According to the recent Economic Viewpoint report by Desjardins, Canada needs international recruitment to boost its labor market’s working-age population.
The report considers the near-term and long-term job market and economic assessments, which have indicated that the country’s labor shortages would be left unaddressed if it were not for immigrants.
This is exemplified by the job vacancy numbers in Canada, which have fallen from more than 1 million in the first half of 2022 to 800,000 in April 2023. This trend can be fully attributed to newcomers, who fill up industries experiencing shortages.
At the same time, the seasonally-adjusted unemployment rate is stable at a near-record low of 1.3% because of immigrants, who are mostly non-permanent residents in Canada and fulfill specific labor market demands.
The large gap between a high job vacancy rate and a low unemployment rate would be even larger if it were not for the recent surge in immigrants to Canada. Immigration, Refugees and Citizenship Canada (IRCC) must admit more foreign workers in the short-term if it hopes to maintain the current ratio.
That covers the short-term. But what about long-term prospects for immigration?
This is where the conversation about an ageing workforce becomes relevant. Canada needs foreign workers to counteract the effects of an aging population, which include a burden on the economy and skyrocketing healthcare costs.
As per the Parliamentary Budget Officer’s latest Fiscal Sustainability Report, provincial government healthcare spending per capita is expected to double between 2020 and 2040. Canada needs to keep increasing revenue so that it does not fall behind this spending, for which a young workforce (ages 15 to 64) needs to out-pace older citizens (aged 65 and over).
As found by Desjardins’ Senior Director of Canadian Economics, Randall Bartlett, the 1.6 % increase in the working-age population in 2022 was the fastest growth in that age-group since 1989. Moreover, this growth was driven almost entirely by immigrants and temporary foreign workers.
However, this growth is not enough. The population gains need to be even higher, which is possible through an increase in the current immigration rate. Without this, the Old-Age Dependency Ratio (or OADR, which is the ratio of the elderly population to the working-age population) would keep rising, and the problems highlighted earlier would keep accumulating.
When considering the economic impact of immigration, Desjardins’ report found that long-term potential GDP and potential GDP per capita growth and maintenance require immigration.
The majority of immigrants to Canada are economic immigrants and earn higher wages compared to Canadians. They are thus a more productive working-age economic group and more likely to secure employment with Canadian employers.
The importance of economic immigrants is evident in Canada’s 2023-2025 immigration levels plan. In 2023, it plans to attract 266,210 members, and by 2025, this number is going to increase to 301,250.