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October 29, 2023

Study: A decline in temporary migration could hurt Canada’s economy

Although many rightfully link Canada’s economic and demographic growth to a permanent resident boom in recent years, a new Desjardins study suggests that Canada may be underestimating the effect that temporary migration has on the national economy in this country.

According to economist Marc Desormeaux, Canada’s economy could be “hit hard” if the country experiences a decline in non-permanent resident (NPR) migration in the face of a period of economic weakness.

The current state of non-permanent resident migration in Canada

Non-permanent (temporary) resident migration is at the root of Canada’s population growth in “most provinces.”

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Note: Temporary residents are a category of migrants to Canada including groups such as foreign workers, international students and refugees

Specifically, foreign worker migration (those with work permits) has led the charge with respect to NPR growth in the last year, as this group has accounted for 70% of all growth in this category. This was found to be true both nationally and in Canada’s four biggest provinces (but more on that later).

Results and Impacts

In this study, predictive modelling – including an upside scenario, downside scenario and worst-case scenario – is used to project how the Gross Domestic Product (GDP) in Canada’s four largest provinces* (Ontario, British Columbia, Quebec and Alberta) would be impacted based on different levels of NPR admission across Canada in 2023 (2023-2024) and 2024 (2024-2025).

*These provinces made up almost 90% of Canada’s total GDP in 2022

Understanding that these results vary by province – between a 0.5 and nearly 2 percentage point drop in GDP in the downside and worst-case scenario projections – the overall results of this study suggest that all four assessed provinces will see a hit to their GDP if Canada sees a reduction in temporary resident migration.

What this means is that the “health” of Canada’s economy would decline as a result of a drop in temporary resident migration. This is because GDP is used to define “the monetary value of all finished goods and services made within a country during a specific period.” In other words, a declining GDP, “used to estimate the size of an economy and its growth rate”, would signal a negative short-term economic future across this country.

Some adverse impacts of a declining GDP may include:

  • An economic recession
  • A decline in “real income”
  • Reduced production
  • Increased unemployment

Conclusion: What could happen if temporary resident migration slows across Canada?

NPR admissions across Canada tend to rise and fall in concert with national economic cycles. In other words, NPR admissions across Canada’s four biggest provinces usually grow when the economy is strong and falter in times of economic struggle.

In light of these results, and expecting a possible recession in the near future, Desjardins makes it clear that Canada’s “recent population‑induced boost to economic activity and tax revenues may not last forever.” In other words, temporary migration to Canada must maintain itself through periods of economic volatility if Canada wants to try to avoid having to “grapple with the immense challenges of a rapidly aging population and a lack of affordable housing supply.”

To accomplish this, Desjardins suggests that Canada needs to produce better data on temporary migration to Canada, as this would help the country “appropriately calibrate labour and housing market policy.”

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