CIMM - Role of Immigration in Canada’s Economic Recovery - Mar 10, 2021
Even amid the economic uncertainty brought about by the COVID-19 pandemic, Canada still faces demographic and economic challenges due to our aging population that immigration helps address. Canada will continue welcoming newcomers who bring the skills our economy needs to help recover and keep growing as we move forward.
The 2021‒2023 Immigration Levels Plan sets out a path for responsible increases to immigration targets to help the Canadian economy recover from COVID-19, with about 60% of admissions to come from the economic class.
Economic immigrants are a central pillar of Canada’s economic recovery and future economic success: they are educated, fill targeted labour market and skills shortages, they contribute to innovation, workplace diversity, and have the skills needed to quickly integrate and adapt to the Canadian labour market.
In the long term, growing immigration with a focus on economic classes, will help maintain the size of the working age population.
Targeted programs and pilots support regions by bringing the benefits of immigration outside urban centres to help fill labour local market gaps, while supporting settlement and integration. In addition, focused efforts on attracting French-speaking immigrants also help contribute to the vitality of Francophone minority communities outside Quebec.
The 2021-2023 immigration levels plan set an ambitious target for immigration at 401K in 2021, including close to 60% of its projected admissions in the economic category, recognizing immigration as a key driver of economic recovery and future growth.
High immigration levels have been recognized by the Bank of Canada as net benefit for the economy, driving labour force growth, consumption and housing activity. In 2017, over 1 in 4 working people (26%) were immigrants.
Economists and other observers have expressed concern that the shortfall of admissions in 2020 could undermine Canada’s economic and social objectives, and hurt important economic sectors. Until borders open fully, Canada will leverage the potential pools of in-Canada candidates for immigration across all categories, such as temporary foreign workers, top talent students, and protected persons – those likely to transition to permanent residence – to help uphold immigrant admissions.
Efforts to attract, select, settle and integrate this number of newcomers have broader implications for the labour market and economy, but also for infrastructure, innovation, social services, federal-provincial-territorial relations, and more.
Immigration contributes to growth
As of early 2020, approximately 82% of Canada’s population growth was attributed to immigration (permanent and temporary), compared to 44.3% of the population growth in the early 1990s: this is anticipated to increase to 100% by the 2040s.
In 2019, the OECD ranked Canada as the number one most attractive country for entrepreneurs. Immigrant-owned firms had a higher level of net job creation per firm, and were more likely to be high-growth firms than those with Canadian-born owners.
Shifting labour market
Canada has a variety of economic programs designed to balance immediate labour market needs with successful labour market integration over the long term. Despite – and due to – the pandemic, labour shortages continue in some sectors and employers are seeking immigrants to fill jobs.
Canada’s high skilled immigration programming, managed by the Express Entry system, emphasizes the importance of selecting individuals with high human capital.
Research supports an emphasis on core/transferable skills and abilities like official language proficiency, post-secondary education, and Canadian work experience, as they are predictors of economic integration. Workers with these skills are better able to adapt to evolving labour market needs over the long term.
The last decade has seen an expansion in the number of permanent economic immigration programs to include streams and pilots across various skill levels, in an effort to be responsive to changing economic conditions, stakeholders, regions, and government priorities.
A rising number of temporary foreign workers and their increased transition to permanent residency has led to an expansion of two-step selection in Canada. More economic immigrants are selected from former temporary foreign workers. Transition from temporary resident to permanent resident status grew by 33K between 2016 and 2019 (55% increase).
Immigration to benefit regions
Almost 60% of labour migrants who arrived between 2006 and 2016 settled in Montréal, Vancouver, or Toronto. However, secondary migration outside big cities is increasing, with the percentage of economic principal applicants settling outside those cities three years after landing growing from 34% in 2015-2016 to 39% in 2017-2018.
Over the past 15 years, the share of recent immigrants in the Prairie and Atlantic provinces more than doubled. Regional immigration supports initiatives like the Atlantic Growth Strategy, and Francophone immigration (Canada has a 4.4% target for French-speaking permanent resident admissions by 2023).
The Provincial Nominee Program, Atlantic Immigration Pilot Program, Rural and Northern Immigration Pilot, and Quebec’s immigration programs, help spread the benefits of immigration across Canada. The recent introduction of economic pilot programs are aimed at testing innovative approaches to respond to labour market needs.
