Canada is winning when it comes to attracting immigrants, but failing to use its windfall. That was the take from RBC examining the immigration boom that makes up nearly all growth. In an email to investors, they explain the immigrants are younger and better educated than Canada’s domestic workforce. However, they were more likely to be overqualified for their job, and have worse housing. If Canada doesn’t correct course, it risks exacerbating the issues it’s trying to solve.
Canada Is Winning The Immigration Talent Lottery, & It Needs It
Canada is pursuing an aggressive immigration plan, and it’s been very effective. The country averaged 7 immigrants per 1,000 people from 2010 to 2019. It tops the G7, beating the US that previously held the top spot before Canada. It’s a good thing too, because Canada is a demographic time bomb.
Canada is hoping immigrants can resolve its upcoming demographic cliff. In 2021, immigration accounted for 90% of the country’s population growth. By 2050, Statistics Canada estimates 100% of growth will be based on immigration. If immigration fails to keep up, deaths would easily outpace births.
That aging population is also leaving a skill gap, as they begin to retire. Canada is targeting 1.5 million immigrants over the next 3 years. It’s also hoping that half of them are economic migrants, bringing their skills. That should help with the near-record job vacancies, and slow wage-related inflation. However, it’s not as easy as it sounds—immigrants also introduce demand and dependents.
“Indeed, new immigrants can fill open positions, but they also increase demand for housing and consumer goods which in turn raises demand for labor,” writes Nathan Janzen, assistant chief economist at RBC, Canada’s largest bank.
Adding, “higher levels of immigration alone won’t ‘fix’ longer-run structural labor supply issues—but they’ll help. They could help even more if immigrant skill sets were better utilized.”
Canada’s Immigrants Are Better Educated Than Its Local Workforce
Canada is the winner of the immigration lottery—they’re young, and well educated. The bank’s analysis shows over a third have advanced degrees, such as a bachelor’s degree or higher. This contrasts with just a fifth of the domestic workforce having an advanced degree.
Immigrants are also more likely to have studied in areas that drive innovation. “Immigrants with higher education are also more likely to have majored in STEM-related fields (science, technology, engineering and math) than their non-immigrant peers,” writes Janzen.
Canada Is Winning, But Its Immigrants Are Losing
Unfortunately, like many lottery winners, Canada wasn’t prepared and is squandering its windfall. Immigrants are more likely to be underutilized, or overqualified for their job. The share of underutilized immigrants (29.8%) is much higher than non-immigrants (4.5%).
Canada’s Highly-Skilled Immigrants Are Overqualified For The Jobs They’re Getting
The share of workers overqualified for their job by immigration status.
Source: Statistics Canada; RBC Economics; Better Dwelling.
“By our count, immigrants with a degree in those fields are six times more likely to work in jobs that do not require related training,” said Janzen.
“Proper integration of their skills could help address worker shortages, add to a more productive labor force and offset increased pressure on inflation and housing.”
Canada’s Immigrants Are Also More Likely To Face Inadequate Housing
Speaking of housing, Canada’s immigrants are more likely to face the brunt of its crisis. Immigrants (16%) are more than twice as likely as non-immigrants (7%) to live in an unsuitable dwelling. Shelter poverty, spending over 30% of income, was also more likely for immigrants (21%) than non-immigrants (13%). Another issue that underutilization likely plays a major role in.
Canada’s Immigrants Are More Likely To Have Inadequate Housing
The share of non-immigrants and immigrants facing shelter poverty (costs are 30% or more of income), and unsuitable dwelling (inadequate or unaffordable).
Source: Statistics Canada; RBC Economics; Better Dwelling.
The bank suggests policymakers work on labor utilization to tap the immigration windfall. Policies tend to favor migrants with impressive credentials. However, the domestic job market doesn’t recognize those skills. Attracting an accountant is great, but irrelevant if they’re stuck doing general labor.
“Proper integration of their skills could help address worker shortages, add to a more productive labor force and offset increased pressure on inflation and housing,” says Janzen.
