Analyzing the effect of immigration targets on the Canadian economy.Over the next three years, Canada will aim to welcome roughly 1.45 million immigrants; with 60% projected to be through economic class programs.

This wave of newcomers is projected to have multiple positive effects for the Canadian economy, and society—some of which can already be seen, as Desjardins’ new study on the impact of federal immigration targets reveals.

For instance, new immigrants are now more likely to be employed than their peers born in Canada. This is a recent phenomenon that comes down to the convergence of two major trends: A noted increase in the employment rate of new immigrants starting in 2016; and the gradual decline in employment rate of people born in Canada.

This effect draws on demographic make-ups of each group. New immigrants are disproportionately of core working age (25-54 years), and are often selected for human capital factors that make them ideal participants in Canada’s labour force. On the other end, Canadians have an aging population, with a consistent group of retirees exiting the workforce every year (a key reason for immigration to occur in the first place). In this light, the wider effects that immigration will have on the economy are pertinent.

New immigrants will change the demographic of Canada

Immigration is at the heart of population growth for Canada. The bulk of new immigrants are economic and of core-working age. With the huge influx expected in the next coming years, Canada’s population is estimated to grow much younger. Currently the median age of Canadians is 41 years, with retirees exiting the labour force every year.

It is expected that the influx of core aged immigrants will not just bring the societal benefits of raising Canada’s population up to self-sustaining levels (i.e.: a birthrate of at least two per household)—but also bring a host of economic advantages to the country.

New immigrants are expected to boost potential GDP growth

New immigrants are more tied to the labour force. Many of them have jobs even before entering the country, and admitted for human capital factors that enable them to effectively contribute to the workforce.

As such immigration is predicted to raise Canada’s GDP (Gross Domestic Product) per capita, as labour input is expected to increase with immigration. GDP is the total monetary value of all the finished goods and services produced within a country’s borders. An increase in GDP is generally a sign of a healthy economy, and can lead to further benefits like increases in hiring, and wage growth.

The arrival of newcomers is expected to further help bolster the supply side economy, and reduce inflationary pressures on the Canadian economy.

Can Canada handle this wave of newcomers?

One key note from the Desjardins studies was the cyclical outcomes for immigrants in the labour market. Roughly every ten years sees a spike in newcomer unemployment, before once again diminishing (though after 10 years in Canada the unemployment rates for immigrants and Canadians was largely indistinguishable).

Newly landed immigrants can also have a harder time gaining initial footing in the Canadian labour market, as they begin to establish themselves in Canada. These findings have raised questions on whether Canada is prepared for the massive wave of immigrants it plans to welcome in the next three years.

This being said, there are still good signs that newcomers will have positive labour outcomes. Job vacancies are currently at record highs—and double what they were during the pandemic. The labour market remains tight—itself one of the key reasons behind historic immigration targets. In addition to an aging population exiting the workforce every year, newcomers with in-demand skills and desirable human capital factors seem more likely to have favourable outcomes in the Canadian labour market.

In summary

Canada’s immigration targets are expected to have positive outcomes for the country both societally and economically. In the wake of the COVID-19 pandemic Canada has greater need for immigrants than ever, and there are reasons for both newcomers and Canadians alike to be hopeful for positive outcomes with the arrival of immigrants in the next three years.