In two recent speeches on November 10th and 14th, Bank of Canada (BoC) Governor Tiff Macklem spoke to attendees and the media about how immigration may be the key to achieving labour market stability and correcting the course of inflation.
His speeches addressed “the future of workers and jobs” by tackling questions that included:
Focused on explaining how employers can expand the pool of available workers to address issues in the labour market and expanding inflation, the following is a summary of Macklem’s speeches as they relate to the role of immigration in helping balance the Canadian labour market.
Governor Macklem’s initial mention of immigration came as he stressed that Canada’s current labour market has more demand than labour supply.
According to the BoC’s governor, labour shortages have put upward pressure on wages across the country and have subsequently driven inflation up. Therefore, Macklem urges Canadian employers to continue hiring immigrants — and recent immigrants in particular — to meet the rising labour demand and combat inflation accordingly.
“[One] way to rebalance supply and demand is to increase the supply of workers,” said Governor Macklem, adding that “the more we can do on supply, the less we will need to do on demand.” The hiring of more immigrants is expected to help better regulate high wages, which the BoC says is a must because “wages will have to slow to get inflation under control.”
After reviewing the 2020 immigration downturn that Canada experienced during the peak of the COVID-19 pandemic, where the country missed its immigration target by around 100,000 workers, Macklem also noted that “immigration is [now] bouncing back as border restrictions return to normal.”
Evidence of Canadian immigration’s return to normalcy is clear in the country’s latest Immigration Levels Plan for 2023-2025, released on November 1. With record-setting immigration targets exceeding 460,000 total permanent residents each of the next three years — 465,000 in 2023, 485,000 in 2024 and 500,000 in 2025 — Canada is clearly rebounding, and aiming even higher, after slow immigration through the height of the pandemic.
Accordingly, immigration will aid in Canada’s labour market balance, growth, and inflation stability, especially compared to other countries around the world. This is because Canada’s “strong immigration targets suggest that … immigration will account for over two-thirds of the expected growth in Canada’s potential output.”
In other words, immigrants add potential workers to the Canadian workforce, which combats the shrinking workforce participation rate in this country due to our aging natural population and consequently aids in beginning to remedy the economic problems we are currently facing.
Note: The full transcript of Governor Tiff Macklem’s November 10th speech at Toronto Metropolitan University is available on the Bank of Canada website, as is the full video of his November 14th speech at the Conference on Diversity, Equity and Inclusion in Economics, Finance and Central Banking (Part 1 and Part 2).
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