Immigration and labor market participation in Canada

Published on: May 13, 2019 | Tags: Canada Immigration, Canada eTA, Canada Work Permit


According to a new study, immigration is bringing a real improvement to labor market participation in Canada and now appears to be one of the best ways forward for future growth. The study has been carried out by the Conference Board of Canada. More specifically, it shows that immigration will be the driving force behind labor market growth over a 22-year period from 2018 to 2040.

Immigration could be ‘the best path’

In combination with efforts to improve under-represented groups participating in Canada’s workforce, immigration is said to be ‘the best path’ to make sure the country will continue to develop and enjoy high standards of living over the next 20 years. The study is called "Can’t Go It Alone: Immigration is Key to Canada’s Growth Strategy," and looks at a number of possible outcomes for the labor market between 2018 and 2040. Conclusions are then drawn.

Over this 22-year period, 9.2 million people from the country's baby boom generation will reach the age of retirement and place increasing pressure on publicly-funded social services within Canada. In 2040, about 25% of the population will be over 65, in comparison to today's 17%. Without an active labor force, economic growth may slow and Canada could face even more pressure to fund the health care needed by its elderly population, according to the study.

Between 2018 and 2040, 11.8 million students will leave school and higher education, providing a significant contribution to the country’s workforce and tax base. However, this will not compensate for the 13.4 million people who are projected to leave the labor market during this time.

Looking at different scenarios

The study reviewed possible scenarios to surmount this likely labor market deficit:

The first scenario envisages no Canada immigration over the 22-year period. However, another possible scenario sees immigration at 1%, with women, indigenous populations and disabled people participating more in the workforce. In a further possible scenario, the study concluded that a combination of increasing levels of Canada immigration and promoting under-represented groups was the “best path forward” for Canada. This would increase the labor market by 5.9 million. The country's GDP would be predicted to grow by 1.9% between 2018 and 2040.

The study notes that this situation would benefit the country's economy and promote economic development. Further benefits would include a reduction in poverty and improved social cohesion and inclusion. In terms of immigration, this scenario would continue to support the positive, forward-thinking plans already in place such as the multi-year immigration plan and more generally the Canada visa and Canada ETA systems. Canada visa, Canada ETA and work permit facilities allow many individuals with different purposes to visit the country every year.

Immigration at 1%

If Canada immigration were to reach an annual level of 1% of the country's population by 2030, this would be “a formative solution” for the predicted labor market shortages, according to the study. 1% would account for a net workforce growth of 3.7 million workers — and a third of the country's economic growth rate over the next twenty years.

Based on just 1% immigration, Canada’s workforce would stand at 23.3 million by 2040 in comparison to 19.8 million as at 2018, according to the study. Improving the participation of underrepresented groups would add approximately 2.2 million to the workforce and $101 billion the economy by the time 2040 arrives, boosting Canada’s labor force to 25.5 million by this time.

Reliance on a certain level of immigration

Conclusions that can be drawn from the study show that while an emphasis on the country's unemployed and underemployed categories is important, the strategy of re-integrating these groups alone cannot meet Canada’s labor market requirements over the longer term.

There are not enough Canadians in the future to meet labor market needs. Therefore, the country will have to rely on immigration to drive its labor force and economic growth.

The 2019 to 2021 immigration levels plan put in place by the government addresses this demographic challenge. It will see Canada attaining an immigration rate of slightly more than 0.9% by the third year. Also, it is important to bear in mind that new arrivals will only be one element of the contribution that immigration will make to Canada’s labor market growth in the near future. Additionally, many of the 11.8 million joining the labor market between 2018-2040 will be the children of immigrants.

So, future immigration will pay a true dividend when taking into account future generations with an immigration background. A most important factor is that these future generations will be Canadians within the labor market. Their strong performance will help the country's economy to grow and thrive.