Increased immigration important for Canada

Increased immigration levels can help soften the effects of an aging population on the Canadian economy, a new report shows.

However, the Conference Board of Canada report reveals that increased immigration alone will not completely offset the effects of aging demographics.

“Immigration provides an important source of labour and helps Canada generate stronger long-term economic growth. However, increasing immigration alone will not reverse Canada’s aging trend,” said Matthew Stewart the Associate Director, National Forecast at The Conference Board of Canada. “In order to fully address the significant cost strains on the Canadian system from an aging population, policy makers must also consider other solutions.”

Currently, Canadians aged 65 and over make up about 16 per cent of Canada’s total population. Over the next 20 years, this figure will rise to over 24 per cent. As baby boomers leave the workforce, Canada’s labour supply growth will be limited and economic growth will be constrained. All else being equal, this will result in economic growth slowing from the already modest current trend of 2 per cent to around 1.6 per cent by 2050.

Increased immigration levels would help boost Canada’s labour force and generate stronger long-term economic growth. But, higher immigration levels only soften the cost strains on the Canadian system, implying that Canada needs to consider other solutions to fully address the impact of an aging population.

In addition to the impact on the labour market, an aging population will also put a major strain on healthcare and Canada’s retirement income support systems. Without significant changes to how healthcare is delivered in Canada over the next 20 to 30 years, the share of government revenues directed to health care is expected to rise from 37 per cent today to 44 per cent. With the provinces already struggling with large deficits, this added burden would be unsustainable.

The Conference Board of Canada’s report, A Long-Term View of Canada’s Demographics: Is Higher Migration Part of the Response to Canada’s Aging Population?, finds that if immigration levels were to increase steadily to reach 407,000 immigrants per year by 2030 and was to target younger immigrants, then Canada’s trend pace of economic growth would improve to 2.3 per cent by 2050.

However, the proportion of the Canadian population aged 65 and over would still rise to about 20 per cent. The share of provincial government revenue spent on health care would remain at or close to the 44 per cent mark.

Some improvements in the share of provincial revenues required to fund health care would be realised, but not until 2060. In the meantime, spending on Old Age Security (OAS) would drop from 12 per cent to below 10 per cent.

Article published 11th October 2016