immigrants par année?

Transcription

1 immigrants par année? L intégration, un facteur déterminant de la croissance Aperçu Alors que le Canada évalue le nombre d immigrants à accueillir dans les années à venir, nous proposons une analyse des incidences économiques et financières de trois scénarios en matière d immigration se déroulant durant la période allant de 2017 à Afin d accroître les retombées économiques et budgétaires de l immigration, il est indispensable de s attaquer aux défis de la lente intégration des immigrants au marché du travail. Ces défis devront être relevés de façon satisfaisante, sans quoi les incidences économiques et budgétaires seront négatives, surtout si les niveaux d immigration augmentent. Une version anglaise exhaustive de cette publication suit ce résumé en français. RÉSUMÉ OCTOBRE 2017

2 immigrants par année L intégration, un facteur déterminant de la croissance Résumé Le Canada évalue actuellement le nombre d immigrants qu il admettra dans les années à venir. De nombreux intervenants ont donné leurs points de vue. En octobre 2016, par exemple, le Conseil consultatif en matière de croissance économique du gouvernement fédéral a recommandé au Canada de hausser ses niveaux d immigration à personnes en Cela, afin de stimuler l économie tout en aidant à atténuer les défis économiques et budgétaires posés par le vieillissement de la population canadienne et le faible taux de natalité. La cible canadienne est actuellement de immigrants par année. Nous nous prononçons sur le sujet en estimant les retombées économiques et financières de trois scénarios en matière d immigration qui se dérouleraient entre 2017 et Dans le scénario de statu quo, nous présumons que le nombre de nouveaux arrivants qui s établissent au Canada continuera de représenter chaque année 0,82 % de la population. Parmi les trois scénarios analysés, c est le scénario de statu quo qui présente le taux d'immigration le plus proche du taux canadien enregistré de 1989 à aujourd'hui. En outre, il sert de scénario de référence pour les deux autres. Dans le «scénario d une immigration moyenne», nous supposons que le Canada accueillera progressivement un nombre croissant de nouveaux arrivants, qui constitueront près de 1 % de sa population d ici Ce scénario repose sur l'hypothèse que le Canada devra accroître son taux d'immigration pour aider à remplacer les babyboomers qui devraient partir en grand nombre à la retraite. Dans le «scénario d une immigration élevée», nous supposons que le Canada accueillera au moins nouveaux arrivants par année d ici 2025 et Consultez les recherches du Conference Board à b

3 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. Le Conference Board du Canada que son taux d immigration se maintiendra à 1,11 % de sa population au cours des 15 années suivantes. Nous avons d'abord songé à évaluer les incidences de l augmentation du flux d immigrants à personnes d'ici 2021 selon les recommandations du Conseil consultatif en matière de croissance économique, mais nous avons choisi de reporter cette hausse de quatre ans compte tenu de la faible probabilité que le gouvernement fédéral soit en mesure, sur le plan opérationnel, d augmenter si rapidement les niveaux d immigration. Nous estimons les incidences de chacun de ces scénarios sur la taille de la population canadienne, le nombre de personnes âgées de 65 ans et plus, le ratio de retraités par travailleurs, le PIB, le PIB par habitant et les coûts des soins de santé en proportion des recettes provinciales. Nous nous fondons sur des hypothèses prudentes, mais réalistes établies sur la base de données récentes sur la situation professionnelle des nouveaux arrivants afin d éviter d amplifier les retombées économiques et budgétaires résultant de notre analyse. Comparaison des trois scénarios Dans le scénario de statu quo, le PIB réel augmente d un taux annuel moyen de 1,85 % de 2017 à Dans le scénario d une immigration moyenne, les immigrants qui arrivent au Canada en 2040 contribuent pour 0,45 point de pourcentage à la croissance annuelle moyenne annuelle du PIB, qui s établit à 1,94 % pendant la période prévisionnelle (environ le quart de la croissance enregistrée). Dans le scénario d une immigration élevée, les immigrants qui arrivent au Canada en 2040 contribuent pour 0,66 point de pourcentage à la croissance moyenne annuelle du PIB réel, qui atteint 2,05 % durant l horizon prévisionnel (près du tiers de la croissance). Dans les trois scénarios, on assiste à une hausse du PIB réel par habitant. Celui-ci s accroît davantage dans le scénario de statu quo, passant de $ en 2017 à $ en 2040, que dans les scénarios moyen ( $ en 2040) et élevé ( $). Dans une certaine mesure toutefois, les scénarios moyen et élevé atténueraient davantage les pressions économiques et budgétaires engendrées par le vieillissement de la population et le faible taux de natalité. Par rapport Consultez les recherches du Conference Board à c

