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Increasing Canada’s Immigration Levels Depends on Improving Job Outcomes for Newcomers

October 02, 2017
Kareem El-Assal Kareem El-Assal
Senior Research Associate and
Senior Network Manager, Immigration
Photo of  Daniel Fields Daniel Fields
Economist,
National Forecast

Canada is currently evaluating how many immigrants to welcome in the future, and in a few weeks the federal government will announce Canada’s 2018 immigration levels target. Our new report provides insights on key considerations we need to keep in mind to help guide immigration levels planning. Namely, with immigration playing a greater role in meeting labour force needs, Canada must improve the job outcomes of newcomers to enhance the economic benefits of immigration.

Background

Over the past 20 years, Canada has admitted a relatively steady 0.74 per cent of its population in newcomers—such that immigration comprised the majority of Canada’s roughly 1 per cent annual population growth between 1996–2016. In 2016, Canada’s immigration rate increased to 0.82 per cent of its population and the federal government announced that Canada will welcome at least 300,000 immigrants per year.

Our report forecasts the economic and fiscal impacts of three immigration scenarios between 2017–40. To make our forecast as realistic as possible, we built in assumptions based on the labour force characteristics of immigrants by entry stream. Principal applicants (i.e., economic immigrants assessed by Canada based on their skills) tend to earn higher wages than the Canadian average after about five years of landing in Canada. But spouses and dependants of principal applicants, family class immigrants, and refugees typically earn less than the average Canadian wage.

Immigration Could Account for One-Third of Economic Growth by 2040

Despite the fact that our report assumes that most immigrants will continue to earn below average wages over the next 23 years, our forecast shows that immigration will continue to make profound contributions to Canada’s economic growth. For example, if Canada were to boost immigration to over 450,000 people per year, as the Federal Advisory Council on Economic Growth recommended in October 2016, immigration could account for nearly one-third of Canada’s annual real GDP growth by 2040. Even if immigration levels rise gradually, immigration will contribute about one-quarter of annual real GDP growth.

But it is critical to stress that higher immigration levels will only create the anticipated benefits if newcomers have good economic outcomes. Simply upping the inflow without addressing the challenges that current immigrants face could lead to economic costs and risk losing public support for immigration.

The Opportunities and Risks of the Scenarios

There are potential opportunities and risks to each of our scenarios. There is the possibility that the economic and fiscal benefits of our scenarios will be more positive if language training, credential recognition, and other factors that affect the integration of the immigrant labour market improve in the coming decades. Newcomer wages may also rise in the future, given the increasing demand for immigrants to fill labour shortages created by an aging population.

Conversely, the economic and fiscal benefits could be worse if the labour market outcomes of newcomers deteriorate. This risk becomes greater as immigration levels rise since more efforts and solutions would be needed to ensure that newcomers find good-paying jobs—something that has proven extremely challenging in recent decades, even as Canada has admitted fewer newcomers than its current target of 300,000 per year. If Canada is unable to improve the labour market outcomes of immigrants, higher immigration levels could lead to negative economic and fiscal consequences, which could erode public support for immigration.

The Elements of a Strong Immigration System

Promoting the opportunities and mitigating the risks of immigration comes down to three major factors.

First, with immigration being such an important component of growth, Canada needs to improve the labour market outcomes of immigrants—for their benefit and to enhance Canada’s overall economic performance.

Second, Canada will need to expand its absorptive capacity so that newcomers can effectively integrate economically and socially. This entails identifying measures to grow Canada’s economy so that Canadians and immigrants alike have access to good job opportunities and can generate enough economic activity and government revenues to contribute to the social welfare programs that support the country’s high living standards.

Finally, and most importantly, the Canadian public must remain supportive of immigration. Future public support is dependent on Canadians having access to high-quality job opportunities and social welfare programs, and immigrants continuing to contribute to the economy. Canada’s ability to “manage” the flow of newcomers to its shores is also important. And, Canadians need to continue to have informed public discussions to help guide improvements to, and increase public trust in, the immigration system.

Read the report!

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