An apartment building construction site is seen in the Lebreton Flats neighbourhood of Ottawa, on June 29.Spencer Colby/The Globe and Mail
Michael Veall is a professor of economics at McMaster University.
High expected immigration is the main reason that Canada’s total output will likely increase by 1.5 per cent annually in 2023 and 2024, according to the headline numbers from the International Monetary Fund World Economic Outlook. That would be the highest in the Group of Seven.
But that document also includes the predicted changes in output per person. That is a better measure of the change in the average standard of living, as it adjusts for Canada’s high population growth. The 2023 and 2024 predictions for the country are -0.6 and 0.1, a cumulative decrease over the two years. That’s the worst performance in the G7.
Part of this has to do with the lack of investment to complement the inflow of people. The most obvious symptom is Canada’s housing crisis.
The writer, Max Frisch, famously commented on European guest worker immigration: “We wanted workers, but people came.” People need homes, and Canada doesn’t have enough of them – even for its resident population. The high prices from the resultant high demand weigh heavily on the economy. While we wait for housing progress, this country needs slower and more focused immigration.
Immigration in general can be good for the economy. The fact that per capita GDP is expected to decline amid heavy immigration doesn’t mean that those already in Canada will on average be worse off; a good part of the reduction in that metric is due to low-income migrants bringing down the average.
Many of us already here will likely be made better off through the contributions of the newcomers. This is particularly clear in the caring and agricultural sectors. And in the long-term, while it is less clear at higher levels, immigration may bring important macroeconomic advantages. Immigrants can bring new ideas and entrepreneurship.
Moreover, Desjardins economist Randall Bartlett finds that these very high rates of immigration are the only way to prevent large increases in the proportion of the population that is 65 and over. Permanent immigrant families will also help share the national debt, especially as they experience increases in productivity and income.
But, as experts such as Mr. Bartlett have pointed out, high immigration is only sustainable if something can be done about housing, and this is not easy.
In the short term, the housing crisis cannot be solved – it can only be mitigated. Building new housing takes time. In the meantime, reducing immigration temporarily to prepandemic levels would help. Those levels would still provide ample room for home construction workers if necessary, as well as other high-skilled workers in strategic areas.
In principle, the current permanent immigration target could still be met with the reductions coming from the temporary side. For example, the student visa program could be limited with allocations used to incentivize educational institutions and their municipalities to do more on housing.
In the medium term, a solution requires more than doubling the inflow of housing units – Herculean even without the headwind of higher interest rates. It is no coincidence that federal cabinet minister Sean Fraser was recently shuffled from the immigration portfolio to housing.
But it is a three-levels-of-government problem, and municipalities do not face the same urgency from the aging population. In communities where most voters own rather than rent housing, the net political pressures may be against permitting increases in housing supply that might dampen housing prices.
Broader resistance to increased immigration will almost surely come. The brunt of unaffordable rents is borne by those with lower incomes. These are largely the same individuals who may be losing out on the higher wages, the greater flexibility in work arrangements, and the benefits of productivity-increasing capital and training that employers might turn to were there not the alternative options of hiring recent immigrants or accessing the Temporary Foreign Worker program.
But none of this is the fault of those who move here, and nothing changes the ultimate economic benefits of immigration. Canada must cherish immigrants, helping them settle as much as possible – but we need some breathing space to be able to do so properly.