4 immigrants par année L intégration, un facteur déterminant de la croissance au scénario de statu quo, les scénarios moyen et élevé réduiraient la part de la population âgée de 65 ans et plus, ainsi que les coûts des soins de santé par rapport aux recettes provinciales. Cela, tout en améliorant légèrement le ratio de travailleurs pour chaque retraité. Les immigrants auraient probablement moins recours aux soins de santé, car ils sont environ 12 ans plus jeunes que la population moyenne. Cela signifie donc que les scénarios moyen et élevé pourraient aider à réduire les pressions budgétaires qui s exercent sur le réseau des soins de santé. Selon nos hypothèses, les recettes gouvernementales seraient plus élevées dans ces scénarios en raison de la hausse des flux d immigration, qui ferait augmenter le nombre de personnes et de travailleurs dans l économie et les gouvernements pourraient consacrer davantage de dépenses à d autres priorités. En théorie, cela profiterait à plus de gens, comparé au scénario de statu quo dans lequel une plus grande part des dépenses est destinée aux soins de santé. Les scénarios moyen et élevé engendrent cependant leurs propres pressions économiques et budgétaires. Ls dépenses sociales du Canada, par exemple, augmenteraient à la suite de l arrivée d un plus grand nombre d immigrants et de l accroissement de la population totale. Aspects d un régime d immigration performant Il est essentiel de souligner que la hausse des flux d immigration ne procurera les avantages anticipés que si les nouveaux arrivants ont une bonne situation économique. Car le fait d accueillir un plus grand nombre d immigrants sans relever les défis auxquels ceux-ci sont confrontés pourrait entraîner des coûts économiques de même qu un déclin de l appui du public à l égard de l immigration. Par conséquent, le maintien d un régime d immigration performant dépendra de trois principaux facteurs. Comme l immigration est une composante déterminante de la croissance, le Canada doit, en premier lieu, améliorer la situation professionnelle des immigrants pour leur propre bénéfice et pour accroître le rendement économique global du Canada. Consultez les recherches du Conference Board à d

5 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. Le Conference Board du Canada Enfin, et surtout, il faut conserver l appui du public canadien à l égard de l immigration. Deuxièmement, le Canada devra renforcer sa capacité d absorption pour permettre aux nouveaux arrivants de s intégrer efficacement sur les plans économique et social. Cela sous-entend qu il faudra déterminer les mesures qui assureraient une bonne progression de l économie canadienne afin de veiller à ce que les Canadiens et les immigrants aient de bonnes perspectives d emploi et génèrent une activité économique et des recettes gouvernementales suffisantes pour contribuer aux programmes de protection sociale qui soutiennent le niveau de vie élevé du pays. Enfin, et surtout, il faut conserver l appui du public canadien à l égard de l immigration. Ce soutien est lié dans le futur à l accès des Canadiens à des offres d emploi de qualité, ainsi qu à des programmes d aide sociale et à une contribution constante des immigrants à l économie. La capacité du Canada à «gérer» les flux de nouveaux arrivants est également importante. Il est aussi essentiel de tenir un débat public éclairé afin d améliorer le régime d immigration et d accroître la confiance du public envers ce même régime. Évaluez cette publication et courez la chance de gagner un prix! Consultez les recherches du Conference Board à e

6

7 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. 450,000 Immigrants Annually? Integration Is Imperative to Growth REPORT OCTOBER 2017

8 450,000 Immigrants Annually? Integration Is Imperative to Growth Kareem El-Assal and Daniel Fields Preface Canada is currently evaluating how many immigrants to admit in the years to come. Many stakeholders have offered their thoughts. For instance, the federal government s Advisory Council on Economic Growth has recommended that Canada increase its immigration levels to 450,000 (Canada s current annual target is 300,000) to stimulate the economy and help alleviate the economic and fiscal challenges posed by the country s aging population and low birth rate. In this report, The Conference Board of Canada weighs in on the conversation by forecasting the economic and fiscal impacts of three immigration scenarios status quo, medium immigration, and high immigration until To cite this report: El-Assal, Kareem, and Daniel Fields. 450,000 Immigrants Annually? Integration Is Imperative to Growth. Ottawa: The Conference Board of Canada, The Conference Board of Canada* Published in Canada All rights reserved Agreement No *Incorporated as AERIC Inc. An accessible version of this document for the visually impaired is available upon request. Accessibility Officer, The Conference Board of Canada Tel.: or accessibility@conferenceboard.ca The Conference Board of Canada and the torch logo are registered trademarks of The Conference Board, Inc. Forecasts and research often involve numerous assumptions and data sources, and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice. The findings and conclusions of this report do not necessarily reflect the views of the external reviewers, advisors, or investors. Any errors or omissions in fact or interpretation remain the sole responsibility of The Conference Board of Canada.

9 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. CONTENTS i EXECUTIVE SUMMARY 1 Introduction 2 Canada s Immigration Levels: Past and Present 4 Policy Considerations 5 Economic Considerations 8 Forecasting the Impacts of Three Immigration Scenarios 10 Summary of Our Methodology 16 Results of the Three Immigration Scenarios 22 Building on the Success of Canada s Immigration System 28 Conclusion Appendix A 30 Bibliography

