Prosperity waning due to Ottawa’s misguided population growth policy

Last week, in response to growing concern about fast-rising immigration levels, the Trudeau government announced it will cap the number of international student permits over the next two years. Canada’s population increased by 1.2 million last year, following a gain approaching one million in 2022, with these increases almost entirely due to immigration.

The most striking feature of the international migration data is the vertiginous rise in the number of “non-permanent residents” (NPRs). They have accounted for most of the newcomers arriving in Canada since 2020, dwarfing the ranks of new permanent immigrants. NPRs consist of temporary foreign workers and international students (many of whom also work), along with smaller numbers of asylum seekers and refugees, together with some of their families. The stock of NPRs has skyrocketed under the Trudeau government, reaching 2.5 million last year. This means one in every 16 people walking Canada’s streets is a “temporary” immigrant; in some large metro areas, the NPR share is significantly higher.

The federal government’s slapdash handling of immigration has caused problems for other levels of government. The dramatic increase of NPRs occurred without any advance notice, coordination or planning with the provinces, let alone the cities where most newcomers settle. After waving the issue away, federal ministers have finally acknowledged that soaring immigration has aggravated the housing affordability crisis and put added pressure on stretched public services. Remarkably, until last week’s announcement, there had been no federal government limit on student visas and no meaningful oversight of the rapidly expanding international education “industry,” which has largely driven the surge in NPRs.

In addition to the effects on housing demand and public services, Canada’s booming population has contributed to an erosion of prosperity, as measured by the value of economic output on a per-person basis. Nationally, per-person GDP fell by at least two per cent last year and is set for a repeat performance in 2024. Canada is getting poorer, even as our population increases faster than in any other developed country.

Why has the Trudeau government been so keen to turbo-charge population growth? The principal reason cited by federal ministers is to offset the effects of aging. Canada is indeed getting older, like every other developed country. Unfortunately, economic research finds that immigration has relatively little impact on the age structure of the population over time. Nor does it have a measurable influence—either positive or negative—on average incomes, wages or productivity. Simply put, most published academic research suggests that neither population size nor immigration are significantly correlated with higher levels of GDP per person.

It follows that Canada’s current economic development strategy—one premised on strong population growth—is unlikely to increase average incomes or living standards. It’s worth noting that many of the most affluent countries actually have small-to-modest-sized populations. According to the CIA World Factbook, of the 25 richest countries as measured by GDP per person, only one (the United States) is home to more than 20 million people. Among the 30 richest countries, just three meet the 20 million population threshold.

Ultimately, prosperity does not primarily depend on population size. It’s far more important for countries to be productive and innovative, to nurture entrepreneurial wealth creation, to build high-quality workforces, and establish and maintain well-functioning institutions. To improve incomes and living standards, Canadian policymakers should direct their efforts to these areas.