Mexican and Guatemalan workers pick strawberries at a strawberry farm, on Aug. 24, 2021, in Pont Rouge, Que.Jacques Boissinot/The Canadian Press
Joël Blit is a professor of economics at the University of Waterloo, the chair of the Council on Innovation Policy and a senior fellow at the Centre for International Governance Innovation.
Over the past year, Canada’s broken immigration system and our productivity emergency have dominated headlines. Last week, these concerns collided as Ottawa scaled back immigration targets, sparking a swift backlash from business interests who argued it would cripple Canadian businesses. This outcry underscores a troubling reality: Canada’s productivity woes stem in part from a business culture reliant on expanding markets and low-cost labour, rather than one committed to technological advancement and innovation.
Ottawa’s pivot on immigration isn’t just politically savvy in the context of souring attitudes toward immigration; it’s downright sensible at a time when housing is unaffordable, the health care system is overstretched and our economy is stalling. The move isn’t about closing doors but about creating a more sustainable system that benefits Canadians. Restoring targets to more historical levels will hopefully help re-establish the long-standing Canadian consensus on immigration.
Predictably, business groups are crying foul, arguing that without high immigration, they’ll be unable to meet their labour needs. But let’s be blunt: Canadian businesses have become far too comfortable relying on a steady stream of cheap labour, with disastrous consequences for our country. Canada has now experienced five consecutive quarters of negative economic per-capita growth. Our productivity gap with the U.S. has increased to the point that Americans now produce almost 50 per cent more per person than Canadians. Not surprisingly, the senior deputy governor of the Bank of Canada has declared that we’re in a productivity emergency.
Businesses that are addicted to cheap labour have little incentive to invest in technology and equipment. Why invest in cutting-edge logistics software when there’s no shortage of low-wage drivers? Why automate agriculture with robotic harvesters and drones when there’s a steady supply of low-wage workers to do it manually? Make labour cheap enough and construction companies will begin to trade in their excavators for shovels!
The business sector’s reaction to last week’s announcement reveals an uncomfortable truth: For many, the idea of doing more with less is daunting. But Canadian industry desperately needs this wake-up call. If labour is no longer cheap, businesses will finally have to get serious about innovation and productivity, whether that means automating more processes or developing higher-value products that can support better wages. This isn’t just good for businesses; it’s good for everyone.
Slower population growth also removes another source of complacency. When companies can count on meeting revenue growth targets just by virtue of a swelling population, why bother developing new products or reaching new markets?
Not surprisingly, Canada’s private sector currently ranks dead last in the G7 on R&D spending as a share of GDP. We are the only G7 country to see business R&D intensity decline over the past two decades. It is a trend that must be reversed.
Ottawa’s policy shift sends the right signal. But further changes to immigration policy are needed. It’s time to end the recently introduced category-based immigrant selection process, which encourages companies to invest in lobbying rather than in technology. We need a full return to the “points system,” one that’s data-driven and targets the most highly skilled talent to fuel innovation and growth. The best and brightest knowledge workers are not only productive themselves, they can make others around them more productive as well.
Last week’s announcement, then, is more than just a return to sensible immigration levels. It’s a rallying cry to Canadian businesses: no more shortcuts. If Canada’s economy is going to thrive in the 21st century, it will be through ingenuity, investment and the right kind of talent – not an endless supply of cheap labour.