10 Acknowledgements This National Immigration Centre report has been prepared by The Conference Board of Canada under the direction of Craig Alexander, Senior Vice-President and Chief Economist. It was researched and written by Kareem El-Assal, Senior Research Associate, Immigration, and Daniel Fields, Economist, National Forecast. The authors thank Craig Alexander; Pedro Antunes, Deputy Chief Economist; and Matthew Stewart, Director, National Forecast, for conducting internal reviews of the report. Thank you also to the following external reviewers for their feedback: Robert Vineberg, Chair, Board of Governors, Immigration Research West; David Green, Professor, Vancouver School of Economics, University of British Columbia; and Immigration, Refugee and Citizenship Canada s Strategic Policy and Planning team: Martha Justus, Chief Economist, Labour Market Intelligence; Glen Bornais, Assistant Director; Kim Chao, Senior Policy Analyst. The findings and conclusions of this report are entirely those of The Conference Board of Canada. Any errors and omissions in fact or interpretation remain the sole responsibility of The Conference Board of Canada. The National Immigration Centre The Conference Board of Canada s National Immigration Centre is a major, research-intensive initiative that examines the immigration challenges and opportunities facing Canada today. Meeting the challenges and benefiting from immigration requires a multi-year effort that brings together many stakeholders and leads to concerted action. The Centre is studying the short-, medium-, and long-term impacts of Canada s immigration policies, programs, and practices in light of the needs and objectives of governments, employers, communities, and immigrants. Through independent, evidence-based, objective research and analysis, the Centre is making recommendations for action to help improve Canada s immigration system. The National Immigration Centre s goals are to: build a strong empirical base and foster dialogue among stakeholders to generate common understanding, shared purpose, and collaborative action; raise public awareness of the nature and importance of immigration to Canada s economy, society, and culture; track and report on the immigration system s performance in achieving Canada s economic, social, and cultural goals. Follow us on

11 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. EXECUTIVE SUMMARY 450,000 Immigrants Annually? Integration Is Imperative to Growth At a Glance As Canada evaluates how many immigrants to welcome in the years to come, we forecast the economic and fiscal impacts of three immigration scenarios between 2017 and Addressing the long-standing labour market integration challenges that immigrants face is imperative to boosting the economic and fiscal impacts of immigration. If the challenges are not effectively addressed, there could be negative economic and fiscal consequences, especially if immigration levels increase. Find Conference Board research at

12 450,000 Immigrants Annually Integration Is Imperative to Growth Canada is currently evaluating how many immigrants to admit in the years to come. Many stakeholders have offered their thoughts. For instance, in October 2016, the federal government s Advisory Council on Economic Growth recommended that Canada increase its immigration levels to 450,000 by 2021 to stimulate the economy and help alleviate the economic and fiscal challenges posed by the country s aging population and low birth rate. Canada s current target is 300,000 immigrants per year. We weigh in on the conversation by forecasting the economic and fiscal impacts of three immigration scenarios between 2017 and In the Status Quo Scenario, we assume that Canada continues to welcome 0.82 per cent of its population in newcomers each year. Of our three scenarios, the immigration rate in this one is most comparable to Canada s recent immigration rates. Moreover, we use this scenario as the benchmark for the other two. Under the Medium Immigration Scenario, we assume that Canada gradually increases its newcomer intake to nearly 1 per cent of its population by This scenario is based on the assumption that Canada will need to increase its immigration rate to help replenish the large number of baby boomers set to retire. In the High Immigration Scenario, we assume that Canada welcomes at least 450,000 newcomers per year by 2025 and maintains an immigration rate of 1.11 per cent of its population over the subsequent 15 years. We initially considered testing the 450,000 level by 2021 based on the recommendation of the Advisory Council on Economic Growth but we decided to delay the increase by four years given the low probability that the federal government would have the operational capacity to ramp up immigration that quickly. In each of the scenarios, we forecast the impacts on Canada s population size, population aged 65 and over, workers-per-retiree ratio, GDP, GDP per capita, and health care costs as a share of provincial Find Conference Board research at ii

13 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. Executive Summary The Conference Board of Canada In all three scenarios, real GDP per capita rises. It is highest in the Status Quo Scenario, increasing from $50,087 in 2017 to $62,901 in revenues. We employ conservative, but realistic, assumptions based on the recent labour market outcomes of newcomers to avoid overstating the economic and fiscal impacts in our analysis. Comparing the Three Scenarios In the Status Quo Scenario, real GDP grows by an average annual rate of 1.85 per cent between 2017 and Under the Medium Immigration Scenario, the 450,000 immigrants arriving in Canada in 2040 contribute 0.45 percentage points to average annual real GDP growth of 1.94 per cent over the forecast period (about one-quarter of growth). In the High Immigration Scenario, the 528,000 immigrants arriving in Canada in 2040 contribute 0.66 percentage points to average annual real GDP growth of 2.05 per cent over the forecast (nearly one-third of growth). In all three scenarios, real GDP per capita rises. It is highest in the Status Quo Scenario, increasing from $50,087 in 2017 to $62,901 in 2040, compared to the medium ($62,348) and high ($61,628) scenarios for To some extent, though, the medium and high scenarios would better alleviate the economic and fiscal pressures of an aging population and low birth rate. In comparison to the Status Quo Scenario, the medium and high scenarios would reduce the population share aged 65 and over, health care costs as a share of provincial revenues, and slightly improve the workers-per-retiree ratio. Immigrants would likely require less health care than average since they are about 12 years younger than the national average age, which means the medium and high scenarios could help reduce fiscal pressures on the health care system. Based on our assumptions, governments would have more revenues due to the higher immigration levels resulting in more people and workers in the economy and would also be able to direct more spending towards other priorities. In theory, this would benefit more people compared to having a greater share of spending directed to health care under the Status Quo Scenario. The medium and high scenarios create economic and fiscal pressures of their own, however. For instance, Canada s social expenditures would rise with more immigrants arriving and a larger population overall. Find Conference Board research at iii

