Population growth: from >1M to 350,000
Marc Miller announces plan to reduce total temporary residents
What’s going on with Canada’s population growth?
There’s been a kind of fight over the steering wheel. The federal government controls the number of new permanent residents, but up to now, not temporary residents. In particular, international students are considered temporary residents, and their numbers have been controlled by the provinces. Post-Covid, Ontario has been bringing in international students in unsustainable numbers, especially at colleges, because they pay very high tuition fees.
To be clear, the students themselves aren’t to blame. It’s a good thing that young people want to come to Canada to study and to work. But they need a place to live, and we can’t ramp up housing fast enough to accommodate the numbers that Ontario brought in. So now the federal government has brought down the hammer by putting province-wide caps in place. Ontario’s going to have to find some other way to fund its post-secondary system.
Doug Ford raising Ontario’s international student targets, and then turning around and saying that the federal government should have rejected their visas, reminds me of Jim Carrey in “The Mask”: “Somebody stop me!” Fine, now it’s happening.
In addition, Marc Miller announced last Thursday that the federal government will be reducing the total number of temporary residents in Canada (not the rate of increase, the total number) by 150,000 to 200,000 each year for the next three years. 2023’s population growth was over 1 million, but for the next three years, it’ll be more like 300K to 350K (500K - 150K).
The announcement from the immigration minister this week is a game-changer. People are asleep on how big a deal this is.
NPRs are currently ADDING 800k annually to population growth. IF the feds do what they say (big if, I know) it means that cohort will be SUBTRACTING nearly 150k annually for the next 3 years. That is an insane delta
The announcement
Miller’s speaking notes. On the need to reduce the number of temporary residents to a sustainable level:
As I said in the fall, when I tabled our levels planning for the next three years, immigration accounts for the vast majority of our population and labour force growth.
At the same time, we have heard from Canadians, and a wide range of civil society leaders and economists – and we’ve listened. Canada has seen a sharp increase in the volume of temporary residents in recent years—from a rise in international students, to more foreign workers filling job vacancies, to those fleeing wars and natural disasters.
We need to ensure the number of temporary residents entering the country is at a sustainable level, while upholding our humanitarian commitments and supporting the priorities of our labour market.
What categories does “temporary residents” include?
Overall, “temporary residents” is a big umbrella term for a large number of streams and programs under IRCC management. They can be chiefly broken down into a few main categories:
42% international students
9% temporary foreign workers under the Temporary Foreign Workers Program
44% are temporary workers under the International Mobility Program, which includes further specifics such as those with post-graduate work permits, spousal work permits for students or workers, those temporarily visiting Canada under youth mobility agreements, workers arriving in Canada through intercompany transfers or arrivals through special humanitarian pathways, including those fleeing Ukraine.
With regard to workers, it’s important to acknowledge that the pandemic left labour shortages in almost every sector of the Canadian economy. Provinces and businesses needed us to bring more workers in to fill these shortages. We used all the tools at our disposal to prevent a breakdown in the economy. And we were very successful in our recovery.
Employment is 1.2 million jobs above its pre-COVID February 2020 level. The unemployment rate is at 5.8% as of February 2024. We’ve done better than recover all the jobs lost during COVID and now at 138% of that number.
With regard to students, the chronic underfunding of post-secondary education and unscrupulous actors looking to profit off of vulnerable individuals – among others – led to exponential growth in international students, with the knock-on effect on post-graduate work permits and spousal open work permits for students and spouses.
Until now, the federal government has set targets for new permanent residents, but not for new temporary residents. This is about to change:
We must ensure robust pathways to permanent residence for those who wish to make Canada their home in the long term, and avoid the pitfalls of an economy built solely on temporary workers.
This means not only setting targets for the number of permanent residents we welcome, but also setting targets for temporary residents. Starting this fall, for the first time, we will expand the Immigration Levels Plan, to include both temporary resident arrivals and permanent resident arrivals. The latter category is something we’re doing already.
This will help strengthen the alignment between immigration planning, community capacity and labour market needs, and support predictable population growth.
