Immigration is a hot topic in Canada due to housing unaffordability and a crunch in public services. The chart below highlights why:
I strongly suspect the 2025 (or sooner) Canadian election will be fought over immigration and public polls have shown a sharp turn in the country that was perhaps more-open to immigrants than any.
Last year, Canada added 1.25 million people and will add at least another 1 million this year. To get a sense of how much that is, 10x it against the US. Numbers released in the US showed 1.6 million immigrants last year. While illegal immigration probably added a fair bit to that, the total number of illegal immigrants in the US is only estimated at 12.3 million, cumulatively.
In short, Canadian immigration is way out of hand. It's powered GDP growth for some time but the result has been falling GDP per capital and falling productivity.
I have little doubt that it will continue and when the pendulum swings it could be a huge drag. Scotiabank economists have come to the same conclusion and dig deeper today with a report highlighting how a stop in immigration will reshape the economy.
"There is a sweet spot when it comes to economic immigration – where everyone is better off over time – but it is narrow and Canada has strayed far off course," Scotia writes. "Canada’s immigration policy needs a reset, not quick fixes."
They estimate around 350K annually in Canada would be best for growth and productivity.
However they note that there has been no slowdown at all, despite the growing backlash.
"If anything, the pace of population growth has accelerated so far this year, based on data from the Labour Force Survey: the rise in population in January and February is the fastest two-month pace in history," they write.
Canadian employment numbers have been surprisingly robust but they note that temporary workers accounted for almost 40% of job gains last year, while 70% of the gains were among people who have arrived within 5 years.
Whether Canada continues to accept high numbers of immigrants or reverses course, Scotia argues there are no easy solutions. There hasn't been nearly enough fixed investment to cope with current numbers and cutting them would undermine the businesses of many of Canada's largest sectors including: banking, telecommunications, housing and consumer products.
On the other side... long tent manufacturers?