14 450,000 Immigrants Annually Integration Is Imperative to Growth The Elements of a Strong Immigration System It is critical to stress that higher immigration levels will only create the anticipated benefits if newcomers have good economic outcomes. Simply upping the inflow but not addressing the challenges that current immigrants face could, in fact, lead to economic costs and risk decreasing public support for immigration. Hence, moving forward, maintaining a successful immigration system will depend on three major factors. First, with immigration such an important component of growth, Canada needs to improve the labour market outcomes of immigrants for their benefit and to enhance Canada s overall economic performance. Second, Canada will need to expand its absorptive capacity so that newcomers can effectively integrate economically and socially. This entails identifying measures to grow Canada s economy so that Canadians and immigrants alike have access to good job opportunities, and can generate enough economic activity and government revenues to contribute to the social welfare programs that support the country s high living standards. Finally, and most importantly, support for immigration by the Canadian public must be maintained. Future public support is related to Canadians having access to high-quality job opportunities and social welfare programs, and immigrants continuing to contribute to the economy. Moreover, Canada s ability to manage the flow of newcomers is also important. Informed public discussions are also essential to help guide improvements to, and increase public trust in, the immigration system. Find Conference Board research at iv

15 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. Introduction Summary In the Status Quo Scenario, real GDP grows by an average annual rate of 1.85 per cent between 2017 and 2040, and real GDP per capita improves from $50,087 in 2017 to $62,901 in In 2040, under the Medium Immigration Scenario, immigration contributes 0.45 percentage points to Canada s average annual real GDP growth rate of 1.94 per cent. Under the High Immigration Scenario, it contributes 0.66 percentage points to average annual real GDP growth of 2.05 per cent. Real GDP per capita rises in all three scenarios, but it is highest in the Status Quo Scenario. The Medium Immigration Scenario and High Immigration Scenario would help to alleviate Canada s fiscal pressures on the one hand; on the other hand, they present fiscal challenges of their own since they would lead to higher social expenditures. Find Conference Board research at

16 450,000 Immigrants Annually Integration Is Imperative to Growth The future of Canada s immigration levels has been central to immigration policy discussions over the past year. In the summer of 2016, Immigration, Refugees and Citizenship Canada (IRCC) posed 15 questions to the public to help inform their policymaking. 1 One of the questions asked: How many newcomers should we welcome to Canada in 2017 and beyond? In October 2016, the Advisory Council on Economic Growth recommended that Canada increase its immigration levels to 450,000 by 2021 to stimulate the economy and help alleviate the economic and fiscal challenges posed by the country s aging population and low birth rate. 2 Later that month, the federal government announced that Canada would welcome at least 300,000 immigrants per year, representing an increase of some 40,000 immigrants annually compared to levels over the previous decade. In January 2017, the Prime Minister s mandate letter to the new Minister of Immigration, Refugees and Citizenship, Ahmed Hussen, detailed his top priorities including to ensure the effective implementation of Canada s increased annual immigration levels. 3 In addition, during their summer 2017 consultations, IRCC asked the public for their thoughts on the country s immigration levels. This report weighs in on the conversation. We begin by providing a brief overview of Canada s immigration levels since 1867 and the main considerations that inform Canada s immigration levels planning process. Next, we forecast the economic and fiscal impacts of three scenarios for immigration levels between 2017 and We conclude by discussing three key factors to maintaining a successful immigration system. Canada s Immigration Levels: Past and Present With a population of some 3.5 million people upon Confederation, Canada sought immigrants to spur economic growth, secure its borders, and build a nation. However, its early immigration efforts were 1 Immigration, Refugees and Citizenship Canada (IRCC), Discussion Guide on Immigration. 2 Advisory Council on Economic Growth, Attracting the Talent Canada Needs Through Immigration. 3 Office of the Prime Minister, Minister of Immigration. Find Conference Board research at 2

17 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. The Conference Board of Canada unsuccessful since many viewed the country as an unattractive destination. Often, those who did arrive used Canada as a stepping stone to pursue economic opportunity in the United States. 4 However, Canada was soon able to turn the tide in its favour, becoming a country of immigrants rather than emigrants in the process. Canada s largest wave of immigration occurred between 1902 and 1914 when some 2.8 million newcomers arrived. A record 400,900 immigrants were admitted in 1913, representing 5.3 per cent of the country s population at the time, as Chart 1 illustrates. Chart 1 Canada s Immigration Levels, (arrivals, 000s, share of Canada s population, per cent, right) Immigrant arrivals (left) Percentage of population (right) Sources: The Conference Board of Canada; Immigration, Refugees and Citizenship Canada; Statistics Canada. However, Canada soon went from record-high to record-low immigration levels due to the two world wars and the Great Depression. In 1942, Canada admitted an all-time low 7,600 immigrants. It reopened its doors after the Second World War, with hundreds of thousands of Europeans arriving to build a new life. Between 1946 and 1986, Canada welcomed more than 200,000 immigrants in a year on three occasions, during years of economic boom (1957, 1967, and 1974). In addition, Canada s resettlement of Hungarian refugees 4 Vineberg, Responding to Immigrants Settlement Needs. Find Conference Board research at 3

