Balance Crucial When Setting Canada’s Immigration Levels

Economist William Watson discusses the impact that Canada’s current and future immigration levels will have on the country’s infrastructure, healthcare, and economy in a recent Financial Post column.

“Nobody opposes some level of immigration,” writes Watson. “The question is: how much?”

In attempting to answer that query, Watson brings forth a recent study by TD Economics.

He argues that although it is commendable of the researchers – Beata Caranci, James Orlando and Rishi Sondhi – to engage in debate on the benefits of immigration, it is hard to calculate an optimal level.

“People will disagree – perfectly reasonably – on what, and how big, the benefits and costs are, how they may change as more people come, and what the discount rate should be.”

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Watson says the TD Economics researchers were optimistic in believing that they could find the right “balance” of immigration.

However, he adds that there is merit to their study when it comes to describing some of the high costs of immigration.

For example, maintenance of a high immigrant inflow would create a requirement for 500,000 more housing units over the next two years, which is far above the capability of the Canadian construction industry.

Watson also highlights the example of healthcare, an area in which Canada ranks 31 out of the 34 OECD member countries when considering acute care hospital beds per capita in 2019.

The number of beds is not increasing, however, the number of people requiring them is skyrocketing, thanks to immigration.

Watson next sheds light on immigration’s impact on the econo-strategic purposes it is set to achieve.

While the purpose of high immigration levels is to attract a young and skilled workforce that generates government revenue for funding healthcare and retirement incomes for the ageing Canadian population, Watson argues the results scarcely align with the goals.

Forty percent of people in the ever-expanding temporary foreign worker program operate in agriculture, forestry and fishing, and another 15 percent in accommodation and food. Although these are jobs in heavy need of workers, Watson highlights, they are light in terms of tax revenue.

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Last, Watson tackles the question of interest rates, and how immigration could possibly increase them.

Despite raising the economy’s capacity over time, immigration boosts demand in the short run – “which is the last thing we need as we fight inflation.”

To keep that in control, the Bank of Canada may have to keep interest rates 50 basis points higher than if immigration rates were lower. This would only hinder the capacity to build new housing or infrastructure.

William Watson’s main point is that his stance on immigration’s impact on Canada must be debated and he, does not want Canadians and policy makers to shy away from having that debate.

He emphasizes that it is not racist to question the impact of immigration, and it is not anti-immigrant to question Canada’s immigration targets. Instead, immigration should be treated as a policy issue that requires critical consideration.

This is especially important as Canada’s newly minted immigration Minister Marc Miller, is set to table Canada’s 3-year immigration levels later this year.