On Friday a Canadian economist breached a long-standing taboo in economics and the near-viral reaction to his comments shows how he hit a nerve.
CIBC Deputy Chief Economist Benjamin Tal didn't even write a report to kick off the furor; instead it was a quip on Canadian business TV station BNN-Bloomberg that re-ignited a much-needed debate.
Tal was analyzing the simultaneous release of the Canadian and US jobs reports and noting the stark differences in wage growth. In the US, workers earned 4.7% more year-over-year while in Canada that was 2.7%.
Stating the obvious is almost an act of subversion.
“To put things in perspective, [Canada] got 410,000 new immigrants in 2021. In the U.S., altogether, they got 500,000,” Tal said on Friday.
“The last time I checked, the US is still ten times larger than we are. But the [level of immigration] is basically the same. In relative terms, we are much bigger than them."
Tal -- an immigrant himself -- didn't drawn any broader conclusions and only said "that's very interesting."
Intuitively it makes sense and it's been something that immigration critics have been saying for a long time. However in the economics profession, it's almost unheard of to do anything but extol the virtues of immigration. Taking another stance is the kind of thing that can get you canceled.
You certainly won't hear anyone at the Federal Reserve say that immigrants are needed to keep workers from getting a raise but this one-off experiment in closing the doors shows that a flood of cheap workers could be what's kept a generation of American workers from getting a raise.
It would be quite a day if Jerome Powell ever got behind the podium and said "wage growth won't be a problem in 2023 because 5 million immigrants are coming to keep wages low."
Of course, no journalist would dare even ask the question.
In any case, that's where the good news ends for workers. As Tal noted, the response to US business isn't to continue to compete for workers; it's to invest in automation. So it won't be 5 million immigrants pushing US wages down; it will be 50 million robots.
As for Canadian workers, it will be a double-whammy with Trudeau aiming to boost immigration this year to 411,000 as the country aims to increase population by 1% per year.
The story was one of the top posts on Canadian Reddit sites on the weekend, with the top comment as
It's almost like the real reason to open the floodgates to 1 million immigrants every 2-3 years is to keep wage growth low and real estate demand high or something.
Nah, must be my racism talking.
Given insanely high housing prices throughout the country, I get the sense that the tide is turning.