18 450,000 Immigrants Annually Integration Is Imperative to Growth Over the past 20 years, Canada has welcomed a relatively steady 0.74 per cent of its population in newcomers. and emigration from Britain following the Suez Crisis contributed to high immigration in Emigration from the United States, by those seeking to avoid participation in the Vietnam War, and the United Kingdom (due to a major recession between 1973 and 1975) played significant roles in Canada s high immigrant intake in In 1987, Canada began to significantly increase immigration levels following several federal evaluations on the implications of Canada s demographic trends (its aging population, declining birth rate, and an immigration rate of per cent of the population) on the country s demographic, economic, and fiscal outlook. 5 This marked the end of Canada s tap on, tap off approach to immigration. Up to that point, immigration levels were closely tied to the country s economic conditions. When the economy was booming, the tap was turned on and Canada welcomed more newcomers. The opposite occurred when unemployment levels were high. Since 1990, Canada has admitted at least 200,000 immigrants annually (except in 1998 and 1999). Over the past 20 years, Canada has welcomed a relatively steady 0.74 per cent of its population in newcomers such that immigration comprised the majority of annual population growth of about 1 per cent between 1996 and In 2016, Canada s immigration rate increased to 0.82 per cent of its population (296,350 immigrants), which marked the highest level since 1913 and only the fourth time in its history that it has welcomed more than 290,000 newcomers in a year (a feat it achieved between 1911 and 1913). In 2017, Canada s target for immigrant admissions is 300, Policy Considerations Before evaluating the future of immigration levels in Canada, it is critical to understand the goals of Canada s immigration system. As highlighted in section 3 of the Immigration and Refugee Protection Act, Canada admits immigrants for a range of economic, social, and cultural reasons. Broadly speaking, Canada s immigration system seeks to boost 5 Hawkins, Canada and Immigration; Dirks, Controversy and Complexity. 6 Government of Canada, Notice Supplementary Information. Find Conference Board research at 4

19 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. The Conference Board of Canada the country s economy, reunite families, provide sanctuary based on humanitarian need, strengthen the country s francophone character (both inside and outside of Quebec), and promote diversity. Canada evaluates a myriad of considerations as it tries to identify optimal immigration levels to achieve these goals. These considerations include immigrant composition (i.e., the number of immigrants to be admitted under the economic, family, and refugee classes), public opinion, absorptive capacity, global trends, the changing nature of the economy (e.g., the impacts of technology and international trade on jobs), and the government s operational capacity to process applications. Economic considerations are most critical to Canada s immigration levels planning process. Economic Considerations Key economic considerations include Canada s labour force size and human capital characteristics, workers-per-retiree ratio, GDP, GDP per capita, and fiscal outlook. Canada s demographic composition will undergo a dramatic shift in the coming decades, with the principal features being population aging, the continued decline in the natural rate of population growth, and the increase in immigration as a share of the total population. As Canada s population ages, more baby boomers will leave the labour force, reducing the number of available workers, which will slow Canada s future economic growth. Further, the combination of more retirees and fewer workers will place greater pressures on federal and provincial budgets, as well as Canada s pension and health care systems. In 2016, people aged 65 and over made up 16.5 per cent of Canada s total population. 7 This share will continue to rise over the coming years, with more than 24 per cent of the population being over the age of 65 by Population aging, combined with the country s low birth rate, will restrict the natural rate of increase (births minus deaths), thereby slowing the rate of population growth considerably. (See Chart 2.) Canada s natural rate of increase, which currently adds roughly 114,000 people annually to the population, will progressively drop to nearly zero by 2033 as the number of deaths rises steadily. We forecast that immigration will 7 The Conference Board of Canada, Canadian Outlook. Find Conference Board research at 5

20 450,000 Immigrants Annually Integration Is Imperative to Growth begin to account for all of Canada s population growth by 2033, assuming that the annual immigration rate remains around 0.82 per cent of the population. (See Chart 3.) Chart 2 Natural Increase Will Become a Declining Component of Population Growth (birth rate, 000s; population growth, per cent) Births minus deaths (left) Share of total population growth (right) Forecast f 18f 20f 22f 24f 26f 28f 30f 32f 34f 36f 38f 40f f = forecast Sources: The Conference Board of Canada; Statistics Canada. Chart 3 Immigration Will Be Key to Growing Canada s Population (immigration, 000s; share of population change, per cent) Net immigration (left) Net immigration as a share of total population change (right) Forecast f 19f 21f 23f 25f 27f 29f 31f 33f 35f 37f 39f f = forecast Sources: The Conference Board of Canada; Statistics Canada. Find Conference Board research at 6

