What’s driving Canada’s ‘population trap’?

69

In 2023 Canada’s population hit 40 million it Rose by 1.2 million people in just the last year and the year before that it grew by 800,000 people Canada’s population is one of the fastest growing in the world but our standard of living isn’t keeping up earlier this week

National Bank released a report warning that Canada is caught in a population trap Matt Lundy is an economics reporter for the globe he’s here to explain what that means how we got here and what experts say needs to change I’m Mana caraman Willams and this is the deciel from the globe in

Mail Matt it’s great to have you here thanks for having me so our population has grown rapidly really over the past year especially actually uh how uncommon is that kind of Rapid population growth for Canada quite uh quite unusual I would say so over the past year roughly we’ve

Grown by about 1.25 million people that’s 3.2% and we’ve not seen that rate of growth since the late 1950s that was back in the baby boom essentially so this is you know what’s normal is usually around 1 to 1.5% we’ve really swung up especially in the past year or

Two and so yeah so this is the last year is in a particular big number but this is actually a bit of a trend if we go back a year or two even before that as well yeah like things things swung up a little bit as the Liberals first came

Into Power uh under Trudeau but it was fairly gradual I would say they wanted to increase the number of permanent residents that were coming in every year where we’re really seeing the growth though is in this temporary resident category that’s temporary foreign workers and students just in the past

Couple years the number of temporary residents in the country has basically doubled so that is really driving overall population growth um can we talk a little bit about what’s happening though because immigration has been important to Canada for a long time right what is what is the difference

Now the difference now is that we’ve had this very sudden upswing uh which in part I would say was cted by the federal government a lot of companies were talking about labor shortages around 2020 as we were reopening from the pandemic as well as in 2021 they geared

A lot of their policies to making it easier to recruit people from abroad but then we also have this sort of cross jurisdiction issue as well where uh we have these colleges and universities that are regulated by provincial governments as well as study visas that are approved by the federal government

And it’s just kind of gotten out of control no one’s really been looking at it and we’ve had this huge upswing in numbers uh and really it’s putting a lot of stress on the system and you touched on this a bit but but let’s just make this distinction I guess between

Permanent residents and temporary foreign workers temporary residents can can you remind us of the difference there yeah so permanent residents it’s pretty much right there in the name they can stay indefinitely in the country and often when people talk about immigration that’s the people who they are referring

To temporary residents are a different category they have a Visa there’s going to be an expiration they’re going to have to leave at the end of that many of those people want to become permanent residents and we’ve seen this really big swing upwards in the number of temporary residents and frankly there’s probably

Going to be a bit of a log Jam where a lot of them are are going to be frustrated they’re not going to become permanent residents and again you kind of alluded to this a little bit here but it sounds like there’s a there’s a business case for why we’ve increased immigration

Ation so heavily is is that kind of the the reason behind it the way that it’s often framed by the federal government is that we had no choice here like from an economic standpoint it was clear that we were aging rapidly as a country and at a time when all of the industrialized

Countries in the world are facing huge demographic challenges we are extremely fortunate as a country that we have the social capacity to welcome immigrants we have Labor shortages if we want to support all these seniors uh we’re going to need more taxpayers basically that has been the argument

From the federal government and it’s one that I think a lot of people have really bought into in the public but I think over the past couple years we are seeing shifting opinion on this and in quite a lot of critiques over what they’re doing

But that is the case they make all right so so let’s get into this uh so a report released by National Bank earlier this week said that Canada is in a situation now known as a population trap so so Matt what does that mean a population trap is a fairly

Obscure economic term I would say but it describes a situation in which the population is growing so fast that it can’t improve living standards specifically we are not investing in the economy at the same rate as people are being added to it and specifically they’re talking about Capital

Investments so what is capital capital is all this stuff that we need to do our jobs basically so it could be software that you rely upon uh it could be Machinery at a factory it’s all sorts of stuff that we use to produce goods and services now countries with high levels

Of capital and strong business investment they tend to be richer countries the problem is that Canada is not investing a lot and really this is an is issue that goes back decades like literally you can find articles lamenting how bad business investment is in Canada in like the 1980s in the globe

So this is something we’ve been grappling with for a long time now you throw in a huge population boom and it’s creating really difficult uh circumstances for the economy where we’re just not in a great growth period right now this is a little bit jargony but I think this is important to to

Touch on like economists are looking at something called real GDP per capita right and and that number is about the same as it was in 2017 so can you break that down like what what does that mean and why is that important yeah real GDP per capita is economic output per person

Uh a lot of people use this as sort of like a proxy or a standin for living standards in a country it’s it’s how much we produce and of course labor gets a share of income so if you’re producing more it bodess really well for your living standards for your income and

