The 20 hours/week cap on the number of hours international students could work off campus (which went back to Harper) was lifted in October 2022, during the post-pandemic recovery, and just went back down to 24 hours/week.
The Economist had an article in April talking about post-Covid immigration in a number of countries, including Canada. Apparently policymakers were worried about labour shortages driving up inflation, but the writer is skeptical. Immigration is surging, with big economic consequences.
Many policymakers have recently argued that migration is helping contain price rises by relieving labour shortages. The list of people to have mentioned or hinted at this association includes Gita Gopinath of the IMF, Jerome Powell of the Federal Reserve and Michele Bullock of the Reserve Bank of Australia. Yet the evidence is weak and may, in fact, point in the opposite direction. Across the G10 there is little correlation between immigration and slower wage growth. Moreover, there is no doubt that immigrants need things as soon as they arrive, boosting demand.
Nowhere is this clearer than in the case of rental housing, which is in short supply across the anglosphere. Research by Goldman Sachs, a bank, suggests that in Australia each 100,000 increase in annual net overseas migration boosts rents by about 1%. A paper by the Bank of Canada in December noted that: “The initial rise in immigration that Canada has experienced is more likely inflationary in the near term.”
Presumably the federal government lifted the cap because people were thinking, students who are already here could work more hours without adding to housing demand. But I would expect that lifting the cap made studying in Canada even more attractive: people go where the jobs are, and full-time work pays a lot more than part-time work.
A talk by Toni Gravelle at the Bank of Canada, in December:
Recent newcomers have helped ease the tight labour market, alleviating critical labour shortages in many sectors. For example, job vacancies have dropped more than 65% from their peak in the finance and insurance sector—a sector that has seen a notable rise in newcomer workers. Overall, job vacancies have fallen more in sectors where the share of newcomer workers is growing faster, though the softer economy may now also be playing a role.
We estimate the boost to consumer spending from the recent increase in newcomers had barely any effect on inflation—less than 0.1 percentage points.
Of course, newcomers don’t just consume goods and services. They also need a place to live, and this is where we do see pressure on inflation.
Most newcomers rent when they first arrive in Canada, which pushes up demand for rental housing and can lead to short-term pressure on rent inflation.
Research shows this pressure dissipates relatively quickly in a flexible, well-supplied housing market. However, Canada’s housing market is not well supplied because of the complex set of structural issues I’ve already noted.
The structural issues that Gravelle noted include:
zoning restrictions;
lengthy permitting processes in many cities; and
a shortage of construction workers.
More
Why can’t Canada just let in more immigrants who can build houses? Kevin Yin, Globe and Mail, December 2023.
Canada’s construction labour shortage. Benjamin Tal, CIBC, June 2023. Tal estimates that 300,000 construction workers will retire in the next 10 years.
Assessing the effects of higher immigration on the Canadian economy and inflation. Staff analytical report from the Bank of Canada, December 2023.
Curtailing labor supply is a terrible way to boost wages. Matthew Yglesias, December 2021. Makes the argument for immigration as a way to counteract post-Covid labour shortages (e.g. from people retiring early), but notes:
The economic impact of immigrants varies based on their skill profile, so it is probably more egalitarian to let in immigrants who are more skilled on average than natives.
When you have very inelastic housing supply, an influx of newcomers can squeeze incumbent residents out of the housing stock, especially if they are relatively high income.
This is why in addition to being obsessed with the benefits of immigration, I am obsessed with the benefits of expanded housing supply — per “One Billion Americans” it’s a seamless web.
The Globe article is cutting - that we are not asking for the right immigrants. I have to hand it to Canada - so popular that we can attract immigrants too educated and skilled to want to go into construction (only 2% do, says the Globe article).
That's a major issue right there.