21 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. The Conference Board of Canada When assessing future immigration targets, the consensus is that higher levels will lead to increased GDP growth a function of more people spending money and working in the economy. While using immigration to support GDP growth is a useful goal, the primary economic goal of immigration is to benefit as many people in Canada as possible. For example, if higher immigration levels caused wages and employment rates to drop, this would have a negative economic impact on many people in Canada, even if GDP grew. We gain a more comprehensive sense of the economic impact of immigration by evaluating GDP per capita since it offers insights into the extent to which immigration impacts the welfare of the average person in Canada. Research has found that immigrants have small impacts on wages and employment rates. 8 (See How Does Immigration Affect Domestic Workers? ) This finding helps to dispel the notion that immigrants have a negative economic impact, but it also suggests that immigration cannot be counted on to lift GDP per capita. It is important to keep these thoughts in mind as we evaluate the impacts of the three scenarios. How Does Immigration Affect Domestic Workers? A common misperception is that newcomers place downward pressures on the wages and employment rates of domestic workers (i.e., Canadian-born and immigrants already established in Canada). However, the literature shows that immigration does not have significantly negative impacts on domestic workers due to various factors: Immigration flows may be too small to have a significant impact on the overall economy. Immigrants and domestic workers have different skills, so they may not be competing for the same jobs. The new skills that immigrants bring may help increase productivity (and hence, wages) of domestic workers. 8 Riddell, Worswick, and Green, How Does Increasing Immigration Affect the Economy? Find Conference Board research at 7

22 450,000 Immigrants Annually Integration Is Imperative to Growth When immigrants perform labour-intensive jobs, domestic workers may respond by specializing in high-skilled jobs, which helps their wages and employment rates. Employers may reduce labour costs by hiring immigrants, and then use the savings to create complementary jobs that domestic workers can fill. Immigrants increase demand for goods and services, which can lead to more investment, greater demand for labour, and increased wages and employment. Immigration increases the size of the labour force, which may cause employers to expand their operations and create new jobs. 9 Forecasting the Impacts of Three Immigration Scenarios The three scenarios for immigration levels in this report are based on several assumptions, including immigration rates, the entry classes of newcomers, and their wages and labour force characteristics. After detailing the assumptions, we assess the implications of the scenarios on Canada s population size, population aged 65 and over, workers-perretiree ratio, GDP, GDP per capita, and health care costs as a share of provincial revenues. Immigration Rate Assumptions In our Status Quo Scenario, we keep immigration as a share of Canada s population constant at its 2016 rate of 0.82 per cent for Of our three scenarios, the immigration rate in this one is most comparable to Canada s recent immigration rates. This scenario is the benchmark to which we compare the two other scenarios. The only demographic variable that is different in the three scenarios is annual immigration rates, while other demographic assumptions are unchanged (i.e., Canada s fertility, death, and emigration rates). We assume that Canada s fertility rate remains constant at Death rates are held at historical trends by age and gender. Emigration as a share of the population remains constant, which is based on Canada s rate of emigration in 2016 (0.18 per cent of the total population). 9 Peri, Do Immigrant Workers. Find Conference Board research at 8

23 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. The Conference Board of Canada In the Medium Immigration Scenario, we slowly ramp up immigration over the forecast period, reaching 350,000 by 2020, 400,000 by 2030, and 450,000 by 2040 (0.99 per cent of the population). This scenario is based on the assumption that Canada will need to increase its immigration rate to help replenish the large number of baby boomers set to retire. In the High Immigration Scenario, we ramp up immigration more quickly. Immigration increases to 350,000 in 2018 and to 450,000 by We then hold immigration as a share of the population constant at 1.11 per cent until 2040 immigration reaches more than 528,000 that year. We initially considered testing the 450,000 level by 2021 based on the October 2016 recommendation of the Advisory Council on Economic Growth but we decided to delay the increase by four years given the low probability that the federal government would have the operational capacity to ramp up immigration that quickly. As shown in Chart 4, differences in immigration levels between the three scenarios are initially small but become substantive in the 2020s and beyond. Chart 4 Immigration Levels by Scenario (000s) Status Quo Scenario Medium Immigration Scenario High Immigration Scenario f 19f 21f 23f 25f 27f 29f 31f 33f 35f 37f 39f f = forecast Source: The Conference Board of Canada. Find Conference Board research at 9

24 450,000 Immigrants Annually Integration Is Imperative to Growth The three classes of immigrants have significantly different wage and labour force characteristics. Immigrant Composition Assumptions In all three scenarios, we assume that 60 per cent of newcomers fall under the economic class, 28 per cent under the family class, and 12 per cent under the refugee class. This delineation is important to make because, as we shall see, the three classes of immigrants have significantly different wage and labour force characteristics, and including those differences helps make our forecast more realistic. The assumptions are based on Canada s immigrant intake between 2006 and 2015 (we exclude 2016 data since this year was an outlier due to the Syrian refugee initiative). We use conservative, but realistic, assumptions i.e., our economic class intake assumption is slightly lower than its actual share over the past decade (60.7 per cent), while our refugee share is slightly higher than the average over the past decade and includes those labelled as all other immigration in IRCC data. We do this to avoid overstating the economic and fiscal impacts of immigration in our analysis. We also differentiate between the entry streams under the three immigrant classes to better account for their average wage and labour force characteristics. For example, based on averages, our scenarios assume that over the next 23 years, 13.5 per cent of all newcomers will be economic class principal applicants who arrive under federal programs ( federal skilled workers ), another 13.5 per cent will be Provincial Nominee Program (PNP) 10 principal applicants, and 33 per cent of newcomers will be their spouses and dependants. Summary of Our Methodology The methodology that we use to forecast the economic impact of our three immigration scenarios is as follows: 10 Under the PNP, provinces and territories can nominate (i.e., select ) applicants to immigrate to their jurisdictions. Find Conference Board research at 10