To set these targets, I’ll be convening a meeting with my provincial and territorial counterparts—as well as other relevant ministers—in early May. Provinces and territories know their unique labour needs and capacity, and need to assume responsibility for the people they bring in as well.
Recently, Canada’s temporary residents volume has increased significantly, now reaching up to 2.5 million (6.2% of our population, in 2023). Therefore, in our levels planning, we will include a target in order to reach an adequate volume of temporary residents Canada can welcome.
As a starting point, we are targeting a decrease in our temporary residents population to 5% over the next three years. This target will be finalized in the fall, after consulting our provincial and territorial counterparts and as part of our annual levels planning.
Going from 6.2% of population (total population is about 40 million) to 5% is a drop of about 500,000.
Global News quotes Randy Boissonnault as well:
Employment Minister Randy Boissonnault said the government was also changing the way Canadian businesses were hiring foreign workers.
“As of May 1, the first change we are implementing is reducing the number of temporary foreign workers entering Canada in certain targeted sectors,” he said. “Employers identified in the 2022 Workforce Solution Roadmap will have a reduction from 30 per cent to 20 per cent of their workforce come in through the temporary foreign worker program under the low wage stream.”
There’s exceptions for construction and healthcare. In addition, Labour Market Impact Assessments will be required every six months instead of every 12 months, making it somewhat more onerous for employers.
Will people actually leave?
I think the key question is: if people's visas expire, how likely is it that they'll be able to continue working under the table? Are Canadian employers willing to turn a blind eye? Because if not, people without work authorization will need to leave.
An article from 2013 suggests that an employer who hires people without work authorization will be running major risks. Working Illegally in Canada: Who’s to Blame – Employers or Employees?
Section 124(1)(c) states: “Every person commits an offence who employs a foreign national in a capacity in which the foreign national is not authorized under this Act to be employed.”
The Act goes on to state that, “A person who fails to exercise due diligence to determine whether employment is authorized under this Act is deemed to know that it is not authorized.”
There is however a due diligence defence to an employer who can establish that they took proactive steps to ensure that a worker was legally permitted to work.
Employers have an obligation to ensure that the people they are employing are lawfully permitted to work in Canada. It is insufficient for an employer to say that they were unaware whether or not a person was in possession of a lawful work permit.
Employers have a duty to ascertain the status of the people they employ and are required by law to exercise due diligence to ascertain the immigration status of their workers. In the event that employers are unable to establish that they have exercised due diligence, they are deemed to know that the worker is not lawfully permitted to work in Canada.
An employer found guilty of the offence of employing a person without a work permit is severe. An employer convicted of a summary offence is subject to a fine of up to $10,000 or 6 months in jail or both. An indictable conviction provides for a fine of up to $50,000 or imprisonment of up to 2 years or both.
Labour shortages?
Matt Lundy, Globe and Mail:
“We are disappointed in the announcement on temporary foreign workers, as this will make it even more burdensome to fill the current 100,000 job vacancies in the food-service industry and create more red tape,” Kelly Higginson, president and CEO of lobby group Restaurants Canada, said in a statement.
“Ottawa should be careful when placing arbitrary caps on immigration,” Diana Palmerin-Velasco, senior director on the future of work at the Canadian Chamber of Commerce, said in a statement. “Temporary residents, including temporary foreign workers, can be a critical pool of talent for some sectors of our economy.”
I think of this as a vicious cycle, or as a short-term fix that worsens the underlying problem of housing scarcity. Marc Miller talks about it as an “addiction.”
In the GTA and Metro Vancouver we have lots of jobs and not enough housing.
Because housing is scarce, prices and rents are high. So real incomes (after paying for housing costs) are low.
Employers can't find workers, and at the same time, workers can't find jobs that pay enough to live on.
So then employers push to bring in more workers to fill the labour shortages.
But this aggravates the housing shortage, pushing up housing costs and pushing down real incomes further.
