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Canada’s Immigration Strategy Bolsters Economy

Population Growth and Economic Strategy

Canada leads industrialized nations in attracting immigrants to address declining birth rates and an aging workforce. With a population exceeding 40 million for the first time, Canada expects continued rapid growth as it welcomes more immigrant workers, refugees, and international students. Immigration is positioned as an economic policy, with a points-based system in place since 1967 to attract skilled workers based on age, education, job prospects, and language proficiency.

Expanding the Labor Market

Facing intensified global competition for skilled labor and labor shortages due to aging populations, Canadian Prime Minister Justin Trudeau’s government views mass immigration as a means to expand the labor market. Usha George, a professor of Canadian immigration policy, highlights the need for increased immigration to support growth in agriculture, industry, and technology.

Government Targets and Record Arrivals

The Trudeau government aims to add approximately 500,000 permanent residents annually. Last year, foreign students, temporary workers, and refugees accounted for a larger group, resulting in a record 1 million arrivals. Canada’s annual population growth rate of 2.7% is the fastest among developed economies. Immigrants now comprise nearly a quarter of Canada’s population, the highest proportion among G7 countries.

Economic Impact and Central Bank Response

Canada’s immigration policy has yielded clear benefits, with population growth driving employment and consumption. This has enabled the economy to resist pressure from the Bank of Canada to raise interest rates, leading to the unexpected restart of tightening operations this month.

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Challenges: Regional Disparities and Living Standards

While Canada’s population grows at an unprecedented rate, the challenge arises in promoting economic growth in rural areas in need of new immigrants while alleviating population pressure in urban areas. The government’s immigration plan has faced criticism, suggesting that raising immigration targets may only increase economic output without improving individual living standards, particularly in the context of Canada’s long-standing hot housing market.

Concerns Over Economic Indicators

Canada’s per capita real GDP has remained stagnant over the past decade and is projected to decline from its peak in 2022. Stagnant productivity growth and a lack of disposable income keeping pace with rising house prices contribute to concerns.

Even economists traditionally supportive of immigration now argue that Canada may have pursued an excessively rapid expansion.

As Canada navigates its immigration strategy, striking a balance between sustaining economic growth and addressing regional disparities and living standards remains a pressing challenge for the government.

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