Long-term economic gains will outweigh the short-term disadvantages of increased immigration to Canada, argues a Globe and Mail columnist.
According to Doug Saunders, the relationship between immigration and the economy is a matter of supply and demand. While the historic tendency has been to focus on the supply side, there has been a recent shift in focus to the demand side, with more attention being drawn to the number of people the economy needs to fuel growth.
Canada has seen a surge of immigrants through the study permit, work permit, and permanent residence programs.
Currently, Canada is letting in roughly 500,000 new permanent residents every year, with 20 per cent of the current Canadian population being PRs.
The temporary resident volume has reached up to 2.5 million as of 2023.
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Canada – similar to the US and Europe – has a tight correlation between the labour market and migration, according to Saunders.
Economist Dany Bahar of Brown University found a strong correlation between U.S. labour market conditions and southern border crossings over 25 years. When the job market is tight, immigration increases; when it’s weak, it decreases.
“This relationship represents a natural economic adjustment mechanism in which crossings increase or decrease as the labour market tightens or cools,” Dr. Bahar commented on X.
“Thus, the US doesn’t have a border crisis, it has a labour market crisis.”
On focusing on the demand side in the Canadian context, BMO economists Douglas Porter and Scott Anderson found that the job markets are currently tight, and the domestic workforce is scarce and aging – making Ottawa’s high PR immigration numbers beneficial.
“In both countries,” they write of the US and Canada, “higher immigration rates mean that employment growth doesn’t need to slow as significantly to bring the labour market into better balance.”
Immigrant Participation Rate
Immigrants arriving in the past five years have a 70-per cent workforce participation rate, higher than the general population’s 65 per cent.
Canada hasn’t yet seen the same economic boost from immigration as the U.S., with recent per-capita growth lagging. However, BMO economists attribute this to higher consumer-debt levels, mainly from mortgage-rate spikes, and predict a convergence with U.S. growth rates due to strong population growth and earlier rate cuts.
The current housing crisis is largely being attributed to the large influx of temporary residents into Canada, which has even triggered an announcement by Immigration Minister Marc Miller to reduce temporary resident numbers over the next three years.
In September 2024, a cap will be set on temporary residents for the first time.
Saunders, however, asserts that Canada’s immigration surges, such as those in the 1910s and 1950s, have historically led to initial slowdowns in per-capita growth and housing shortages before delivering long-term economic benefits.
Recognizing this pattern requires a closer look at the demand side of immigration.
