Canada needs immigration reform to escape ‘population trap,’ economists say

Click to play video: 'Miller says feds prepared to limit number of international student visas if support for students not addressed'
Miller says feds prepared to limit number of international student visas if support for students not addressed
RELATED: Miller says feds prepared to limit number of international student visas if support for students not addressed – Dec 7, 2023

There is a need to reduce Canada’s immigration levels as the country faces what National Bank of Canada economists are calling a “population trap,” where the country is finding it difficult to absorb the number of new arrivals.

In the report published Monday, economists Stéfane Marion and Alexandra Ducharme say they agree immigration is good for the gross domestic product (GDP), “but all good things have their limits.” They argue that Canada does not have the infrastructure or “capital stock” to both bring in the amount of people currently planned, while also improving our standard of living.

Marion, who is National Bank’s chief economist, addressed these concerns during an Economic Club of Canada forum last week.

“For the first time in Canadian history in 2023, our capital labour ratio declined,” Marion said during the discussion.

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“That’s a population trap. Historically, it’s normally associated with emerging markets. We’re the only country that’s ever experienced this. So this is why we have this urgency to deal with this immigration policy, because it is absorption capability that is undermining living standards.”

Click to play video: 'Report shows growing number of immigrants leaving Canada'
Report shows growing number of immigrants leaving Canada

A “population trap,” according to Oxford Reference, is defined as a situation where no increase in living standards is possible, because the population is growing so fast that all available savings are needed to maintain the existing capital-labour ratio.

In Monday’s report, Marion and Ducharme, said Canada’s annual total population growth should not exceed 300,000 to 500,000 in order to avoid that “trap.”

National Bank notes Canada’s population grew by more than 1.2 million last year, a “staggering” number that would be halved were the government to commit to levels put forward by the bank.

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Canada's immigration levels remain unchanged despite criticism

The federal government has been facing constant criticism over its immigration policies as some Canadians continue to find it difficult to break into not only the housing market, but even the rental market.

Last week, internal documents from 2022 were reported by the Canadian Press as showing employees within Immigration, Refugees and Citizenship Canada warned their deputy minister that boosting immigration would affect housing. Though the Liberals still increased the target for the number of permanent residents to half a million in 2025, defending the decision by pointing to a need for more newcomers to help fill a major labour shortage.

Canada’s immigrations levels have also been linked to the ongoing housing crisis, with housing experts, including a senior official at Minister Sean Fraser’s own agency, saying the Liberals’ immigration policy has driven up both house prices and rent.

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Under current building goals, the Canada Housing and Mortgage Corporation predicts the country will be short 3.5 million homes, in addition to what’s already being built, to restore housing affordability by 2030.

Fraser, in comments Monday, appeared to signal support for an idea put forward by Conservative Leader Pierre Poilievre of tying the number of immigrants with the number of homes built. However, he suggested the pledge made by the Opposition leader didn’t focus enough on where the most impactful population growth was coming from: temporary foreign workers and international students, not permanent immigrants.

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“We need to recognize that we have to bring other players to the table, not just provincial counterparts but the institutions who are dramatically increasing the number of study permits they request, sometimes at the personal financial gain of some of the people behind some of those private colleges,” he told reporters.

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Ottawa has announced various plans to speed up housing supply, including the modernization of a Second World War-era housing plan that saw hundreds of thousands of homes built from thousands of pre-approved plans between he 1940s and the late 1970s.

Despite this, Fraser pointed to temporary immigration programs that are putting pressure on the housing system and needed addressing, Immigration Minister Marc Miller, along with Fraser and Public Safety Minister Dominic LeBlanc, have all signalled in the past the federal government is considering a cap on international students, but want to work with provinces first to try and find solutions.

“Enough is enough,” Miller said in announcing changes to the international student program last year. “If provinces and territories cannot do this, we will do it for them, and they will not like the bluntness of the instruments that we use.”

Miller previously described the idea of a cap on international students as akin to “surgery with a hammer” during an interview with Global News.

Currently, there are very few limits on temporary residents — those who come to temporarily rather than permanently settling here — and while Miller said he plans to recalibrate the number who can do so, there are little details on what could change at this time.

Meanwhile, in their report, National Bank economists stress based on current demand and reduce shelter cost inflation, Canada would need to double its housing construction capacity to about 700,000 starts per year, a goal they call “unattainable.”

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— with files from The Canadian Press, and Global News’ Aaron D’Andrea and Touria Izri

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