Why immigrants should be optimistic about Canada’s economy

On November 1, Immigration, Refugees and Citizenship Canada (IRCC) released their annual Immigration Levels Plan, which is used to guide their operations and determine the number of newcomers Canada will welcome.

This year’s target of 432,000 new permanent residents (PRs) is the highest ever in Canada’s history. The numbers for 2023 (465,000) and 2024 (485,000) will continue the upward trend of (500,000) in 2025.

The arrival of nearly 1.5 million people to Canada over the next three years will have an important impact on Canada’s labour force and economy. In this article, we share the forecast for Canada’s jobs and housing markets, and for the nation’s overall economic and social well-being.

An aging nation

Of Canada’s nearly 39 million people, around 8 million, or roughly 21.5% of the population, are newcomers. The targets set out by the IRCC will raise that number swiftly and sharply — and according to Rebekah Young, Scotiabank’s head of Inclusion and Resilience Economics, this is a positive development.

“We have more retired people, and fewer workers in the economy,” said Young. “That’s really constraining through an economic lens.”

Welcoming newcomers, who, according to Young, tend to be younger and better educated, is one way to find the help we need — and to shift our demographics.

The good news is Canada is one of the few advanced economies with a growing population. “Because we have such expansive targets for newcomers, we actually see our population growing by around 1.8% per year,” she said.

A younger, working, educated and enlarged population in turn helps the commercial sector.

“Newcomers are also consumers. They’re buying houses or vehicles, they’re going grocery shopping or to the movies, so they’re spending in the local economy,” Young pointed out.

And, of course, newcomers are also working and paying taxes — much-needed money that may not be coming in due to a shrinking labour force.

“They’re paying into federal, provincial and municipal revenues, that are then used to provide more services to Canadians, including supporting some of the benefits that go to aging Canadians,” she said.

Nearly 1 million job vacancies

According to Statistics Canada, there were 957,500 job vacancies in Canada in the first quarter of 2022 — the highest quarterly number on record.

“Labour shortages existed prior to the pandemic, but now they’re even more amplified.”

The pressure on industry is enormous. “Business leaders are increasingly vocal about labor shortages,” she said. “There’s an understanding that this isn’t temporary, that we are going to be facing skill shortages and skills mismatches long after the pandemic is gone.”

Even with the proposed immigration numbers, Young said that there will still be job vacancies.

And what kind of workers are arriving? “There are really highly educated newcomers that will come in and fill jobs in high tech sectors, particularly given that the U.S. immigration policies have been so closed,” she said.

The benefit, according to Young, is that we have access to a pool of workers who want to “make transformative change in some of these very high-end sectors that can enhance overall productivity.”

Young shared that Canada could do a better job in fully leveraging these skills as too many university-educated newcomers are in positions that aren’t the right fit for their abilities.

At the same time, newcomers who are in the earlier stages of their careers are filling important gaps as well, “If you look at the health care sector, for example, or home care — that caring economy — there are major vacancies there that are having a very real impact on Canadians.”

Finally, there are the more intangible benefits to boosting immigration. “The entrepreneurialism and the ideas, the innovation, the different way of thinking about things,” Young said. “Economics isn’t great at capturing the value of diversity but it’s clear that there are benefits there.”

“Where could the government improve is in expediency and bureaucracy,” Young said, noting that rapid expansion, as well as pandemic changes, to various programs have led to backlogs that can be challenges for both those waiting to come to Canada and businesses looking for talent.

A hot housing market

Houses and rentals in Canada have been expensive since before the pandemic. Even after the market peaked in 2022, affordability remains an urgent concern. Adding people without adding housing will only intensify the issue.

“We’re not building houses at a tremendous pace and that’s certainly a challenge. These are government challenges,” Young said. “Clearing some of the regulatory and bureaucratic processes that impede building more supply should help. We’ve just got an expanse of land here — that really shouldn’t be the issue.”

Many Canadians have put their home-buying aspirations on pause due in some part to the recent hike in interest rates, which affects mortgages. In turn, the market has cooled, but the same trend may be adding more pressure to the already stretched rental market, which saw an annual increase of 11.1% in 2020.

Newcomers will have to consider not only which communities need their skills, but also what the cost of living and wages looks like across the country. “Toronto and Vancouver tend to be big, key centers that newcomers want to go to,” Young said, noting that there are often existing communities in larger cities which can provide a sense of stability and security. But the average home price to income ratio is fourfold what it is in some other smaller cities across the country. Newcomers will be making that calculation.”

The longer-term picture may be brighter. Included in the 2022 Budget are several proposals by the Department of Finance to increase housing construction, support affordable housing and protect buyers and renters.

Canada on pause

Experts are warning of global recession, which begs the question of how newcomers and Canada as a whole might fare. According to Young, the outcome might not be as dire as in other parts of the world.

“We expect Canada to lead the pack over the course of the next couple quarters and in the next couple of years,” she said. “Canada has many more positives on the economic front than we think. It’s definitely going to feel the pains of a global slowdown. But we would categorize it in our best guess more as a pause – or a short and shallow slowdown – vs. a deep and prolonged contraction of the economy.”

Among the factors making the Canadian economy resilient, Young cited job markets, and noted that “there isn’t a better place to weather the downturn than in Canada.” She also underscored the value of well-governed and stable institutions that contribute to the resilience in the economy.

Between now and 2025, newcomers will bring Canada some much-needed relief to the desperate labour force, filling important jobs and taking some of the fiscal pressure off a nation that must now find resources for the care of a rapidly aging population. The influx of skills, ideas and entrepreneurialism will benefit employers across sectors, and promises to boost our economy on the world stage.

And these benefits aren’t temporary. The success of newcomers to Canada leads to the success of their children and to the country.

“There are long term dividends of newcomers coming, settling with family and ensuring that the second generation thrives and continues to revitalize the outlook for Canada,” Young said.