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A worker, originally from Eritrea, at Meridian Manufacturing Inc. in Winkler, Man.

Canada's strong pro-immigration policy is more than just a humanitarian stand. It's an economic imperative

In the late 1990s, the economy of Winkler, Man., was stuck in a rut. The problem wasn't a lack of opportunity. It was a lack of people.

"We had local people who wanted to expand their businesses, but we had a tough time finding enough workers," says Martin Harder, the mayor of the community of about 12,600 in southern Manitoba, about an hour and a half southwest of Winnipeg and a short drive to the North Dakota border.

The town, a hub for the Pembina Valley's rich agricultural sector that produces everything from grains, beans and potatoes to dairy, beef and pork, was seeing growing opportunities to expand as an industrial base for the region, with manufacturers emerging for farm equipment and modular building construction. But the town's low unemployment and shortages in skilled labour threatened to stifle business growth.

So Winkler launched an ambitious program to recruit immigrant workers – starting with the skilled trades that were critical to kick-starting the community's business investment. The influx of new families spurred a mini-boom in housing construction, a need for expansion in education and health services, rising consumer demand that fuelled investment in a range of other businesses. Some of the skilled immigrants eventually became entrepreneurs, setting up businesses and spurring more hiring.

"That's really how it mushroomed," Mr. Harder says.

Today, Winkler is one of the fastest-growing municipalities in Canada (up 18 per cent since 2011, and top five among centres of 10,000 population of more, according to the 2016 national census). The median age of its citizens is a whopping seven years younger than the national median. Its property values are some of the highest in Manitoba.

And the 53 national flags that hang in the foyer of Winkler's city hall – one for every country represented by the town's immigrants – stand as a tribute to how critical immigration has been to Winkler's prosperity.

"Immigration has always been a part of our company's growth," says Doug Eidse, branch manager at Meridian Manufacturing Inc., whose plant in Winkler has expanded from about 20 staff before the immigration push to nearly 400 today – roughly two-thirds of whom are immigrants. "We simply wouldn't have been able to grow the way we have."

The labour problem that Winkler faced is coming, soon, to the entire Canadian economy. And just as it did in Winkler, immigration is emerging as Canada's solution – the key to keeping its economy fed with the circle of labour that's critical to a thriving economy. Canada is publicly embracing immigration in the face of growing anti-immigrant rhetoric in the United States and in many parts of Europe – something Prime Minister Justin Trudeau addressed again this week in his visit to Washington. But it's increasingly evident that Canada's strong pro-immigration policy is more than just a humanitarian stand; it's an economic imperative. For the first time in more than a century, immigration may be about to take shape as the critical central cog in Canada's economic growth strategy.

It may not be immediately evident in Canada's 6.8-per-cent unemployment rate, but Canada is headed for a labour shortage; unless someone can reverse the aging process of the population, it's unavoidable. Where a little more than a century ago the country turned to an imported work force to fill the gaping labour hole in its vast untapped Prairie farmlands, it now needs a new wave of immigration to fill the labour hole being left behind by the baby boomer generation. As that cohort enters its retirement years, the sun is setting on one of the most powerful catalysts for economic expansion in history.

Behind the government's principled public rhetoric is already one of the biggest immigration programs in Canadian history: Last year, Canada took in more immigrants than in any year since 1913 and it intends to at least match that number this year. Yet, demographers and economic experts, including those advising the federal government, warn that even more will be needed to stem the dramatic slowdown in labour force growth that will come as the boomer generation exits to the workplace over the next 15 years or so. Without a major increase in immigration, Canadians can expect to see annual real gross domestic product growth of about 1.5 per cent become the norm in the coming decades, a discouraging shadow of the 3.1 per cent that it has averaged during the boomer-infused past 50 years.

"That demographic headwind is coming. And it's not coming 30 years from now; it's coming now," says Dominic Barton, chairman of the Advisory Council on Economic Growth that federal finance minister Bill Morneau assembled last year to recommend policies to sustain the economy's long-term health. One of its first recommendations, last fall, called for the government to increase the annual immigration intake to 450,000, from the current 300,000.

"Immigration is critical to Canada's economic strategy," Ahmed Hussen, the recently installed Immigration Minister, told The Globe and Mail in an interview this week. "We have always viewed immigration as a key ingredient in our economic growth, prosperity, and our success as a nation."

So far, the Trudeau government has been non-committal on the council's recommendation; Mr. Hussen said only that the government will reconsider its immigration levels in the normal course of consultations for the setting of the target for the next year's immigration intake, which the government announces every fall. That suggests that the upcoming budget is unlikely to contain any substantial new announcements acting on the council's recommendations.

