By Craig Alexander and Kareem El-Assal , special to Globe and Mail |
Craig Alexander is senior vice-president and chief economist at The Conference Board of Canada. Kareem El-Assal is senior research associate for immigration at The Conference Board of Canada.
A recent Environics Institute poll found that 80 per cent of Canadians believe immigration is good for the economy. The poll, however, also showed that 16 per cent of Canadians (the equivalent of about six million people) do not see immigration as an economic benefit.
As politics in many parts of the world have shown, being dismissive of immigration skeptics is unwise. Support for immigration in Canada is very important and needs to be constantly cultivated. Typically, Canada has promoted immigration by championing diversity and pointing to the economic benefits. A less conventional way of doing so is imagining what Canada’s economy would look like without immigration.
Over the past five years, the economy has grown in real terms by about 2.2 per cent annually. In the decades to come, we expect it to grow by an average of 1.9 per cent if Canada continues to gradually increase its inflow of newcomers. If Canada shut its doors to immigrants completely, we estimate that economic growth would drop to 1.3 per cent annually – similar to the demographically induced slow growth in Japan.
Economies grow either because they have more workers or they use them more productively. Without continued immigration, Canada’s labour force will shrink. Fewer newcomers would also weaken demand in the economy, which, for instance, would make it more difficult for Canadians to find buyers for their homes. In the absence of a productivity boom, Canada’s pace of economic growth would decline, reducing income growth and constraining the ability of the economy to generate a rising standard of living for its citizens.
Slow economic growth would make it even more difficult for Canada to pay for social priorities such as health care, which is only going to become more expensive as the population ages. To help compensate, Canadian governments would need to increase taxes – which would squeeze incomes – or run higher deficits.
A shrinking labour force, modest domestic demand and the prospects of fiscal pressures and tax hikes would do little to encourage the private investment that Canada relies upon to drive productivity and real income growth.
This argument may seem hypothetical, but we need not look beyond Atlantic Canada to understand the perils. The Atlantic region has seen weak population growth because its immigration numbers have not compensated for a natural population decline caused by a higher rate of deaths than births and the high rates of Atlantic Canadians heading west in search of opportunity. This has meant a vicious cycle of slow economic growth, low public- and private-sector investment and difficulties retaining Atlantic Canadians and immigrants alike.
The main message is that Canada needs to gradually increase immigration inflows. The federal government’s 2018-2020 Immigration Levels Plan will see the country’s intake steadily rise to 340,000 newcomers a year by 2020, up from about 290,000 in 2017. According to our projections, by 2034, Canada will face the same challenge Atlantic Canada is currently experiencing – the natural rate of increase will turn negative. Boosting immigration to some 400,000 in the early 2030s will help keep population growth steady at about 1 per cent per year. More importantly, for Canadians’ standard of living, this level will support a healthy labour force and economic growth – despite the ongoing exodus of baby boomers from the labour market.
Simply increasing immigration, however, is not enough to maintain high living standards. Canada must also ensure that those arriving here meet the needs of business and are given a fair shot to succeed in the economy. Immigrants face significant labour market barriers such as lack of recognition of their foreign qualifications, and so we must continue to identify improvements to our selection criteria and settlement services to benefit immigrants and our economy.