How Has the Recent Surge in Population Growth in Canada Affected Productivity

This report makes the case that the surge in immigration over the last few years, particularly amongst Non-Permanent Residents (NPRs), has contributed to the recent decline in Canada’s productivity. Because the capital stock moves slowly, faster population growth reduces the available stock of machinery, buildings, and natural resources per worker, making them less productive. And because new immigrants and NPRs are less productive than immigrants who have been in the country for a long period of time, a surge in immigration lowers the average quality of the workforce. None of this means that no one in the economy benefits from immigration. Owners of capital certainly benefit when labour is cheaper and more abundant. However, the principal beneficiaries of immigration are immigrants themselves. Given the huge wage disparities between Canada and the developing countries from which the vast majority of immigrants come from, the potential economic gain to immigrants is very large. Governments can improve the economy’s adjustment to the higher immigration through policies to improve the investment climate would help increase the capital stock, and better credential recognition to reduce the wage gap for new immigrants. However, policy action on these fronts can only go so far. Ultimately, it is always going to take some time for the capital stock to catch up with a bigger workforce, and new immigrants are likely to be less productive for a significant period This means that if immigration remains at its current level, it is likely to remain a drag on productivity for some time to come.