[uiri]

Brain drain is effectively a form of arbitrage in the labour market. You end up with a single market on the supply side and multiple markets on the demand side. All the highly skilled individuals on the supply side gravitate towards the high end on the demand side. The cheaper developers that a US company could hire in Canada are of the same skill level that they could hire in the US by lowering their hiring bar. There's nothing to gain by opening an office in Toronto that isn't equally valid in lower cost areas of the US (e.g. Florida).

Side note: Silicon Valley is not the center of the world. Neither is Toronto, for that matter. Toronto is in the same timezone as New York. Plenty of larger US software companies based on the West Coast have an office in New York. IBM's HQ is even in a NYC suburb. Detroit and Boston are other good candidates for satellite offices with less legal/tax related headaches compared to Toronto or Montreal.

[nasalgoat]

You're assuming that every high quality dev follows the money down south. My experience is that there is still plenty of high quality developers and admins here in Toronto who, due to circumstances, can't move down or simply choose to stay for reasons that aren't money - usually quality of life.

By offering above-average local salaries, it is very easy to hire these people. I know because I've done it.