That sort of thing the problem right now is that Canada has been in a long period of economic stasis on a perp person basis so the overall numbers they’ve typically been growing but per person the economy has stagnated another way of looking at this is something our

Colleague Tony Keller used in a column which is that the number of forks in the economic Pi is growing faster than the P itself that means we’re all taking a smaller bite out of that P and of course we should make it clear critics themselves are saying this is this is a

A policy failure right it’s not the fault of people coming to Canada yeah that’s a clear distinction to make we’re not blaming immigrants here we want to keep the focus on the decisions that got us in this place okay so you also talked about investment as part of this so if

If part of the problem is not enough capital investment to keep up with what we need uh I guess why is that why don’t we have enough business investment in in Canada I think part of the issue is that we have really uncompetitive indust indries um if you look at so many things

Whether it’s Airlines banking groceries or whatever we usually just have a few or a small handful of companies that dominate in them so one thing could be opening up uh the Canadian Market more to foreign competition that would spur more investment as well that would ultimately better be better for

Productivity but another thing you know at least as it relates to immigration is that over the past couple of years we have been helping companies out a lot we’ve been telling them you’re talking about a shortage of Labor we’ll help you bring in workers from abroad we’re going

To expand the temporary foreign worker program we’re going to allow foreign students to work as many hours as possible off campus and this the type of thing where you know if you can get a worker at $15 an hour let’s say depending what the minimum wage is in

Your Province that’s often a lot cheaper than investing millions in new equipment or new software that would make your company more productive so a lot of economists have been criticizing the government on this front that they are making the cost of Labor frankly a lot cheaper than it should be

The report we’re talking about comes from National Bank uh but Matt they’re not the only ones talking about this right what are economists elsewhere saying about Canada’s level of immigration there was an event last week where all of the chief economists at the major Banks and Canada uh were speaking

And they’re all very very critical about immigration policy in this country usually they’re pretty conservatives talking about this stuff they don’t really want to court controversy or say something that might be misconstrued let’s put it that way but there was a lot of criticism so one thing um the

Chief Economist at TD Bank she said that Canada had really screwed things up because we have this really favorable position where we share a huge border with the us we don’t have the same migration issues that they deal with we’re surrounded by three oceans as well

We really pick can choose who we want to come into the country and even with those advantages she said that we’ve screwed things up um as well the chief Economist at CIBC he just said the numbers don’t add up if you look at how many homes we build versus how many

People we’re bringing in now it’s a total disconnect and he he really said that we need to reain things in we’ll be back after this message Canada’s in this specific situation this population trap I I wonder are other countries also facing this how common is

This as far’s population trap I mean I I would imagine Canada is in a fairly unique situation for countries that resemble it uh they mentioned National Bank that population traps are typically something you see in emerging economies countries that are frankly not as wealthy as Canada is and if you look at

The numbers like Canada is growing like five times faster fter right now than the average oecd country way faster than other G7 countries uh we are really out there in rare territory for how fast countries are growing right now why is it that wealthier countries often don’t

Get stuck in this situation well one they probably have stronger business investment like if we look at peer countries like the US the US invests way more than we do so that is very helpful for their economy but Canada is you know on one hand we’re a desirable place

Where a lot of talent wants to go to that is a huge advantage that we have but we’ve probably not had strong oversight on certain aspects of our immigration policy yeah so it sounds like countries that usually get into a population trap this is often due to to birth rate then

But this is not how Canada got here yeah exactly like if you’re looking at quickly growing countries that end up in some sort of population trap again mostly emerging economies higher birth rates can does not have a huge birth rate right like it we are growing as a

Country like 98 99% of our population growth is from immigration so Canada is in this population trap because of really high levels of immigration uh in particular we talked about temporary foreign workers Matt uh I’m wondering do we know how Canadians are feeling about immigration these days they don’t feel

As good about it as they used to in the fall uh there’s this polling company called environics and they ask Canadians about immigration every year they found that 44% of Canadians felt immigration levels were too high a year earlier it was 27% so you know a pretty notable

Uptick on that front and there are other surveys that show even a slight majority of Canadians now think immigration is too high and the reason for that is that they’re tying it to a lot of the affordability issues that we’re seeing in the country so I think that gets into

Complicated ter territory how much can you really blame immigration for a lot of the issues that we’re seeing like we’ve not been building enough homes for decades now even before we were talking about these issues with immigration at the same time having a short-term spike in demand is not helping either so we’ve

Talked about what a population trap is but but let’s look more broadly at the implications of this mat uh what’s the impact on on housing Healthcare and access to Services I mean I realize that’s a big question but but what do we tend to see well one clear thing right now is that

