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C. Managing Canada's Resources and Industries · Managing Canada's Resources and Industries

Knowledge-Based Industries and Human Capital

C1.4About 65 minutes
Learning goals
  • I can explain what human capital and knowledge-based industries are.
  • I can identify examples of knowledge-based and other human-capital industries in Canada and where they cluster.
  • I can analyze the economic importance of these industries for Canada.

Words to know

human capital
The knowledge, skills, education, health and experience that make people productive.
knowledge-based industry
An industry whose main product or advantage comes from ideas, research, information and highly skilled people, such as software, biotechnology or AI.
quaternary sector
The part of the economy based on knowledge and information: research, technology, finance and data.
innovation
A new idea, product or method that creates value.
intellectual property
Creations of the mind, such as inventions, software, designs and music, that can be protected by patents, copyright and trademarks.
technology cluster
A place where many related knowledge-based companies, universities and investors are concentrated.
brain drain
The loss of skilled and educated people who move to other countries or regions.
clean technology
Products and processes that reduce environmental impacts, such as renewable energy, energy efficiency and pollution control.

Hook: a company with no smokestack

Some of Canada's most valuable companies do not dig, cut, catch or build anything you can hold. They write software, design video games, discover medicines, analyze data or teach. Their main resource is people's knowledge. Economists call that human capital.

In Grade 8 you met the quaternary sector: jobs based on knowledge and information. In this lesson you will look at those industries as a geographer: what they need, where they are, and how much they matter to Canada.

What counts?

Knowledge-based industries depend mainly on research, ideas and highly skilled workers. Examples:

  • Information and communications technology: software, telecommunications, cybersecurity, data analytics.
  • Artificial intelligence (AI): machine learning research and applications.
  • Life sciences: biotechnology, pharmaceuticals, medical devices.
  • Aerospace and engineering: aircraft design, satellites, robotics.
  • Clean technology: renewable energy, batteries, efficiency, pollution control.
  • Finance and insurance, research and development, and digital media such as video games and visual effects.

Other industries based on human capital depend on skilled people providing services: education, health care, engineering and architecture, legal services, film and television, and tourism, where knowledge of a place and people skills create the value.

What a knowledge-based industry needsUniversities andcollegesSkilled people(human capital)Investmentand fundingResearch, ideasand innovationNew productsand servicesHigh-wage jobsand exportsBetter methods forother industries
Knowledge-based industries turn people, research and investment into new products, jobs and better ways of doing things across the economy.

Where they are: clusters

Because they are not tied to raw materials, knowledge-based industries are mostly footloose. They cluster where there are universities, skilled workers, investors and good quality of life:

  • Toronto and Waterloo Region: software, finance, AI and start-ups. The University of Toronto and the University of Waterloo feed this corridor. Geoffrey Hinton, a University of Toronto professor, shared the 2024 Nobel Prize in Physics for discoveries that make machine learning with neural networks possible.
  • Montreal: AI research (the Mila institute), video games and aerospace.
  • Ottawa: telecommunications and software (including in Kanata) and federal government research.
  • Vancouver: video games, visual effects and film.
  • Edmonton: AI research (the Amii institute).

Canada's history of knowledge industries is long: insulin was first used to treat diabetes after research at the University of Toronto in 1921-1922.

Why they matter economically

  • High-wage jobs. For example, Natural Resources Canada reports that in 2023 clean technology contributed $80.8 billion (3.0%) of Canada's nominal GDP, supported 354,257 jobs, and paid an average of $105,768 per job, 38.8% above the national average.
  • Exports of services and ideas. Software, engineering and games are sold worldwide without shipping heavy goods.
  • Spillovers to other industries. Knowledge industries make other industries more productive: mines use automated drills and sensors, farms use satellite data for precision agriculture, and forest companies use LiDAR to map trees. NRCan reports that 68% of natural resources workers had a post-secondary certificate, diploma or degree (2024): resource jobs are knowledge jobs too.
  • Less tied to limited resources, so they can help diversify the economy.

