The Canadian labor market is facing labor shortages due to the combination of an aging population and low birth rates. Increasing the number of immigrants in Canada is imperative to tackle this matter.
Canadian Confederation was established in 1867, and since then, the proportion of people classified as immigrants – those who have been landed immigrants or permanent residents in Canada – has reached a record high, accounting for 23% of the country’s total population by 2021.
With 22.3% of the population being immigrants, Canada is the most populated nation among the G7 nations. Depending on current demographic trends, Statistics Canada estimates the proportion of immigrants in the Canadian population by 2041 could range between 29.1% and 34.0%.
Canada released the latest Immigration Levels Plan on November 1, 2022, substantiating these projections. Canada plans to accept 465,000 immigrants in 2023, 485,000 immigrants in 2024, and 500,000 new permanent residents by 2025.
Following all these large figures, you may wonder why Canada accepts so many immigrants. Taking a closer look at the demographic changes in Canada, let’s delve a little deeper into this topic.
In order to understand why immigration is becoming so prevalent across the country, two critical elements need to be recognized – the aging of Canada’s native population and its low reproduction rate. Because of these demographic changes, the labor market is contracting in Canada, which has a variety of negative effects on its economy.
A growing number of Canadians are getting older
Statistically, Canada’s population under 15 years of age grew six times slower than the population over 65 years of age from 2016 to 2021. Moreover, the number of seniors has increased by 18.3% to 7 million between 2016 and 2021 and accounts for 19% of the population. In addition to these statistics, the census reporting period 2011-2016 had the largest increase in seniors of any time in Canada’s history (+20%), indicating an aging population.
Canada’s low fertility rate
Natural population increases in Canada tend to be negative due to the birth rate being below replacement levels. The population replacement level is currently 2.1 children per woman. Fertility rates in Canada have steadily decreased over time, continuing a downward trend that began in 2009. By 2020, the fertility rate will be at a historic low of 1.4 children per woman. 2020 marked the lowest year-over-year decline in births in Canada since 1997. The number of newborns fell by 3.6% year-over-year.
For Canada to flourish, immigration is a necessary requirement.
As Canada’s economy grows and develops, immigration plays an important role.
To maintain consistent production and provision of goods and services, every nation needs a robust labor force, since its citizens are the source of spending and consumption in a country. Vulnerable populations and a labor force shortage will negatively affect a country’s economic well-being, limiting production and expenditure. Canada will be able to avoid these problems better with increased immigration.
The Importance of Immigration for Canada’s Population and Economic Growth
Canada heavily relies on immigration to grow its population due to the concerns discussed earlier. A total of 1.8 million individuals arrived in Canada as permanent or temporary immigrants between 2016 and 2021, almost 80% of the country’s population growth. During this period, Canada grew its population nearly twice as fast as the population growth of the other G7 nations.
In fact, immigrants contributed 79.9% of Canada’s workforce growth between 2016 and 2021, demonstrating the importance of immigration to the country’s labor force. In response to a “historic” shortage of employment opportunities, Canada will benefit from increased immigration.
Over 50% of Canadian businesses report being unable to increase production due to the current labor market conditions, compared with 40% before the pandemic and 30% a decade ago, according to RBC economists Nathan Janzen and Claire Fan. Leveraging and integrating immigrants’ skills into the Canadian workforce can result in improved productivity, thanks to increased immigration.
In addition to facilitating the growth of the Canadian labor market, increased immigration will also accelerate the development of the economy. In the process of getting employed, earning money, spending money, and increasing the economy’s resources, new immigrants will inject more money into the economy, which will result in positive economic growth. Immigration also contributes directly to the country’s economic growth through taxes and spending on essentials like housing and transportation as more immigrants join the workforce.
