The pandemic has prompted much talk about Canada’s economic future and the path to long-term prosperity. Recent research by the Conference Board of Canada confirms that increasing Canada’s immigration levels remains the most effective lever to grow our economy and address persistent labour-market needs.
By Iain Reeve and Lisa LalandeI – Contributed to the Globe and Mail* – July, 2021
For instance, while GDP alone is not an indicator of economic well-being, it remains a useful measure of the overall level of economic activity and the health of an economy. Our modelling shows that a modest increase to immigration levels over our pre-COVID trajectory would yield an additional $67-billion in GDP annually by 2040. This is larger than any year-over-year increase in Canada’s total GDP in the past five years.
Immigration can also improve the ratio of working-age to retirement-age people in Canada, which is critical to ensuring that we have the work force to meet labour needs, and the resulting tax base to support our social programs and investments.
For instance, according to our modelling, a slightly more aggressive immigration scenario would yield, by 2040, an extra $15.4-billion in federal revenues alone. By contrast, the entire federal settlement service program costs around $1-billion a year.
More important, our current skilled-labour needs are not being met. Postsecondary and adult skills training programs are not adapting to shifting labour-market trends. Immigration is the most dynamic and flexible tool we have to align skilled workers with labour-market needs. An injection of skilled workers, particularly into smaller communities, would help businesses grow, populations stabilize and sustain existing businesses already employing Canadians. However, this requires us to encourage more immigrants to settle outside of big cities by providing them with better information about what our smaller communities have to offer along with links to job opportunities.
Despite the clear and measurable benefits of a growth-focused immigration plan, there has been some criticism of the government’s current targets. Critics have stated that while immigration raises the overall GDP, it has a less positive impact on GDP per capita. However, our modelling shows while GDP per capita grows less quickly with higher immigration levels, this effect is modest at best. For instance, GDP per capita is projected to be only 1.9 per cent lower by 2040 in our higher-immigration scenario, which is not enough to offset the economic and social benefits of immigration.
This discrepancy between GDP and GDP per capita is a consequence of Canada’s mixed performance integrating immigrants into the labour market. On average it takes immigrants more than a decade to earn income at a level that matches their skills, education and experience. Improving this integration will improve productivity, meet skilled-labour needs faster, stimulate the economy and improve the GDP per capita, which benefits all Canadians.
Other criticisms we have seen in recent months point to the strain growing immigration levels could have on key infrastructure, including housing prices and transportation. Regardless of the level of immigration, housing prices have skyrocketed with minimal action, and investment in infrastructure, particularly in major cities, lagged need for decades. However, increased efforts to encourage immigrants to settle outside of major cities could spread the benefits and costs of growth more evenly across the country.
In addition to the economic benefits of immigration, all of Canada gains from a more diverse, multicultural society. But ensuring immigrants and our country succeed takes planning. It takes programs that set people up for success and settlement services that address specific needs. It takes communities who are ready to welcome newcomers and employers who will confront their conscious and unconscious biases in hiring and promotion of immigrants. And it takes accompanying policies and programs to ensure all Canadians prosper.
The pandemic has focused our attention on the country’s long-term path to prosperity. We cannot lose sight of the critical role that immigrants must play in helping us get there.
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About the Author
*Iain Reeve and Lisa LalandeI – Iain Reeve is the associate director of immigration research at the Conference Board of Canada. Lisa Lalande is the chief executive officer of the Century Initiative.
Sean Kilpatrick – The Canadian Press