Challenges: competition for talent with other countries (brain drain), keeping start-ups and their intellectual property in Canada, high housing costs in cluster cities, and making sure people across regions, including rural and Indigenous communities, have fast internet and training to take part.

Average compensation per job, 2023National average (calculated)about $76,200Clean technology jobs$105,768Source: NRCan, 10 Key Facts (2023 data). National average worked out from NRCan's '38.8% above'.
Knowledge-intensive clean technology jobs paid much more than the average job in 2023. The national-average bar was calculated from NRCan's statement that clean tech pay was 38.8% higher ($105,768 ÷ 1.388).
Worked example

Modelled example: compare economic importance

Compare a video game studio in Montreal with 300 employees and a sawmill in a northern Ontario town with 300 employees. Which is more important economically?

  1. Wages and skills: both employ skilled workers. Game developers often need university or college programs in programming or art; mill workers include millwrights, electricians and machine operators with trades training.
  2. Exports: both may export: games are sold online worldwide; lumber is shipped mostly to the U.S.
  3. Regional importance: in a big city, 300 jobs are a small share of employment. In a small town, 300 mill jobs may be the main employer, supporting stores, schools and services.
  4. Location and resilience: the studio could move to another city (footloose). The mill depends on the nearby forest and markets for lumber.
  5. Conclusion: at the national level the studio adds high-value exports and innovation; at the regional level the mill may matter more.

Economic importance depends on scale (national vs local) and measure (wages, exports, regional dependence). A strong answer weighs both.

Hands-on activity

Human capital inventory

You need: paper, a pencil and one or two family members or neighbours who are willing to be interviewed.

  1. Ask each person: What is your job (or a past job)? What skills and knowledge does it need? Where did you learn them (school, college, apprenticeship, on the job, from family or community)?
  2. Make a chart of the skills. Circle those that are knowledge-based (research, data, design, programming, teaching, health knowledge).
  3. Ask: Has technology changed your job in the past 10 years? How?
  4. Write a paragraph about how human capital shows up in jobs you might not expect, including in resource and trades jobs.
Just for fun

Why did the AI program enrol in geography class?

It wanted to learn about neural networks, but it kept getting them mixed up with river networks.

Your turn

1

Define human capital and give an example.

2

List four knowledge-based industries.

3

Why are knowledge-based industries described as footloose?

4

Name two Canadian technology clusters and one specialty of each.

5

Give two reasons knowledge-based industries are economically important.

6

What is one challenge for Canada's knowledge industries?

More practice: warm-up

1

Which sector is based on knowledge and information?

2

Which Canadian university was involved in discovering insulin as a treatment?

3

What is clean technology?

4

Name a city known for video games and visual effects.

5

Is a hospital part of a human-capital industry?

More practice: on your own

1

Using NRCan's 2023 data, how much more did the average clean tech job pay than the national average, in dollars (approximately)?

2

Explain how a knowledge industry can help a resource industry. Give an example.

3

Why do universities matter so much for technology clusters?

4

Why is tourism considered an industry based on human capital?

5

How does fast internet affect where knowledge jobs can locate?

Challenge

1

Evaluate this statement: Canada should invest in knowledge industries instead of natural resources.

2

Explain how brain drain and immigration both affect Canada's human capital.

3

A northern Ontario town depends on one mine that will close in 15 years. Suggest how human capital could help the town's future.

Check your understanding

Quiz

1.

Which best describes human capital?

2.

Which of these is a knowledge-based industry?

3.

Why can knowledge-based industries locate in many places, unlike mines?

4.

According to NRCan (2023 data), what share of Canada's nominal GDP came from clean technology?

5.

Which statement about knowledge and resource industries is most accurate?

6.

What is 'brain drain'?

For parents and teachers

This lesson links the economy to people's skills. A great conversation at home is about your own work: what knowledge it takes and how technology has changed it. Common difficulties: thinking only 'tech' jobs count as knowledge-based (skilled trades, health care and education are human-capital jobs too); assuming knowledge and resource industries are opposites; forgetting to name the measure when judging economic importance.