Economists recommend inviting more skilled newcomers to Canada

A recent report released by Desjardins Economic Studies highlights the benefits of welcoming skilled newcomers to Canada.

According to the report, “Canada should continue to welcome newcomers who can help fill labour shortages in the construction sector. However, we should also be mindful of hurdles preventing workers from contributing to their full potential. In particular, we should think about how to reduce discrimination and harassment in the construction sector.”

This recommendation comes as Canada experiences a historic housing affordability crisis, driven in large part by a lack of supply to meet the demands of a rapidly growing population.

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In the third quarter of 2023, Statistics Canada released data showing that Canada’s population had reached 40,528,396 people. This was an increase of 430,635 over the previous quarter and over 500,000 since the milestone of 40,000,000 reached in June 2023.

The challenges this poses to maintaining housing affordability in Canada are well documented. The Canada Mortgage and Housing Corporation (CMHC) estimates that Canada will need 3.5 million more units on top of what is already being built to support the country’s current and growing population.

In the meantime, the most recent data from the Canadian Real Estate Association shows that the average price of a home in Canada is $657,145 as of December 2023. However, it is much higher in densely populated cities such as Toronto or Vancouver where homes are often priced at over one million.

Non-permanent residents not working construction

The Desjardins report says that among the top 20 employment industries in Canada (in terms of the number of people working within the sector), construction is in the fifteenth position.

Further, using data from Census 2021, the report found that non-permanent residents (NPRs) and immigrants made up less than 22% of Canada’s construction workforce.

This demonstrates that there has been little growth since similar data was collected in 2019 and it was found that 21% of newcomers worked in construction occupations.

Further, a recent Bank of Canada report found that just “5% of employed NPRs (or 3% of total NPRs) go into construction as their main job.” This means NPRs are the fastest-growing segment of the population, but they are not working in construction jobs.

Costs and productivity also a factor

The report says that increased immigration is not the only factor involved in the housing shortage. For example, it notes the cost of building materials is at a 10-year high. This is exacerbated by supply-chain disruptions throughout the COVID-19 pandemic and now high interest rates.

CMHC estimates that high costs will cause some 40% of residential developers to reduce the number of future projects while over 30% will “put new projects on the back burner.”

The housing sector is also impacted by low productivity. Desjardins says that productivity in the sector has been flat or declining and has some suggestions on how to increase production to meet demand. One of the suggestions is to create a catalogue of pre-approved building plans. This is a strategy that has also been endorsed by Canada’s Minister of Housing, Sean Fraser.

Preapproved plans for houses in Canada should cut down on the time it takes to get municipal approval and to get financing.

More strategic immigration

In the end, the Desjardins report recommends that Canada should become more effective in welcoming newcomers in the construction sector. It notes that in 2022, just 455 new permanent residents became permanent residents through the Federal Skilled Trades Program (FSTP). There were no Express Entry draws for FSTP candidates in 2023.

A report by the Royal Bank of Canada (RBC) echoes this sentiment, saying that “Canada needs to be more strategic in selecting immigrants – and temporary residents who often become future immigrants – with the strongest long-term economic prospects, including those outside highly-educated fields.”

Immigration, Refugees and Citizenship Canada (IRCC) says it is working to invite skilled newcomers to help in sectors that are dealing with a labour shortage. In May 2023, IRCC introduced category-based selection draws for Express Entry candidates with a human capital attribute or occupation that is in-demand in Canada. One of the categories is for candidates in trades occupations. However, IRCC held only two draws inviting these candidates, issuing a total of 2,500 ITAs for Express Entry candidates with experience in a trades occupation.

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