But the government's strong public affirmation of an open immigration policy, at a time when some other traditional immigration destinations are taking a step back, may present a timely window for Canada to secure a new generation of high-skilled immigrants to provide the foundation for its post-baby-boom economy. The stage is set for a public debate that could shape the work force – and the country – for generations to come.

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Why Canada needs more immigrants

Economic growth essentially boils down to producing more goods and services. There are two ways to do that: Increase labour input (have more workers producing things) and increase labour productivity (get more production from each worker). While such things as technological advances, investment in equipment and infrastructure and improved education can raise productivity levels, typically labour-force growth accounts for more than half of Canada's GDP growth.

That's where the problem comes in for Canada's economy. Demographic forces are grinding its labour growth to a halt.

The initial numbers from Canada's 2016 national census, released earlier this month, show the population grew an average of just 1 per cent a year since the previous census in 2011, the slowest pace since Confederation. Immigration accounted for about two-thirds of that growth. The contribution of so-called "natural" growth – births minus deaths – has been shrinking since the baby boom ended 50 years ago; Statscan projects that in about 30 years, the country's death rate will likely outnumber its birth rate, reflecting the aging of the population. At that point, immigration will be Canada's sole source for population growth.

And it's not just that the population is barely growing, it's also getting older. At the end of the baby boom in the mid-1960s, Canada's median age was 25. Today, it's 40. Thirty years from now, based on Statscan projections, it could be approaching 45.

It all means that more Canadians are aging their way out of the work force, with fewer young people to replace them. In the mid-1970s, Canada's working-age population (ages 15-64) was growing 2.5 per cent annually; since 2010, it has averaged just 0.7 per cent. Based on the demographic trend line and typical immigration rates of the past several years, that working-age growth pace could slow to a 0.2-per-cent annual crawl over the next decade, Statscan's projections show.

Canada is hardly alone in this aging crunch; all of the world's major advanced economies will face a similar threat in the coming years. Some countries, further along the demographic down-slope than Canada, are already living examples of the dangers ahead: In Japan, whose death rate surpassed the birth rate a decade ago and whose net migration rates have historically been among the lowest in the OECD, annual real GDP growth has averaged just 1 per cent over the past six years.

But the issue is more pressing in Canada than for many of its advanced-economy peers. Canada's median age is higher than the OECD average and its fertility rate is below the OECD average. Canada's under-15 age group as a share of its total population is three percentage points lower than that of the United States, and its natural population growth rate is considerably lower.

"It's not a question of 'whether' for Canada," says Kate Subak, executive director of the Century Initiative, a private-sector group of business leaders and academics that advocates "responsible and thoughtful" population growth as a vital pillar of Canada's future economic vitality. "It's a question of how much."

Prime Minister Justin Trudeau shakes hands with a Syrian refugee during Canada Day celebrations on Parliament Hill in 2016.

Too much? Too little?

Immigration of 450,000 a year would represent the highest numbers Canada has ever dealt with in absolute terms; the previous peak in 1913, just before the huge immigration wave of the early 20th century came to an end with the start of the First World War, was 401,000. But the 1913 influx added more than 5 per cent to the national population of the time. By comparison, an increase to 450,000 now would raise the immigration rate from about 0.8 per cent of the population to 1.3 per cent.

"We would love to take it even higher," Mr. Barton says. "Where the government rightly pushed back was that we've got to make sure we can absorb people at the higher rate. Let's demonstrate that we can." Mr. Barton acknowledges that even his advisory council's recommended 50-per-cent increase of immigration levels won't come anywhere near fully offsetting the coming demographic hit to the labour force. The council estimates that immigration rates would have to "nearly double" from the current 300,000 to replace the labour that will be lost through the aging of the existing population.

But what the proposed 150,000-a-year increase will do, the council has calculated, is add about 0.3 percentage points to the country's annual population growth – enough to at least lift GDP growth to more sustainably healthy levels.

And the increase to the working-age population base would alleviate some of the severe fiscal pressures that are implied by the combination of a growing number of non-working seniors needing health care and social services, and a shrinking base of working-age taxpayers to cover the rising bill. Statscan has projected that the "old-age dependency ratio" – the number of people over 65 relative to the number of working-age Canadians – is on track to surge from about 25 per cent now to 37.3 per cent by 2030. The council estimated that its proposed immigration increase would at least slow that dependency rise to 35.7 per cent by 2030.

Mr. Barton argues that the increase of the immigration system in 2016, to accommodate the large intake of Syrian refugees and to increase total immigration by roughly 30,000 over 2015, is encouraging evidence of the system's ability to expand relatively quickly to process significantly higher immigration numbers.

