The immigration surge that has driven record population growth over the past couple of years represents a strain on housing and infrastructure right now, but could also hold the key to reviving productivity growth in the years ahead, according to CIBC World Markets.
In a new report, CIBC economists examined the impact of Canada’s recent rapid population growth — which has surged by 3.2 million since mid-2021. It is up 5.6 million since late 2015.
“The Canadian economy was able to avoid a full-blown recession only due to the meteoric ascent in population growth in the past few years,” it said.
Yet the influx of new arrivals has also strained the country’s infrastructure, given that most new arrivals are aged 15 to 54, creating immediate unanticipated demand for housing and public services.
“With the sheer scale of the population/capital mismatch in Canada, the public backlash was both predictable and inevitable,” the report said.
Moreover, the rising share of temporary foreign workers in the labour force has weighed on productivity, given that they tend to work fewer hours, in lower-paying jobs, than permanent residents.
At the same time, this addition of younger immigrants has upended Canada’s long-term population aging trend, which may prove to be a strength in the long-term, the report noted.
“The youth dividend Canada is currently enjoying might, in time, prove to be a major asset,” it said.
“[F]rom a longer-term perspective, retaining and integrating current immigrants and [non-permanent residents] would result in stronger potential growth and improved productivity, as more new arrivals find employment closer to their skill level or add to their skillset,” it said.
“If as a society we manage to create the conditions for better integration of [non-permanent residents] in the labour market over time, we should be able to reverse the negative trajectory in productivity growth of the past few years,” it concluded.