What’s the right number of newcomers to welcome to Canada?: Desjardins
Canada is pushing for record immigration as the country deals with a labour crunch and an aging population, but a new report from TD Bank suggests there may be unintended consequences if economic and social infrastructure growth does not keep pace.
Last year, the federal government announced a plan to welcome 500,000 new immigrants per year by 2025. The country’s population has already grown by 1.2 million people in the last 12 months.
While the growing population is positive news for the labour market and economic growth in the country, the TD report suggests this growth creates new challenges in several areas, including housing, infrastructure and healthcare.
“While population growth is a good thing and a necessary remedy to aging domestic demographics, the benefits erode if it occurs too fast relative to a country’s ability to plan and absorb new entrants within the economic and social infrastructure,” the report states.
“To set the country up for success, policy needs to be balanced in ensuring an appropriate infrastructure is in place to bring the best out of workers and families. This way the economic pie won’t just grow in size, but the quality will increase as well,” it continued.
TD estimates the housing shortfall could reach 500,000 units in just two years, and government policies meant to speed up the construction process are unlikely to fill the gap.
The report estimates that even if population growth reverts to the long-term average, Canada will still have a housing shortage of about 150,000 units.
“In other words, housing supply will struggle to keep pace with Canada’s rapidly expanding population under each scenario,” the report states. “A meaningful improvement in affordability will likely remain elusive.”
In addition, TD Bank estimates the Bank of Canada will need raise the neutral level of interest rates by 50 basis points to counterbalance the government’s immigration targets.
Issues aren’t limited to housing. TD found that Canada already struggles when it comes to acute hospital beds per capita and further population growth is likely to exacerbate the issue.
“While the right hand has been solving for labour market shortfalls, the left hand has not put in place the appropriate infrastructure to absorb this large influx of people, particularly if the intention is for a continuation on a longer-term basis,” the report states.
LABOUR RED TAPE
Even addressing labour could be an issue, as many newcomers are often given less-skilled positions despite their prior qualifications, the report said, and policies to reduce red tape could take years to implement before the workforce sees any changes.