of innovation do not link directly to job growth, as they focus on changing aspects of pre-existing organizational structures, processes and products, the dictionary definition of innovation (“the introduction of something new,” and “a new idea, method, or device”20) however, suggests that the creation of new industries and jobs is itself innovative, hence the use of the term in the following examples:
This spirit of innovation that Canadians share helped to create the industries and jobs that created and grew Canada’s middle class. Today, that same drive to innovate creates new jobs and export opportunities in growing industries as it transforms jobs in existing ones.21
Budget 2017 launched the Government’s Innovation and Skills Plan—an ambitious effort to make Canada a world-leading centre for innovation; to help create more good, well-paying jobs; and to help strengthen and grow the middle class.22
Equality
Job growth and a more employed population, however, do not necessarily correspond to equality. The OECD’s Inclusive Growth report 23 highlights that:
Digitalisation and globalisation […] spur innovation, productivity and growth and have allowed millions of people in developing and emerging economies to escape poverty and improve their living standards. Yet, capital flows and global economic integration have also increased the difficulty for governments in taxing mobile capital income, with possible detrimental effects on inclusiveness. Digitalisation might also have impacted wage inequality and productivity growth, by exacerbating the divide between highly and low skilled workers. Globalisation and digitalisation impacts are among the factors responsible for a growing disconnect between productivity growth of firms standing at the frontier and that of laggards.24
The report also goes on to state that “if left unchecked, data driven innovation may undermine the social fabric on which democratic market societies are based,” which suggests that innovation in all of aspects of the economy is not always positive, and that:
[…] the twin challenge of fostering productivity growth and reducing inequalities requires leveraging on technological advances and innovation to boost economies and ensure that higher productivity growth translates into broadly shared gains in well-being.25
This was also highlighted in a 2017 article, which stated:
We are innovating far faster in some areas than other crucial areas and this distortion is amplifying that feeling of being left behind. Where a clear profit motive doesn’t exist it is clear there is far less innovation and investment. […] Many Governments have been slow to address the issues [with innovation] creating the perception they are “out of touch”. The tech world needs to shoulder some responsibility at a time when we know that the pace of change is increasing and where AI and robotics will replace many of today’s jobs.26
In these examples, and in a lot of the policies the government suggests they will implement, innovation and digitization go hand-in-hand. Therefore, it is important that the potentially negative effects of innovation and the disparity between innovation and an equal society are discussed, especially in a budget plan that mentions innovation and its variants 260 times, but “inequality” and its variants only fifteen times. The government, in this case, may be too quick to promote innovation in all sectors, without suggesting viable options for the sectors and members of society who may not see the benefits of the innovation implemented, such as skilled, manual workers in the manufacturing industry.
Summary
In summary, in the budget, the government’s use of the term “innovation” often falls under the OECD’s specified terms for innovation; process, product, and organizational.27
However, in other parts of the budget, the use of the term “innovation,” specifically relating to job growth, relies on the vague, dictionary definition and its use is less straightforward as it does not refer to specific, innovative actions, but a broader climate to encourage new job growth, which itself is arguably innovative.
As a budget titled Equality and Growth, the ardent promotion of innovation to foster growth without adequate consideration given to how innovation could affect economic equality may go against the government’s aims suggested in the 2018 budget plan.
What do you think about the federal government’s use of the term “innovation”? Do you think the term is being used incorrectly to tie it to job and business growth?
Government of Canada. (February 27, 2018.) Equality + Growth: A Strong Middle Class. Federal Budget 2018. Pgs. 63 and 83. Retrieved March 12, 2018, from: https://www.budget.gc.ca/2018/home-accueil-en.html. ↩
