New Canadians, including Zahra Aminmoghaddam, centre, from Iran, take the oath of citizenship during a special Canada Day ceremony in West Vancouver on July 1, 2017.DARRYL DYCK/The Canadian Press
David Green is a professor in the Vancouver School of Economics at the University of British Columbia and an international fellow at the Institute for Fiscal Studies in London.
“When all you have is a hammer, all the world’s a nail.” This saying isn’t usually seen as a complimentary description of any policy approach but it appears to capture Canada’s immigration policy.
Immigration, undoubtedly, touches on nearly every aspect of our economy – from employment to output growth to health care to housing. And to hear the government speak, you would think it’s the right tool for the job in every one of them. The problem is, it’s at best an ineffective hammer for every one of them, and using it more will cause more problems than it will solve.
The size of the hammer is big and getting bigger. At the start of November, the federal immigration minister announced the new levels plan, taking Canada from receiving 405,000 permanent immigrants last year to 500,000 in 2025. Matching that is an expansion of the number of temporary foreign workers, to more than 770,000 in 2021 – almost double the high levels under the Harper government 10 years ago.
I am in favour of immigration at the levels of the recent past. But now the main argument made to ramp up immigration is that it will spur economic growth, and this is a tantalizing promise that turns out not to be true. Study after study after study shows that sudden expansions in immigration increase the size of the economy (the GDP) but don’t change GDP per person or the average wage – how well off people are. The research shows that immigration tends to lower wages for people who compete directly with the new immigrants (often previously arrived immigrants and low-skilled workers) and improves incomes for the higher skilled and business owners who get labour at lower wages. That is, it can be an inequality-increasing policy.
But isn’t this time different? Don’t we have such a high number of unfilled jobs that the economic machine is threatening to break down? First, the employment rate is now much higher than in the past and GDP per capita growth is strong. There is no evidence the machine is breaking down from lack of workers.
Second, the economy is not a machine that breaks down when parts are missing. It is an organic being that flows, guided by prices. If we didn’t bring in immigrants to match the vacancies, that does not necessarily lead to catastrophe.
When that happens, wages would have to increase to attract domestic workers. Some firms would not be able to pay the higher wages and might shut down or not undertake some projects. But those would be the least productive projects – the ones that don’t warrant the market wage. There’s nothing wrong with that. It’s the way markets work.
Immigration thus keeps wages down in occupations in high demand, and that reduces incentives for firms and workers already here to invest in the skills needed to fill those positions, reducing opportunities, missing an opportunity to increase the skill level of the work force and getting in the way of training and education policies intended to help workers with those opportunities.
Using immigration to solve the labour crunch therefore has the potential to weaken productivity and lower wages.
Linked to the argument about labour shortages is the aging of our population. The retirement of the baby boom will lead to substantial increases in the ratio of non-workers to workers over the next decade. Surely, bringing in more immigrants is the right solution to this? The answer is that it will help a little bit but immigrants aren’t that much younger than the people already living here, and adding 100,000 more immigrants a year won’t move the age dial enough to seriously alter the dependency ratio.
And while it’s not solving these problems, a jump in immigration will put strains on other parts of our economy and society. Adding 100,000 more immigrants a year will mean a big increase in people looking for housing in our cities each year, where the housing markets are already at the breaking point.
The government’s response to this most obvious of problems is that immigrant trades workers will fill shortages in construction trades, increasing housing production. But the construction sector isn’t grinding to a halt because of lack of workers – employment in the sector is already above 2019 levels and there is plenty of activity. The problem in housing supply is rooted in municipal regulations around density and offshore buyers treating our housing as an investment. Immigration won’t hit those nails. It will make problems worse. And when it does, it will put a strain on Canadians’ much vaunted immigration-welcoming attitudes.
Further strains on the health care system are also concerning. A case might be made for bringing in the front-line health workers our system needs now. But the current system underutilizes foreign-trained immigrants, and the problem lies with rigid professional associations, not with the federal government. Bringing in more health workers without solving this problem is unfair to the people we are bringing in, adding them to the large number of frustrated foreign-trained health workers already here. Again, increasing the numbers is not the solution to the problem.
Immigration is both necessary and positive. Immigrants make our society more vibrant. And the evidence is they don’t lower standards of living. But neither do they raise them. Labour markets are finally poised to give workers the wage gains they have been waiting for. Housing markets are straining. Blocking the first and worsening the second in pursuit of pounding nails that immigration doesn’t even hit well isn’t wise policy. A sudden jump without better preparing housing markets and creating mechanisms to integrate the new immigrants is irresponsible.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
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