Canada’s current immigration policy, one of the most open in the world, is now being criticized by the country’s top economists for causing economic damage and requiring reconsideration.
Prime Minister Justin Trudeau’s decision to significantly increase immigration, along with allowing a large influx of temporary workers and international students, without adequate support, has led to a myriad of economic problems. Chief economists from Canada’s largest banks highlighted these issues during a panel discussion in Toronto.
Beata Caranci, chief economist at Toronto Dominion Bank, expressed surprise at the mishandling of immigration policies given Canada’s privileged position. Unlike many other countries, Canada has not faced poorly controlled migration across its land borders and has had the opportunity to consider policy implications carefully. However, despite designing and implementing its policy, Canada has still encountered challenges.
In the past year, Canada accepted approximately 455,000 new permanent residents and more than 800,000 non-permanent residents, including temporary workers, foreign students, and refugees. With a population growth rate of 3.2%, it is growing faster than any Group of Seven nation, China, or India.
Some economists, like Stéfane Marion from the National Bank of Canada, argue that Canada has fallen into a “population trap,” where an increase in the standard of living becomes unattainable due to insufficient savings to stabilize the capital-to-labor ratio.
In response to housing cost concerns, Trudeau has acknowledged the need for changes, with Immigration Minister Marc Miller pledging to address issues related to foreign student enrollment. However, pressure remains on the government to maintain high immigration levels as older workers retire and the fertility rate declines.
While the federal government aims to encourage rental housing construction, economists like Avery Shenfeld from CIBC Capital Markets believe there is urgency in balancing the influx of students and temporary workers with homebuilding strategies.
The consensus among economists is not to shift to a restrictive immigration policy but to be more deliberate in aligning immigration levels with the country’s capacity. Canada’s reliance on immigration to address labor shortages has made it too easy for businesses to hire, according to Jean-Francois Perrault from Bank of Nova Scotia.
Disastrously weak productivity and housing affordability are identified as the biggest challenges facing the Canadian economy. While immigration contributes to population growth, other factors such as lack of innovation and business investment also affect productivity.
In summary, economists emphasize the need for a balanced approach to immigration policy, considering its impact on various economic factors. Failure to address these issues could lead to a recession scenario, prompting calls for proactive measures by the Bank of Canada.