\nImmigration in Canada has accounted for all the growth in the labour force for well over a decade, but it\u2019s still not enough to significantly offset the impact of an aging demographic or substantially reduce the structural shortages in the jobs market.<\/p>\n
A big reason for this is that the skill sets that many immigrants bring to Canada and the study fields of international students do not match well with the anticipated longer-term structural needs of the economy. This impairs the prospects for newcomers and, more broadly, the economy.<\/p>\n
Right now, the immigration system may be focusing too much on the labour market’s short-term demands, filling holes in sectors where low-skilled occupations have been experiencing acute shortages since the pandemic.<\/p>\n
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This has led to a surge in non-permanent residents, a strain on housing and social services, and eroded public support for immigration.<\/p>\n
The federal government needs to update immigration policies to focus more strategically on immigrant outcomes and the long-term structural needs of the labour market, while keeping in mind the infrastructure capacity to accommodate newcomers. Addressing this will be key to maintaining economic prosperity over the long run, and Canada\u2019s high quality of life.<\/p>\n
This report will look at how a combination of a mismatch in immigrants’ skills and the labour market\u2019s long-term needs, along with pressure on the country\u2019s infrastructure capacity is leading to negative economic outcomes.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
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Expanding immigration<\/strong> targets to address an aging demographic and meet short-term labour market needs has led to a widening gap between workers\u2019 skills and the abilities needed to address long-term structural labour shortages.<\/div>\n<\/li>\n\n<\/div>\n
Employment from temporary work<\/strong> permit holders including international students is concentrated in sectors with low-skilled occupations, which reduces the incentive for businesses to innovate and invest in labour-augmenting or -saving technology.<\/div>\n<\/li>\n\n<\/div>\n
Canada\u2019s two-step pathway<\/strong> to apply for permanent residency needs greater oversight to ensure the system isn\u2019t being abused by educational institutions and applicants.<\/div>\n<\/li>\n\n<\/div>\n
The stress on infrastructure and social services<\/strong> needs to be addressed to improve economic outcomes for immigrants and their surrounding communities.<\/div>\n<\/li>\n\n<\/div>\n
Canada\u2019s Comprehensive Ranking System<\/strong> needs to be updated to prioritize economic immigrants with higher predicted earnings.<\/div>\n<\/li>\n<\/ul>\nGrowing the ranks of working-age people who have higher earning potential will be crucial to help spread the costs of social support programs such as healthcare. But policymakers also need to meet the challenges of integrating a large and growing number of new immigrants over the medium term.<\/p>\n
Expanding immigration targets<\/h2>\n The push by the federal government to increase immigration to offset the impact of an aging demographic has been successful in strengthening the labour force in the near term.<\/p>\n
Canada\u2019s population grew by a substantial 3.3% in the 12 months to July 2023\u2014the highest rate in more than six decades. The rise was driven almost entirely by in-migration as the federal government raised immigration targets for permanent residents.<\/p>\n
.<\/strong> Natural population growth is falling to the point where by 2030, overall population growth is expected to be fueled entirely by immigration.<\/a><\/p>\nMeeting short-term labour market needs<\/h2>\n\n
The current approach has succeeded in providing a large supply of labour to the Canadian market, but the majority of roles filled have been concentrated in low-skilled occupations.<\/p>\n
The labour force surged 6.8% in the past three years\u2014growth unseen since the early 2000s. More international students are earning money while studying than ever before. In 2000, about one in five had a job. Today, about half are working while studying. Employers were able to tap into a pool of an estimated 1.2 million temporary residents with work permits in fiscal 2022-23. The federal government also made available one-time 18-month extensions in 2023 to people working under post-graduation work permits (PGWP) to further address broad-based labour shortages.<\/p><\/div>\n
However, not surprisingly, employment from temporary work permit holders is concentrated in sectors with low-skilled occupations that have been experiencing acute labour shortages such as accommodation and food services. That may serve the Canadian economy well for the moment, but there is a downside.<\/p>\n
It reduces the incentive for Canadian businesses to innovate and invest in labour-augmenting or -saving technology needed to deal with an aging demographic and keep the economy globally competitive.1<\/sup> The current economic weakness may also have a significant impact on low-skilled occupations with non-permanent residents and recent immigrants likely to disproportionately bear the brunt of job losses.<\/div>\n<\/div>\nMismatch between skills and labour market needs<\/h2>\n The longer-term benefits of the abundantly available labour are also not clear as shortages in multiple fields, primarily healthcare and skilled trades, remain significant despite the increase of workers.<\/p>\n
Almost half (46%) of projected structural labour shortages are in occupations that don\u2019t require a university or college education. That indicates the skill sets that international students are studying do not match well with the anticipated longer-term structural needs of the jobs market.<\/p>\n