25 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. The Conference Board of Canada Table 1 Forecast Methodology Demographic Assumptions Newcomers as Share of Population Status Quo 0.82 per cent until 2040 Medium Immigration 0.92 per cent by 2020; 0.95 per cent by 2030; 0.99 per cent by 2040 High Immigration 1.11 per cent by 2025 and until 2040 Fertility rate Death rates Emigration rates Immigrant Composition Economic Federal Skilled Worker Principal Applicants (PA) Economic Federal Skilled Worker Spouse & Dependants (SD) Economic Provincial Nominee Program (PNP) PA 1.54 per woman Follow historical trends by age and sex, with the pace slowing over the forecast period Constant at its 2016 share of the population (0.18 per cent of the total population) Intake Share (per cent) Economic PNP SD 16.5 Family Class 28 Refugees Government assisted 3 Refugees Privately sponsored 3 Refugees Landed in Canada 3 Refugees Landed in Canada SD 3 Total 100 Immigrant Wages Post-Landing* 1 Year (per cent) 5 Years (per cent) 10 Years (per cent) 23 Years (per cent) Economic Family Refugees Weighted total Employment Assumptions** Economic 74.9 Family 63.7 Refugees 58.7 Weighted total (based on immigrant composition) Employment Rate (per cent) 69.3 *wages drawn from most recent Statistics Canada data ( ), compared to the Canadian average, and weighted by our immigrant composition assumptions; see charts 5 and 6 for the full breakdown of wage assumptions **drawn from census data Source: The Conference Board of Canada. Find Conference Board research at 11

26 450,000 Immigrants Annually Integration Is Imperative to Growth Wage Assumptions Using the most recent Statistics Canada data, we compare the wages of employed immigrants who arrived between 1991 and 2014 with the average wages of those employed in Canada. We also weigh the annual evolution of immigrant wages over this period by entry stream. (See Chart 5.) We use a 23-year period since our forecast is over the same length of time ( ). Over 23 years, the average immigrant rarely achieves wage parity with the Canadian average a problem that has grown since the 1980s, as many studies have shown. 11 However, this largely depends on the immigrant s entry stream. Chart 5 Immigrant Wages as a Share of Canadian Average Wage by the Number of Years Post-Landing and Entry Stream (per cent) Federal Skilled PA Provincial Nominee Program PA Government refugees Refugees landed Federal Skilled SD Provincial Nominee Program SD Private refugees Refugees dependants Family Note: We keep Provincial Nominee Program (PNP) income constant after year 16 due to data limitations (since the PNP launched in 1998, data are only available between 1998 and 2014). Sources: The Conference Board of Canada; Statistics Canada. 11 Aydemir and Skuterud, Explaining the Deteriorating Entry Earnings ; Green and Worswick, Entry Earnings of Immigrant Men in Canada ; Hou and Picot, Annual Levels of Immigration; Reitz, Immigrant Employment Success. Find Conference Board research at 12

27 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. The Conference Board of Canada Principal applicants (federal and provincial nominees) tend to reach wage parity with the Canadian average within five years of landing, and then earn higher wages in subsequent post-landing years. This is due to the fact they are admitted based on their human capital characteristics and, often, pre-arranged employment. Their spouses and dependants earn well below the average wage. For example, spouses and dependants of federal skilled workers who are in the labour force earn 60 per cent of the average wage after a decade upon arrival and just over 89 per cent after 23 years. Family class earnings are about 79 per cent of the average wage after 23 years. The refugee class has the lowest earnings of immigrants, which is not surprising given they are admitted to Canada based on their need for protection rather than their ability to contribute to the economy. Their earnings reach 51 per cent of the average wage a decade after landing and about 73 per cent after 23 years. Overall, when we weigh all classes as outlined above, immigrants earn just over 83 per cent of the Canadian average wage after 23 years, as Chart 6 illustrates. We believe that our use of previous wage data contributes to the conservative nature of our forecast since, as discussed below, Canada has recently implemented various policy measures that could improve the labour market outcomes of immigrants over the course of our forecast period. Chart 6 Immigrant Wages as a Share of Canadian Average Wage by Years Post-Landing and Entry Class (per cent) Economic Family Refugee Total wages, weighted by immigrant composition Sources: The Conference Board of Canada; Statistics Canada. Find Conference Board research at 13