But critics have argued that immigration at the recent historical levels (it averaged 260,000 a year in the last five years of the Harper government, before rising to 300,000 last year under the new Trudeau government) has placed a substantial burden on government finances, quite apart from the administrative costs.

A 2015 study from the Fraser Institute, a Vancouver-based economic think tank, estimated that recent immigrants (those arriving in the past 25 years) cost Canadian governments as much as $35-billion in 2014, through a combination of lower tax revenues paid (reflecting their generally lower income levels than Canadian-born workers) and higher government services received. While immigration proponents took issue with the Fraser analysis (for one thing, the study treated the lower earnings and resulting lower taxes paid by recent immigrants as "costs," rather than treating all the taxes paid by recent immigrants as a fiscal windfall), the research nevertheless raises an important issue about the relative performance and contribution to Canada's economy by newcomers to this country – and whether bigger immigration quantities will necessarily result in better economic outcomes, not least for the immigrants themselves.

The mix, and the outcomes

The unemployment rate among newer immigrants – those who have been in Canada five years or less – was more than 11 per cent last year, versus 7 per cent for the population as a whole. But once immigrants have been here 10 years or more, their employment success is dramatically improved – an unemployment rate of just 6.4 per cent, better than the 6.8 per cent of people who were born in this country.

Similarly, Statscan data show that in 2014, the median income for a new immigrant within two years of landing in Canada was 27 per cent lower than the country's overall median income. But for immigrants who had been in the country for 10 years, the median income was in line for the country as a whole.

Significantly for those shaping Canada's immigration policy, an immigrant's income success depends to a large extent on the circumstances by which they gained entry to the country in the first place.

Canada has main immigration streams: Economic-class immigrants, who gain entry into Canada primarily in recognition of their marketable skills, education, work experience and official-language fluency; family-reunification immigrants, who move to Canada to join family members who previously immigrated to Canada; and refugees. Statscan data show that skilled workers in the economic class earn very close to the national median after two years in the country, but family-class newcomers earn, on average, more than 40 per cent less than the national median income after two years in Canada.

Government-sponsored refugees earn more than 60 per cent below the national median.

The wide discrepancy raises the question of what immigration mix the government will want as it looks to increase its immigrant intake. The Conservative government of Stephen Harper put a strong emphasis on economic immigrants during its nearly decade in power, transforming much of the country's immigration policy into one geared to identifying candidates well suited to immediately fit with the country's labour needs. During Mr. Harper's time in office, economic immigration rose 23 per cent, and the share of economic-class immigrants in Canada's total immigration rose to 63 per cent from 55 per cent.

Under the current Liberal government of Justin Trudeau, the balance has swung back somewhat toward increased numbers of refugees and family-reunification immigration. Last year, even though the government significantly raised total immigration, it actually reduced the target number for economic immigrants in order to accommodate more family reunifications and the surge in Syrian refugees. Nevertheless, the government's advisory council firmly believes that the government should focus on boosting economic immigration; indeed, it recommended that the entire 150,000-a-year increase that it proposed should be in the economic class.

But some critics say that before Canada further steps up its immigration targeted at the most skilled and educated workers, it needs to better address the underemployment among skilled immigrants that has become a nagging concern in Canada's biggest urban centres. The Conference Board of Canada has estimated that the country's immigrant population loses the equivalent of $12.6-billion a year in income from people working jobs for which they are overqualified, because their academic and professional credentials aren't fully recognized in Canada.

Experts say underemployment has gotten more acute over the past two decades, as the countries of origin for immigrants to Canada has shifted away from English-speaking countries and Europe, where education systems and professional standards look a lot more familiar to Canadian employers, and increasingly toward Asia. The result, they say, are the proverbial PhDs driving taxis.

"This has ceased to be a cliché – it's a real problem," says a Vancouver-based publisher and immigration activist who chaired the federal government's 2015 Panel on Employment Challenges for New Canadians. "There's no sense bringing someone over to do something they don't want to do. We're not doing immigrants any favours in that case."

CASE STUDY: Brooks, Alta.

LOCATION: Trans-Canada Highway, two hours east of Calgary

POPULATION: 14,451 (2016 census)

IMMIGRANTS/TEMPORARY FOREIGN WORKERS: 24% (2011 National Household Survey)

MEDIAN AGE (2011): 34.9 (5.7 years below the national median)

Brooks is not your typical cowboy town on the Alberta prairie. A quarter of the population in this ranching centre consists of visible minorities.

Brooks’s transformation into a global village started in the late 1990s, when the local meat-packing plant (now known as JBS Food Canada) underwent a massive expansion that increased its work force to nearly 2,500 from about 1,000 employees. That created a huge demand for workers in a community that, at the time, had only about 10,000 residents. Employer and town turned to immigration to fill the jobs, bringing in workers from such disparate corners of the world as sub-Saharan Africa, South America and the Philippines.