As of 2014, 83% of Provincial Nominees admitted between 2002 and 2014 were still residing in their province of nomination. While these migrants have a lower skills profile than federally selected migrants, their employment rates tend to be higher.
Immigrant settlement and integration
All permanent residents are eligible for IRCC-funded settlement services (e.g. language training, community connections, employment-related services) to support their social and economic outcomes and to help them successfully integrate into Canadian society. In 2019-2020, investments totalling approximately $785M (outside Quebec), funded more than 500 third-party settlement service provider organizations across Canada.
Labour market attachment is both a key indicator of and an important contributor to newcomers’ successful integration to Canada. Current employment-related settlement services help immigrants and refugees overcome newcomer-specific barriers in accessing and contributing further in the labour market.
Strong settlement services provide newcomers a solid foothold and opportunity to contribute to Canada’s economic recovery in the medium-to-long term.
Supporting facts and figures
The Canadian population was 30.7 million people in 2000, and is projected to grow up to 38.7 million as of July 1, 2022 (this includes temporary residents). Roughly 22% of the Canadian population is foreign born, the highest in the G7 (2016 census data).
Birth rates are decreasing, currently at 1.47 (2019) down from 1.61 (2011). The share of the population 65 and older is increasing and the share of the working age is falling. The worker to retiree ratio is currently 4:1; this will be 2:1 in less than 20 years.
According to the Conference Board, maintaining the immigration rate around 0.8% would result in the highest rise in real GDP per capita. Increasing annual immigration toward 1% by the 2030s would support modest labour force and economic growth. Increasing immigration to 1.1% per year would result in greater fiscal challenges as it would lead to higher social expenditures.
While there is a slight benefit to GDP growth from immigration, there is no significant impact on GDP per capita. This could increase through investment and improvements in labour market integration process like addressing underemployment, language training, and improving foreign credential recognition.
Outcomes of economic immigrants
Economic principal applicants reach – and often surpass – the Canadian average employment earnings in less than five years in the majority of classes. Over time, immigrants overall catch up to Canadian average earnings outcomes, although refugee and family class immigrants require more time.
Canada’s model of selecting immigrants with higher levels of human capital, including education, official language ability, age, and Canadian work experience leads to better employment and higher earnings.
The employment gap between immigrants and Canadian-born workers is narrowing. In 2018, 79.4% of newcomers aged 25 to 54 were in the workforce, compared to 84% of people who are Canadian-born.
Canadians benefit from the contributions of second-generation immigrants. Forty-one per cent of second-generation Canadians had university degrees versus 24% of people with two Canadian-born parents. In 2017, second-generation Canadians earned higher than average employment incomes of $55,500, versus $51,600 for children of Canadian-born parents.
Effects of a recession on immigrants
Immigrants arriving during recessionary times could face depressed earnings growth rate as the first few years in Canada are determinative with respect to future earnings growth.
Immigrants’ earnings tend to increase with more time spent in Canada, though the number of years it takes for average immigrants earnings to converge with the Canadian average varies between the different immigrant groups. The number of years for immigrants’ earnings to catch up to the Canadian average increased during past economic downturns.
In October 2020, the Government tabled the 2021-2023 immigration levels plan, targeting of over 1 million new permanent residents over 3 years (401,000 in 2021; 411,000 in 2022; and 421,000 in 2023). By 2023, immigration levels will account for 1.08% of Canada’s population.
The COVID-19 pandemic is currently impacting levels achievement: in 2020, the projected immigration target saw a shortfall, reaching only 54% of the projected admissions (184,372 permanent resident admissions out of the projected 341,000).
Contributions of Immigration outside Economic Classes
Family Class: Family reunification helps attract, retain and integrate newcomers. In addition to contributing to the social and cultural fabric of Canada, family members help supplement household income as parents and grandparents provide childcare, allowing principal applicants to work longer hours. Spouses and partners often also contribute to the household income.
Refugees: Like other immigrant populations, refugees who resettle to Canada contribute to our social fabric and our economy. Data from the 2016 Census highlighted that refugees who had been in Canada for more than ten years reported participation rates, employment rates, and unemployment rates that closely mirrored the Canadian-born population”. Another study, Labour Market Outcomes Among Refugees to Canada, published by Statistics Canada in 2019, also indicates that with some exceptions, employment rates after five years in Canada were substantial among refugees, while there were variants based on country of origin and sex.
Temporary residents: Canada works hard to retain top talent by facilitating transition to permanent residence. Canadian work or study experience are rewarded.
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