Economists are warning that Ottawa’s reported undercounting of non-permanent residents by around one million in the official figures could have an impact on Canada’s per capita GDP – a global measure used to gauge a country’s prosperity.
They say that understating the number of non-permanent residents could skew assessments of how Canada’s economy is growing along with its population, and that actual per capita gross domestic product might be lower than reported.
A leading economist cautioned federal ministers at their August cabinet retreat that there may be around one million more non-permanent residents living in Canada, including foreign students, than government estimates suggest.
Benjamin Tal, deputy chief economist at CIBC Capital Markets, also published a report on the matter last week. In it, he said the official number of non-permanent residents, or NPRs, that is “widely quoted and used for planning purposes undercounts the actual number of NPRs residing in Canada by close to one million.”
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The Globe and Mail has reported that Mr. Tal informed the Liberal government retreat in Charlottetown of the undercounting of non-permanent residents during a briefing on housing affordability. He warned that underestimating the number of non-permanent residents in the official statistics means Canada is miscalculating the number of new homes required.
Mr. Tal’s findings were echoed by former federal economist Henry Lotin, who told The Globe that he has been warning Statistics Canada since 2017 that it may be undercounting the number of non-permanent residents.
Mr. Tal told The Globe that since the actual population count is estimated to be larger than official numbers, it could have an impact on the accuracy of per capita GDP, which gauges a country’s economic output per person.
The universal measure of wealth and prosperity – calculated by dividing the GDP of a country by its population – is often analyzed alongside GDP, to monitor productivity and compare it with that of other countries. Industrial countries and those with high economic output and small populations tend to have the highest GDP per capita.
A country can have consistent economic growth but if its population is growing faster than its gross domestic product, GDP per capita growth could be negative. Missing people from the population count can artificially inflate per capita GDP.
Canada is ranked behind the United States and Ireland in the World Bank table of per capita GDP, but ahead of Britain and France. Monaco, Liechtenstein and Luxembourg, all of which have relatively small populations and high economic output, rank highest.
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Mr. Lotin, founder of consulting firm Integrative Trade and Economics, said per capita GDP is “used in dozens of economic metrics” and that inaccurate population statistics could affect its calculation.
“Many Canadian and international research agencies and consulting firms make ‘best of’ or ‘top in’ lists. The OECD and World Economic Forum are two prominent examples,” he said. “Canada’s ranking can, and has, been determined by $1,000 to $2,000 GDP per capita difference. Consultants, governments and think tanks pay attention to these rankings.”
He added that while a $2,000 per capita differential is “a bit small” to affect our ranking heavily – by as much as 10 country ranks, for example – a differential of $5,000 is enough to “materially affect Canada’s place in the world [when] benchmarked against other OECD competitors.”
“If the population is one million more than the 40 million advertised, and output does not change in count, then basic math says we overstated per capita GDP by 2.5 per cent,” he added.
Mikal Skuterud, professor of economics at the University of Waterloo, said the economic activities of temporary residents not counted in the official population may be captured in statistics through payslips and tax. He said there’s evidence of high rates of earnings in the foreign student population, which includes some who are not accounted for in official population counts.
Melissa Gammage, a spokesperson for Statistics Canada, said in a statement that the agency’s statistics on non-permanent residents “are accurate, produced using robust mechanisms and in collaboration with many stakeholders.”
But she said Statscan constantly reviews its methodology. Starting on Sept. 27, it will publish new data tables on non-permanent residents “computed using a revised methodology and going back to 2021.” These residents include international students on visas and temporary foreign workers.
“These new tables will also include more details on NPRs, such as their estimated numbers and permit types, as well as other methodological improvements,” Ms. Gammage said.
Mr. Tal’s report says Statscan’s current system assumes that temporary resident visa holders leave the country 30 days after the expiration of their visas, even though many of them remain in the country for longer and apply to extend their stays.
Mr. Tal estimates that about 750,000 of the non-permanent residents absent from the official numbers were missed this way. Another 250,000 are people – mostly international students – who were missed by the census, he says.
Housing Minister Sean Fraser, who was immigration minister before July’s cabinet shuffle, said in an interview last week that it is “possible that there are more people, particularly temporary residents, who remain in Canada that might not officially fall within our numbers.”