As the levels of immigrants in Canada continue to increase, with an estimated 1.4 million people expected between 2023-25, a question might arise: what is the right amount of Canadian immigration?
According to a recent Desjardins study, one might consider Canada’s demographic & economic goals, along with infrastructure for public services & federal support, to address this question.
The Economic Situation
One noteworthy purpose of Canada’s immigration procedure is to address labor market shortages, which Canada’s aging population cannot sustain. Well, historically, there has been a cordial relationship between the economic potential & temporary and permanent inhabitants in Canada.
However, the recent report reveals a shift in this relationship, with more newcomers/ immigrants arriving & filling the nation’s output gap. This is paired with the low employment rates, which reveals that there are too many immigrants for economic growth in Canada.
However, despite the new Canadian immigration measures in recent years, the national unemployment rate has remained steady at 5%. Simultaneously, job vacancies have stayed elevated over nationwide unemployment. All of this implies that while the nation is approaching its economic potential via immigration, there are still numerous jobs available. Further, it is vital to note that many temporary foreign workers come to Canada to fill the labor market gap.
Because of these elevated vacancies & the nation’s inability to fill these positions, nobody can say that the increased immigration levels are justified economically.
In addition to this are the longer-term effects that economic immigration has on the economy of Canada. Attracting newcomers to the nation helps increase both potential GDP growth & potential GDP per capita. This is due to the fact that recent immigrants are more likely to find employment than those born in Canada. Well, people immigrating to Canada tend to be younger, thus yielding more potential work hours & work years.
Permanent & non-permanent immigrants drove a notable growth of the working-age population in Canada in the last year. This suggests that immigration can help meet Canada’s needs & goals, both in short-term & long term, from an economic perspective.
The Demographic Situation
Central to the discussion on the economic advantages of Canadian immigration is the aging population. Due to Canada’s national healthcare system, elderly people past the age of 64 can strain the nation’s economy. This is because medical expenses tend to increase with age & Canada’s healthcare system ensures that most of these costs are not the burden of the individual.
This effect can be additionally enunciated in provinces/ regions without massive population centers with smaller economies, a vaster ratio of aging populations, & experience less immigration to fill the labor market gaps.
According to the Fiscal Sustainability Report by a parliamentary budget officer of Canada, provincial government healthcare spending per capita will double between 2020 – 2040, thus reaching CAD 10,000 every year.
According to Desjardins, to enable the current ratio of working-age individuals to the aging population by 2040, Canada would need to expand its working-age population by 2.2% on average annually. Moreover, to put this into perspective, the working-age population in Canada in 2022 grew by 256,000 new economic permanent residents & 756,000 work permit holders, representing a working-age population growth of 1.6%.
If the nation wanted to target the historical ratio between these two populations from 2023-2040, the government would need to increase the working-age population by 4.5% annually. Under both scenarios, Canada needs to increase the working-age immigration from 2022- a year representing the highest rate of working-age population growth since 1989.
Provincial Nominee Programs help spread the advantage of economic/ financial immigration throughout the Canadian provinces, addressing critical labor shortages. This can significantly relieve the stress on provincial economies in the context of the growing medical expenses of the aging population.
Is It So Simple & Easy?
While the above issues make a strong case for increasing Canadian immigration, there are often costs associated with admitting so many people to a new nation, specifically in a short time frame.
One prominent area is the Canadian housing market. Because of the rising demand created by the nation’s growing working-age population, affordability of every kind of housing has fallen in Canada. In addition to this issue, another problem is the lack of new housing projects in the context of higher interest rates, increasing production costs, & lack of pre-sale interest.
Desjardins estimated that Canada would need a minimum of 100,000 new housing starts yearly to offset the increasing housing costs. However, the organization now believes this figure requires revision because of the many temporary foreign residents being welcomed annually.
Conclusion
The right amount of Canadian immigration is integral for the country’s long-term economic success as foreign-born professionals help meet the labor market needs & contribute to overall GDP growth.
Immigration further supports the demography of Canada, specifically in the housing market. The government of Canada can make numerous efforts to tighten requirements for non-permanent residents to alleviate issues regarding housing affordability. As a result, this could lead to constrained growth in the working-age population & raise questions regarding fiscal sustainability, specifically in the broader provinces in Canada.
Finally, the federal government needs to balance immigration policy with a result-driven approach aimed at increasing housing affordability & quality of living for Canadians.
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