After coronavirus: Immigrants will be key to Canada’s economic recovery

Kareem El-Assal
Published: April 17, 2020

The coronavirus pandemic is having a devastating impact on economies around the world.

The IMF projects the global economy will contract by 3 per cent in 2020, in what it calls the worst economic downturn since the Great Depression.

Just days before it announced travel restrictions to help contain the spread of COVID-19, Canada said it would welcome over 1 million immigrants between 2020-2022, mainly to help grow its economy.

Of course, little did Canadian government officials know at the time of the announcement that the global economy would be heading towards such a major contraction.

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Should Canada welcome more immigrants?

The current state of affairs may lead one to legitimately question whether Canada should continue with its immigration plan, or scale it back.

There is no doubt that COVID-19 will require Canada to adjust its immigration plan.

However, it would not be sound economic policy to significantly reduce Canada’s immigration levels beyond the coronavirus crisis.

The reason for this is that Canada needs immigrants more than it ever has in its modern history to promote economic growth.

Why Canada needs more immigrants

Canada’s desire to welcome over 300,000 immigrants per year is meant to help alleviate its demographic challenges.

Canada has one of the world’s lowest birth rates and one of the world’s oldest populations. As more Canadians retire, it will struggle to replace them in the labour market since the country is not having enough children. This is where immigration comes in.

Immigration has been the main driver of Canada’s population growth since the 1990s, and will be the only driver of it by the early 2030s.

Population growth is important because it fuels labour force growth. The two ways to grow an economy is by adding more workers and using those workers more productively.

Today, immigration tends to account for all of Canada’s labour force growth, or the vast majority of it, in a given year. This means that Canada would constrain its economic growth potential if it welcomed fewer immigrants.

Canada will see a full economic recovery

The consensus among economists is that the Canadian and global economy should rebound fairly quickly once social distancing measures have been eased.

This means that more Canadians will be back to work, and there will also be more job opportunities for immigrants.

Canada’s economy pre-coronavirus is very telling of what we can expect once the economy is back to normal.

Leading up to the coronavirus pandemic, Canada’s unemployment rate was at record lows and its economy enjoyed a decade of growth following the 2008 global financial crisis. Remember that Canada maintained high levels of immigration even following that crisis, which in hindsight, was the correct economic decision to make.

One significant reason for the low unemployment rate pre-coronavirus is many of Canada’s over 9 million baby boomers were retiring, which caused a shortage of workers as the economy was expanding. This benefitted Canadian-born workers and immigrants alike.

Similarly, Canadian-born workers and immigrants are poised to benefit from the post-coronavirus economic rebound. In the coming years, it is realistic to expect Canada to deal with worker shortages again, and even more so than prior to COVID-19 as all of Canada’s 9 million baby boomers reach the age of retirement within the next decade.

Immigration policy always has long-term economic implications and we should not lose sight of that even in the wake of the coronavirus crisis.

Immigrants will help to create more jobs post-coronavirus

Canada’s economy is facing tough times, but immigration will play a pivotal role in supporting Canada’s economic recovery since immigrants will help to fill newly-created jobs and also support job creation in other ways.

Statistics Canada research shows that immigrants have a high propensity to start businesses. In one of its recent studies, Statistics Canada found that immigrant entrepreneurs created 25 per cent of new private sector jobs between 2003 and 2013, even though they accounted for 17 per cent of companies studied. In other words, immigrant entrepreneurs punched above their weight when it came to job creation.

Hence, immigrant entrepreneurs post-coronavirus will create businesses that will create new jobs for fellow Canadians.

Finally, immigrants bring significant savings with them which helps to fuel the economic activity that is critical to fueling job creation in Canada.

Consider the useful proxy of international students. According to the federal government, the over 600,000 international students in Canada contribute over $22 billion in economic activity each year which supports nearly 200,000 Canadian jobs.

Canada has over 8 million immigrants, who make an even bigger contribution to economic growth and job creation than international students.

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Kareem El-Assal is the Director of Policy & Digital Strategy at CanadaVisa.

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