Two of the Conference Board of Canada’s top analysts say record-breaking immigration to Canada has alleviated – not exacerbated – inflation in this country by helping employers get the workers they need and so helping to resolve labour shortages.
In an opinion piece published in the Financial Post, Conference Board vice-president Mike Burt and chief economist Pedro Antunes argue the availability of these extra workers has more than offset any upwards pressure on housing due to extra demand.
During the year that ended in March, the country added 1.2 million new permanent and temporary residents and this year Canada is expected to surpass even that record-breaking number.
In political circles, that’s led many to question the wisdom of high immigration levels to Canada since there have been strains on the country’s housing and social services infrastructure and home prices and rents have gone up dramatically during that time.
Burt and Antunes recognize that burp up in demand for these services due to immigration.
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“Of course, immigration has also added to demand. Strong hiring supported income growth, and immigrants coming to Canada need places to live and spend money on all the necessities of life,” the acknowledge.
“This adds to demand pressures and is especially concerning for rental housing affordability. Such strength in underlying demographic demand is inflationary when there is so little slack in the economy. Taking in so many in such a short period of time has stretched our ability to provide settlement services, affordable housing and other necessities.”
But the two Conference Board experts point out immigration into Canada has helped keep rapidly-rising wages in check and so served to soften inflation.
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“By the end of 2021, Canada’s economy had more than recovered from pandemic job losses, and by mid 2022, the unemployment rate had fallen to a record low of 4.9 per cent, while job vacancies surpassed a million,” they note.
“Inflation was also surging. At first from pandemic-induced effects (supply-chain problems, lagging oil production and unexpectedly strong demand for durable goods) and later from the commodity price surge that followed Russia’s invasion of Ukraine.
“The combined effects of rising inflation expectations and super-tight labour markets became a major concern for our central bank. Given the risk of a wage-price spiral, the Bank of Canada began a series of rapid and sharp interest rate hikes, knowing that inflation would not settle at two per cent with labour markets so tight.”
By providing employers with a pool of workers, immigration dampened the upward pressure on wages.
“The rise in immigration has helped fix our labour market challenge in another way,” they note.
Immigration Provides A Boost To Canada’s Economic Growth
“Rather than beating back consumer spending to slow hiring, we added to the supply of labour. Over the past seven months, despite robust job gains, the unemployment rate edged up from five to 5.7 per cent in October. As well, job vacancies have fallen by nearly a third.”
The two experts conclude that Canada must continue to maintain high immigration levels for the sake of its economic growth.
“Without immigration, Canada’s labour force would be in decline, especially over the next five years as Canada’s Baby Boomers retire in growing numbers. Steady immigration adds to our productive capacity, our GDP and our tax take — enough to offset public-sector costs and modestly improve government finances,” they maintain.
“One thing is certain, if immigration is aligned with our capacity to welcome those who are arriving, it will continue to drive economic growth and enrich our society through diversity, as it has through most of our history.”
In Canada, employers can hire foreign nationals who can gain their permanent residency in the country through Express Entry system’s three federal immigration programs, the Federal Skilled Worker Program (FSW), Federal Skilled Trades Program (FST), and Canada Experience Class Program (CEC), or a participating provincial immigration program.
Through a network of Provincial Nominee Programs (PNP), almost all of Canada’s 10 provinces and three territories can nominate skilled worker candidates for admission to Canada when they have the specific skills required by local economies. Successful candidates who receive a provincial or territorial nomination can then apply for Canadian permanent residence through federal immigration authorities.
Canadian employers can also recruit and hire foreign nationals through the Temporary Foreign Worker Program (TFWP) and the International Mobility Program (IMP).
The Global Talent Stream (GTS), a part of the TFWP, can under normal processing situations lead to the granting of Canadian work permits and processing of visa applications within two weeks.