In Vancouver you can easily score awesome developers for 80K/year (160K in the valley) Through SR&ED you can get up to 40% of this back (so you're down to 50K / engineer (*note that I've not personally used SR&ED but I know others who have successfully). And finally, benefits packages are in the low thousands / year instead of tens of thousands. All told, you can build a team of awesome engineers for 1/2~1/3 the price of what it'd cost in the valley.

Absolutely they do. Employers don't have to chip in for basic insurance... that's already paid for. Employers end up taking part of that money and throwing it into extended benefits: in Vancouver I get $200 every 2 years for eyeglasses, $400/y HCSA (covers massage, acupuncture, nutritionist, etc.), $1500/y dental, fantastic Rx coverage, 1x/annual income life insurance, etc etc etc. - all of which costs the company less than what it costs the same company to provide basic insurance to their employees in the USA.

Sure, the employee pays more in income tax, but there's no lifetime maximum on claims, no 'taking a chance' and hoping you don't get sick, no gambling with your health period. For me that extra 6% I pay in income tax is well worth it.

We pay ~$100 - 200 / employee / month for dental & extended health care in Canada. I've heard of some startups in the US with older employees paying an order of magnitude more than that.

Benefits packages for employees are def cheaper :)