Canada seems to be quite welcoming to immigrants, with a whopping 1.45 million expected to arrive between 2023 and 2025. This has led many Canadians to wonder – how much immigration is just right for Canada? The Desjardins study dives into this topic, considering Canada’s demographic and economic goals, which are largely supported by immigration, and the capacity of public services and federal support systems.
The Economic Aspect
A key goal of Canada’s immigration policy is to address labor shortages that the country’s aging population cannot fill. Strangely enough, this seems to be happening concurrently with a low unemployment rate, leading some to believe that we might be welcoming too many newcomers for our economy to handle.
However, even with the increase in immigration in recent years, the unemployment rate has remained stable at around 5%. Meanwhile, there are still a large number of job vacancies that are not balanced by the unemployment rate. It seems that, despite the influx of immigrants, there are still plenty of available jobs. This situation is further clarified by the arrival of many temporary foreign workers who are here to meet specific labor needs, often through an LMIA facilitated process. Given these circumstances, it makes economic sense to maintain the current level of immigration.
But the economic impact of immigration doesn’t stop at the short-term. In the long run, attracting immigrants to Canada helps boost our potential GDP growth and per capita GDP. This is due to the fact that recent immigrants are more likely to be employed than native-born Canadians, and they tend to be younger, which means more working hours and years of contribution. In fact, the growth of Canada’s working-age population (15-64 years) in 2022 was driven exclusively by immigrants. Therefore, from an economic point of view, immigration seems to be a viable solution to Canada’s needs and goals.
The Demographic Perspective
One cannot discuss the economic benefits of immigration without considering Canada’s aging population. Given our national healthcare system, elderly people who no longer work can put significant strain on our economy. This is especially true in provinces without major population centers, which have smaller economies, a broader ratio of aging to working-age populations, and less immigration to meet their labor market needs.
The Desjardins report raises the question, what level of immigration would help sustain Canada’s aging population while promoting economic growth? Striking this balance would ensure a rising standard of living and the sustainability of public finances. According to Desjardins, to maintain the current ratio of working-age individuals to the older generation through 2040, Canada would need to increase its working-age population by an average of 2.2% per year. In 2022, there was just a 1.6% growth in the working-age population.
If Canada wants to maintain the historical ratio between the older and working-age populations from now until 2040, we would need to raise the working-age population by 4.5% annually. Under both scenarios, Canada would need to significantly ramp up immigration from the 2022 levels.