Some workers didn’t stay at the meat plant – it’s notoriously hard work – but many have stayed in the community. The meat plant relied on immigration to continue to fill vacancies. New Canadians moved on from the plant to start businesses to serve the increasingly diverse immigrant community. Workers brought their families over to join them, injecting a new generation of youth into the community. The population growth drove consumer demand that fed local businesses and home construction. It also drew highly-educated professionals to the community to fill its growing needs – teachers, doctors, lawyers, civil servants. All of which fuelled even more immigration – a few years ago, for example, the town imported doctors from South Africa and Britain to solve a physician shortage.

Now, immigration has become an industry in itself. About a year ago, the Canadian government made Brooks a designated immigration centre, which has brought new funding and jobs to the town to provide services for new immigrants placed in the region.

“There have certainly been adjustments, and there continue to be,” Mayor Barry Morishita says. “But we’ve done some amazing things here, in terms of being welcoming and inclusive, and making sure that our culture is represented both by what’s been here for a long, long time, and integrating new cultures. We’ve gotten really quite good at that. And that’s made our community quite attractive in a lot of ways, both for new immigration and for people who are looking for an inclusive and different community to live in. They draw a richness to our community.”

Cities and towns

One key issue for Canada that may have both economic and political ramifications down the road is the strong tendency for new immigrants to gravitate to the country's major urban centres. More than 80 per cent of immigrants to Canada are concentrated in its 10 biggest cities; nearly two-thirds of them are in just three metropolitan areas (Toronto, Vancouver and Montreal). Toronto, the country's biggest city and most popular destination for immigration, takes in 80,000 to 90,000 new immigrants annually.

"There are pressures on the system, no doubt about it," says Toronto city councillor Michael Thompson, chairman of the city's Economic Development and Culture Committee. But in the longer run, he says, the strain on municipal government services is more than made up for by the economic opportunities the inflow of immigrants generates, through expanded labour supply, an increase in the city's skills base, the boost in consumer demand and the trade links that develop with immigrants' source countries.

"It's a great benefit to our economic development," he says.

While immigration is helping keep Canada's urban population younger, the country's rural areas, towns and small cities, where immigration inflows are typically much lower, look increasingly grey. The average age in Canada's large cities is about three years younger than the average in small cities and towns, and nearly five years younger than in rural areas.

About 17 per cent of Canada's rural and small-town population is over 65; in the big cities, it's less than 14 per cent.

Without increased immigration to these smaller centres, Canada risks a widening economic divide between its big cities and its smaller and rural communities. Large centres will disproportionately benefit from labour and skills growth, while the country's small towns will, almost literally, die off.

"It absolutely needs to be addressed, in certain parts of the country, especially," says Kareem El-Assal, an immigration researcher at the Conference Board of Canada.

"In Atlantic Canada, there are several provinces already where the death rate exceeds the birth rate. They're at risk of seeing their population shrink significantly over the next decade or so if they don't figure out how to drive more immigration to the region."

The will to open up

Ultimately, experts say, immigration's role in addressing this century's biggest economic challenge for Canada will only succeed to the degree that the growing immigrant population can be successfully and productively integrated into the labour force.

That will not only be an issue of logistics – of matching the right communities with the right jobs with the right immigrants – but of getting businesses and voters to continue to embrace immigration as a key element in strengthening both their economic well-being and their community.

"It can't just be the government that pushes it," Mr. Barton says. "If businesses feel strongly, they have to pound the table."

"We need to continue to build public support for immigration as an essential part of nation building," says Canadian Senator Ratna Omidvar, a leading advo cate for immigration and the executive director of the Global Diversity Exchange at Ryerson University in Toronto.

She says the "conditional multiculturalists" in this country "need to be convinced [immigration] is working well" in order to garner the political support necessary to sustain an expanded immigration policy.

And Mr. Barton believes that message will need to be brought down to the local level – to win over the "café critic," as he calls it – for the next wave of immigration to truly take hold.

"When you're talking nationally, it's hard to relate to it; it just becomes a number," he says.

"But if we could bring it down to more of a region or a city, and say, 'We had 1,300 people come in; here's what they're doing; here's how it's working.' I think people understand stories, not statistics … real stuff to bring it to life."

Back in Winkler, the real-life success story of one small community boils down to the same message that Mr. Trudeau has been delivering on behalf of the country: That the welcoming of newcomers is simply what Canadians do. The mayor agrees.

"Unless you have the social fabric to wrap your arms around the immigrants coming into your community, it won't work," Mr. Harder says.