Like rent inflation has gotten completely out of control and it correlates pretty strongly with the sort of population growth that we’re seeing we also are seeing lots of issues with Access to Health Care again this is stuff that we were talking about for the pandemic these are long-standing issues

In Canada but again you add that much demand to the situation and it’s really not helping so it seems like there are a number of problems that are have been caused here Matt what are some of the solutions to how Canada breaks free from this population trap I guess I wonder

First about economists what what are they calling for one thing they would like to see is to rein in some of the temporary resident growth that we’ve seen whether through workers and I think especially International students as well when you have the immigration Minister Mark Miller talking about how a

Lot of these institutions are quote unquote puppy mills uh that they’re turning out these bad degrees it’s a bad education it’s really just part of this immigration system where you pay for a couple years so you can get a three-year postgraduate work permit to hopefully stay in the country permanently like

Something you’re talking about foreign students coming into universities things have things have gone out to control on that front it it looks like we’re heading toward about 900,000 um International students in Canada as of last year that’s grown a huge amount in that National Bank report

They actually put a number on what they thought was an appropriate level of annual population growth for this country and there’s only 300,000 to 500,000 people per year which again 1.25 million is the most recent annual number that we saw that would require wholesale changes to what we do I mean the number

Of permanent residents that were slated to bring in next year is 500,000 that’s already at the upper limit uh another thing as well would be on the temporary foreign workers side we’ve made it very easy for companies to hire uh International workers at low wages um do

We want to be bailing out that side of the economy do we want to be creating a lot of low-wage jobs in this economy that’s something that could possibly be short up as well another aspect of this as well is the federal government sets Targets on permanent residents they

Don’t do that type of thing for temporary residents so that’s another factor in why this growth has become so explosive is that we don’t really have those parameters people still need to get work or study visas to come in the country they need to prove that they have sufficient Financial Resources for

Example to come here we in fact refuse quite a lot of people on Visas so it’s not just like anyone who wants to come into Canada can do that but on the other hand we don’t have those sorts of limits or parameters around it but I don’t

Think we can forget the fact that business investment has been crummy for a long time in this country and thinking of ways to incentivize companies to invest that would help our economic capacity as well and of course a lot of this does come down to government policy

As we’ve we talked about what is the federal government doing in response to this Matt well let’s say on the investment side like the federal government is trying to get way more home building out there um they’ve removed some taxes on the construction of purpose built rental units which

Which should be pretty helpful and in fact there are some developers that have said we’re going ahead with projects because of this move as far as the demand side of things in population there’s been a little tinkering around the edges um they’ve doubled the financial resources uh that

International students need to come into the country for their visa approval but really it’s been so far a lot of talk they’ve said that things have gotten out of control they’re prepared to act into reain in temporary residents they’ve mentioned the possibility of a cap on the number of international students

With visas so it feels like something is coming and that we are going to see more on the demand side happening this year so just lastly here Matt what will you be watching for over the next year how how will we know if we’re you know making moves to get out of this

Population trap what I’ll be watching this year first and foremost I think it’s going to be on that demand side of looking at what is happening with population Dynamics if anything in the past few months we’re continuing to accelerate are we going to see some moderation there are they going to re in

Uh the number of temporary residents that would be interesting and I’d be looking at where does labor policy intersect with business investment are we going to tell companies hey we’re not going to give you a limitless amount of low-wage workers here we’re not going to give you that access we’re going to need

You to invest instead so the spring budget would be an area where maybe we see some moves to encourage companies to invest more I’d be looking at that I don’t know if there’s going to be some day where we say hey everyone we’re out of the population trap uh but we can

Look at those dynamics of investment and population growth for signs that things are maybe trending in a better Direction Matt thank you so much for walking us through this today thank you that’s it for today I’m Mana ramman Wilms mik Stein produced this episode our producers are meline white Cheryl

Sutherland and Rachel Levy McLaughlin David Crosby edits the show Adrien Chung is our senior producer and Angela Penza is our executive editor thanks so much for listening and I’ll talk to you tomorrow

Canada is one of the fastest growing countries in the world ( and in 2023, the population officially reached 40 million people. But economists are warning that there’s a price to pay for that growth – that Canada’s living standards and investments in infrastructure aren’t keeping up.

Matt Lundy ( is an economics reporter for the Globe, and he joins the podcast to explain why Canada’s policies have led to a ‘population trap’ ( and why Canada’s immigration rates have soared.

Questions? Comments? Ideas? E-mail us at [email protected] (mailto:[email protected])

Reference

LEAVE A REPLY

Please enter your comment!
Please enter your name here