Craig Alexander is senior vice-president and chief economist of The Conference Board of Canada.
By Nov. 1, the federal government is required under law to announce the new immigration target for the coming year.
This important decision comes at a time when Canada has a greater opportunity to attract the cream of international talent. Under the Trump presidency, the United States has become a less attractive destination. Many other advanced economies have also become less welcoming, while Canada continues to shine as a champion of multiculturalism. Moreover, Canada needs newcomers to help mitigate the impact of an aging population.
The question is what constitutes the right immigration target?
In 2016, former Immigration Minister John McCallum announced that Canada would welcome at least 300,000 immigrants annually in 2017 and beyond – an increase of about 40,000 immigrants a year compared with the previous decade. This was the highest immigration level since 1913. The increase in 2017 was a good first step, but there is an opportunity to raise it further in the coming year.
Federal Immigration Minister Ahmed Hussen is currently consulting with his colleagues and Canadians to identify the appropriate number. This is a much more challenging task than it sounds. Canada must not only consider demographic and economic metrics – such as birth, death and unemployment rates – but also "known unknowns," such as the impact that automation will have on jobs in Canada. Immigration levels are also influenced by key social factors such as public opinion.
The Conference Board of Canada does detailed modelling on the impact of various immigration-level scenarios. We look at the effect on economic growth, income per capita, health-care costs, the ratio of workers to retirees and other metrics. Most importantly, we also consider the challenges of integrating newcomers into the Canadian economy.
While immigration is a huge benefit to our economy, the Conference Board estimates that $12.7-billion of potential is lost each year as a result of the labour market barriers that immigrants experience. This gap occurs in spite of the fact that immigrants are highly educated and bring many skills. Canada's economic performance suffers through lost productivity, lower tax revenue and reduced purchasing power for immigrants.
Canada has made significant reforms in recent years to improve immigrant outcomes. These changes include: giving provinces and employers a bigger role in the selection process; increasing selection standards; and giving advantage to immigration applicants already in Canada, such as international students. Much work has also been done on the settlement front, such as increased investments in language training and providing immigrants with more information before they arrive in Canada.
In addition to these positive reforms, Canada can pursue other measures. Often, businesses are keen to hire immigrants but don't know where to start. Governments can do more to help businesses navigate the immigration system and develop intercultural competency. Canada also needs to identify the right balance between accountability and flexibility for the settlement program. It is vital to ensure that taxpayer dollars are spent prudently, while also giving settlement organizations the ability to be flexible and innovative to respond to the needs of immigrants and business within their local communities.
The strength of the Canadian economy is rapidly eating up the slack in the labour market, as evidenced by the fall in the national unemployment rate to 6.2 per cent in August. The pace of economic growth will moderate in 2018, but more businesses are likely to report hiring challenges. This will add to the rising number of firms saying that they cannot find the skilled workers they need. So, there is scope to raise Canada's immigration levels above the 300,000 brought in last year. Canada should be able to integrate at least another 20,000 newcomers.
But conversations on Canada's future immigration levels should not simply focus on the exact number of newcomers. Rather, an important focus should be on how Canada can improve the job outcomes of immigrants. The combination of higher immigration levels and better employment opportunities for immigrants will spur economic growth. Conversely, higher levels and the same or worse labour market outcomes for newcomers could undermine public support for immigration. This must be avoided at all costs.