28 450,000 Immigrants Annually Integration Is Imperative to Growth Employment Assumptions Our analysis of wage data is based on immigrants with employment income. To account for immigrants without employment, we factor in immigrants below the working age of 15, as well as those who are part of the working age population but are unemployed. Over the past 45 years, the share of newcomers under the age of 15 has averaged around 22 per cent, which we apply in our analysis. Meanwhile, immigrants have high employment rates compared with the rest of Canada s working age population. Using the same weighting system as we do for wage data (60 per cent economic, 28 per cent family, 12 per cent refugees), we draw from the most recent Statistics Canada census data ( ) to assume that economic class immigrants (principal applicants, spouses, and dependants) have an employment rate of 74.9 per cent. To put this number into perspective, the average employment rate in Canada is currently 61.6 per cent, 12 and set to decrease over the next 23 years as Canada s population ages (dipping to about 57 per cent by 2040). The main reason for this disparity is that the average immigrant age (28.4) is far lower than the national median (40.6). 13 Between 2001 and 2011, the family class had an employment rate of 63.7 per cent (still higher than the Canadian average) and the refugee class had an average employment rate of 58.7 per cent (slightly below the Canadian average). Overall, when we weigh the three immigrant classes, the overall employment rate for was 69.3 per cent. We maintain this assumption despite the average likely being a conservative estimate since the results are weighed down by the recession. (See Methodological Limitations. ) 12 Statistics Canada, Labour Force Survey Estimates (LFS), by Sex and Age Group. 13 Statistics Canada, Estimates of Population, by Age Group and Sex. Find Conference Board research at 14

29 Le Conference Board du Canada. Tous droits réservés. Veuillez communiquer avec cboc.ca/ip si vous avez des questions au sujet de l'utilisation de ce document. The Conference Board of Canada Methodological Limitations Our methodology s limitations include: We assume that the immigrant composition will remain the same throughout the forecast period, even though it changes based on Canada s policy priorities. We do not assume that immigrant wages and employment rates improve despite recent policy reforms aimed at improving the labour market performance of newcomers. Newcomer wages may also rise given the increasing demand for immigrants to fill labour shortages created by an aging population. Conversely, we do not assume that immigrant wages and employment rates deteriorate, which is also possible if the labour market integration challenges that immigrants face are not addressed. We do not assume that the wages and employment rates of domestic workers are affected. The PNP wage data that we draw upon have a smaller sample size compared with other entry streams since the PNP only launched in Immigrant employment rates and wages are weighed down by the recession. We do not account for second-generation immigrants, who tend to fare better in the Canadian labour market compared with the first generation. We do not account for the potential impacts of international trade, automation, and the rising temporary resident population on Canada s economy and immigration levels. We do not account for the costs of higher immigration levels. Results of the Three Immigration Scenarios Status Quo Scenario In the Status Quo Scenario, real GDP grows by an average annual rate of 1.85 per cent between 2017 and Over this period, Canada s population ages significantly, with the share of the population over 65 reaching 24 per cent by 2040 (up from 16.9 per cent in 2017). The ratio of workers to retirees (those aged 65 and over) drops significantly from 3.64 to 2.37 by Aging causes health care costs to rise profoundly, by an average of 4.66 per cent annually between 2017 and 2040, and accounts for 42.6 per cent of provincial revenues in 2040 (up from 35 per Find Conference Board research at 15

30 450,000 Immigrants Annually Integration Is Imperative to Growth cent in 2017). Real GDP per capita improves from $50,087 in 2017 to $62,901 in 2040, and the population grows to 44.3 million. (See Table 2.) Table 2 Status Quo Scenario Results (rate, per cent) Immigration rate Immigration Population Real GDP (2007 $ millions) Real GDP per capita (2007 $) 2017f ,000 36,672,452 1,836,811 50,087 18f ,825 37,068,810 1,867,689 50,384 19f ,049 37,463,419 1,899,392 50,700 20f ,253 37,855,658 1,932,412 51,047 21f ,429 38,244,408 1,966,291 51,414 22f ,565 38,628,350 2,001,345 51,810 23f ,653 39,006,273 2,037,555 52,237 24f ,680 39,376,889 2,074,856 52,692 25f ,639 39,739,067 2,112,871 53,169 26f ,551 40,095,456 2,151,549 53,661 27f ,406 40,445,027 2,191,123 54,175 28f ,201 40,787,121 2,231,491 54,711 29f ,930 41,121,157 2,272,589 55,266 30f ,590 41,446,745 2,314,558 55,844 31f ,180 41,763,845 2,357,782 56,455 32f ,701 42,072,398 2,402,517 57,104 33f ,155 42,372,863 2,448,289 57,780 34f ,547 42,665,561 2,494,662 58,470 35f ,879 42,951,120 2,541,345 59,168 36f ,161 43,230,411 2,588,712 59,882 37f ,396 43,503,944 2,637,311 60,622 38f ,577 43,770,979 2,686,696 61,381 39f ,717 44,032,915 2,736,354 62,143 40f ,824 44,290,842 2,785,941 62,901 f = forecast Source: The Conference Board of Canada. Medium Immigration Scenario Under the Medium Immigration Scenario, 450,000 immigrants arrive in Canada in 2040 (0.99 per cent of the population), and the population rises to 45.6 million (1.3 million more people than in the Status Quo Scenario). Real GDP is slightly higher than the Status Quo Scenario, growing at an average annual rate of 1.94 per cent over the forecast Find Conference Board research at 16