To really fix the underlying problem, we need to reduce population growth to a level where we can build enough housing to keep up, and then we also need to build housing as fast as we can, so that we can drive down housing costs and raise people’s real incomes.
Better late than never?
A reaction on Reddit to discussion of the student caps:
Portraying the Liberals as the steady hand on the wheel who finally had enough and “dropped the hammer” isn’t particularly accurate. They’re entirely complicit and have only reacted because polling has signalled that Canadians are unhappy.
Honestly, that's what you expect to happen in a democracy: the government should respond to what people want.
I think it's fair to say that Canadian governments are typically focused at continuity ("keeping the show on the road"), making major and unpopular changes only when it's forced on them, as opposed to exercising foresight and making changes in advance. Machiavelli has a comment along these lines. When things are changing rapidly and governments are failing to respond quickly, it's perfectly fair for voters to be extremely unhappy. (In short: okay, now the Liberals have acted, but why didn't they do it earlier?)
As Alex Usher noted in June 2023 ("The Bailiffs Are at the Door"), Sean Fraser was publicly expressing concern about international student numbers. There was public discussion in the summer about cutting back the numbers. But it wasn't until January that Marc Miller announced the federal caps.
More
Today's announcement today by the federal government is massive. It basically amounts to an annual decline of the non-permanent resident population by 150K-200K a year...
We've never seen anything like that in Canadian history. Past declines have been relatively modest.
With a permanent-resident target of 500K, and a non-permanent resident target of -150K to -200K (that's with a minus), int'l migration numbers will be set back to roughly net 300-350K, quite low by recent standards.
Matt Lundy, Globe and Mail: With move to limit temporary residents, Ottawa is ‘attacking the demand curve now.’
“I think it’s a big move,” said Robert Kavcic, senior economist at Bank of Montreal. “This is attacking the demand curve now, which is a complete change in philosophy for policy makers, and one that we think is actually going to work.”
Mr. Kavcic estimates that population growth will ebb closer to 1 per cent from recent levels in excess of 3 per cent. This would bring growth more in line with historical rates.
Mr. Kavcic said that efforts to boost housing supply can take years to materialize. “Whereas with the stroke of a pen, Ottawa can pull the demand curve back overnight,” he said. “And it seems like that’s what they’re gonna do.”
Marc Miller, the immigration minister, has announced the Liberal government will set targets for non-permanent residents. The government is looking to shrink temporary residents' share of Canada's population over the next three years.
Miller said temporary residents made up 6.2% of Canada's population in 2023 and the government is working to reduce that share to 5% by 2027. That would mean a decrease in the temporary resident population of roughly 19%.
This is potentially a HUGE deal. Let’s break it down.
The Canadian population has grown by 3.2% over the past year, the highest in 70 years. We’ve added a staggering 1.2 million people in twelve months. This is more than double the pace in 2019 and in the years that preceded it. For comparison, the U.S. population, which stands at nearly ten times the size, is estimated to have grown by a nearly comparable amount. Whoops.
Most of the population growth is via non-permanent residents, accounting for 800,000 of the 1.2M new people. Non-permanent residents (NPR’s) account for 6.2% of the population. According to my good friend Ben Rabidoux of Edge Analytics, if we want to get NPR’s down to 5% of the population by 2027 we will have to see an outright DECLINE of 440,000 non-permanent residents (assuming permanent resident targets remain the same).
In other words, our population growth rate would go from 3.2% (the highest in 70 years) to 0.8% next year, and roughly 0.7% in 2027.
In simple terms, we could see immigration go from 1.2M to 290,000 within a year.
The good news here is this will provide a relief valve for the Bank of Canada who has been fighting an uphill battle with sticky shelter inflation. Shelter inflation should slow further, and rates should come down, perhaps more than expected.
It’s bad news, however, for developers that have a record number of new rental units currently under construction. A material slowdown in population growth will slow rent inflation. We are already seeing rents slow in Toronto and Vancouver.
With seemingly every level of government aimed at slowing runaway house prices it seems safe to suggest the era of rampant house price inflation may be in the rearview mirror. Let’s see.