What Drives Canada's Immigration Policies?

Government decisions have consequences. But they also have reasons.

Popular opposition to indiscriminate immigration has been significant and growing in many Western countries. Few in Canada deny our need for more skilled workers, and I think most of us are happy we’re providing a sanctuary for refugees escaping verifiable violence and oppression. We’re also likely united in our support for decent, hard working economic immigrants looking for better lives. But a half million new Canadians a year is widely seen as irresponsible.

So why did Canada, along with so many other Western governments, choose to ignore their own electorates and instead double down on ever-increasing immigration rates? Whatever nasty insults we might be tempted to hurl at elected officials and the civil servants who (sometimes) do their bidding, I try to remember that many of them are smart people honestly struggling to be effective. Governing isn’t easy.

So it’s worth cutting through the rhetoric and trying to understand their policies on their own terms.

As recently as 2022, the government - as part of its Annual Report to Parliament on Immigration - claimed that:

“Immigration is critical to Canada’s economic growth, and is key to supporting economic recovery”

There you have it. It’s at least officially about the economy. To be fair, the report also argued that immigration was necessary to address labor shortages, support an aging domestic population, and keep up with our “international commitments”. But economic considerations carried a lot of weight.

Now what I’d love to know is whether the “immigration-equals-better-economy” assumption is actually true. It’d be a real shame if the receipts told us a different story, wouldn’t it?

One possible way to measure economic health is by watching per capita gross domestic product (GDP) growth rates. Insofar as they represent anything real, the inflation-adjusted GDP rates themselves are interesting enough. But it’s the rates by which GDP grows or contracts that should really capture our attention.

The green line in the graph below represents Canada’s (first quarter) GDP growth rates from the past forty years. To be clear, when measured against, say, its 1984 value, the GDP itself has trended upwards fairly consistently. But looking at changes from one year to the next makes it easier to visualize more detailed historical fluctuations.

The blue bars in the chart represent each year’s immigration numbers as a percentage of the total Canadian population. That rate leapt above one percent of the population in 2021 - for the first time since the 1960’s - and hasn’t shown any signs of backing down. Put differently, Canada absorbed nearly 12 immigrants in 2023 for every 1,000 existing residents.

Seeing both trends together in a single chart allows us to spot possible relationships. In particular, it seems that higher immigration rates (like the ones in 2018-2019 and 2022-2023) haven’t consistently sparked increases in the GDP.

With the exception of those COVID-crazed 2020 numbers - which are nutty outliers and are generally impossible to reliably incorporate into any narrative - there doesn’t ever seem to have been a correlation between higher immigration rates and significant GDP growth.

So, at best, there’s no indication that the fragile economy has benefited from that past decade’s immigration surge. As well-intentioned as it might have been, the experiment hasn’t been a success by any measure.

But it has come with some heavy social costs. The next chart shows the painful disconnect between an artificially rising population and a weak housing construction market. The blue bars, as before, represent immigration rates as a percentage of total population. This time, however, they go back all the way to 1961. The red line tells us about the number of single-detached housing starts per 1,000 people.

With the exceptions of the mid-1960’s and the past few years, each of the historical immigration surges visible in the graph was either preceded or accompanied by appropriate home construction rates.

As an anomaly, the 1960’s surge was for obvious reasons far less damaging. Back then you could still purchase a nice three-bedroom house in what’s now considered midtown Toronto for no more than two years’ worth of an average salary. I know that, because that’s exactly when, where, and for how much my parents bought the house in which I spent most of my errant youth. Those elevated immigration levels didn’t lead us into economic crisis.

But what we’re witnessing right now is different. The housing supply necessary to affordably keep us all sheltered simply doesn’t exist. And, as I’ve already written, there’s no reason to imagine that that’ll change anytime over the next decade. (Can you spell “capital gains tax inclusion rate change”? I knew you could.)

Just to be complete, the disconnect doesn’t apply only to detached “built-to-own” houses. This next chart demonstrates that housing starts of all flavours - including rental units - grew appropriately in the context of historical immigration surges, but have clearly been dropping over the last couple of years.

Since housing starts data isn’t the only tool for measuring the health of a housing market, here’s a visualization of rental apartment vacancy rates in Canada:

The combination of a sluggish construction market and an immigration-fueled population explosion has been driving up prices and making life miserable for countless families. And things appear to be headed in the wrong direction.

So sure, immigration should play an important role in Canadian life. But by this point in the game, it’s pretty clear that recent government policy choices failed to reverse economic weakness and contributed to disastrous outcomes. Perhaps it’s time to change course.