'Population trap' in Canada: what it is and how it can affect the arrival of migrants

Canada is known, among other things, for its open-door immigration policy.

This has allowed, over the years, the arrival of talents and abundant labor that has energized its economy, including many from Latin America.

And, in recent years, it has turned Canada into one of the countries in the world with the fastest population growth.

In 2023 the number of inhabitants rose by 3.2%, a historical record since data exists, to exceed 40.5 million, another population record.

“Canada's population growth comes almost entirely from permanent or temporary net immigration“, a spokesperson for the Canadian Immigration Department (IRCC) told BBC Mundo.

More than 1.25 million foreigners settled in Canada last year, including permanent and non-permanent residents.

The magnitude of the figure has, however, caused alarms to go off due to the shortage of available housing and a phenomenon that threatens to undermine the Canadian economy: the “population trap.”

We tell you what is happening in Canada and how it may affect the arrival of migrants in the future.

The open door policy

Over the past half century, Canada has transformed into a multicultural nation.

With an immense area inhabited by only 12 million after the Second World War, the Canadian government promoted policies during the following decades to attract foreigners to populate the country and expand its economy.

In addition to turning Canada into one of the most multicultural societies in the world, Immigration has been a key driver of growth by providing talent and labor to companies.

The country's Prime Minister, Justin Trudeau, who has governed since 2015, gave a boost to open-door policies with measures to progressively increase the admission of foreigners.

Although the government establishes limits on new permanent residents (for example, a maximum of 465,000 visas were specified in 2023), so far it has not done so for non-permanent residents, a category that includes mainly foreign students, but also temporary workers and refugees.

Thus, last year visas were granted to some 454,590 new permanent residents and 804,690 non-permanent residents.

These figures, much higher than those of previous years, represent the largest population increase in Canada since records have been kept.

And they have caused, according to the National Bank of Canada (NBC), the worrying phenomenon of the “population trap.”

The “population trap”

While Canada's population grew by 3.2% in 2023 compared to the previous year, GDP grew by only an estimated 1.29%, pending the final data.

The “population trap” occurs when the number of people in a country grows rapidly, but its economy cannot develop at the same rate.

This means that the investment of the country's companies and public organizations is only enough to maintain current resources, making any increase in living standards impossible.

According to the BNC (one of the largest commercial banks in the country), Canada suffers from this phenomenon due to a significant increase in immigrants without equivalent economic growth to support the new population.

“It is the first time in modern history that our net capital stock per capita has decreased annually,” Alexandra Ducharme, BNC economist, explains to BBC Mundo.

The “net capital stock per capita” is the average amount of production resources – such as buildings, technology and machinery – that are available to each person.

“Preliminary figures indicate that last quarter is probably the sixth consecutive quarter of decline in this index, which would be the longest streak since the 1982 recession,” notes the economist.

And he assures that, “unless we achieve a notable recovery in investment, it will be difficult to escape the trap, considering the immigration objectives” of the government.

Asked about this problem, the spokesperson for the Immigration Department stated that “in general, immigration continues to contribute positively to economic growth.”

However, the BNC believes that the “population trap” can lead to a lack of jobs, pressure on public services and a housing shortage.

The latter is already a fact: in the last six years, population growth has far exceeded the construction of new homes, except in 2021 when immigration was limited due to the pandemic.

The housing problem

In 2023, Canada added 1.2 million new inhabitants, but construction on only about 200,000 homes began.

For every residential unit started last year, 4.2 working-age people entered the Canadian labor market, according to BNC data.

And, although the difference was not so great in the years before 2023, this imbalance “has contributed to the recent extreme pressure on housing inflation, both in purchase prices and rentals,” according to the BNC economist. .

The country's central bank also echoed this problem.

“In the last year we had a particularly large increase in population growth through immigration (…) at a time when there was limited supply. This can be seen most clearly in the housing sector and, in particular, in rents,” said Carolyn Rogers, deputy governor of the Bank of Canada.

The average monthly rental price of an individual apartment in Canada stood at around US$1,610 in December 2023, 22% more than two years before, and in cities such as Toronto or Vancouver it exceeded US$2,000, according to data from the Rentals portal. AC.

If this trend continues, there would be a shortage of approximately 3.5 million homes by 2030.the Canada Mortgage and Housing Corporation estimated in a recent report.

The Department of Immigration, however, was optimistic: “While population growth due to immigration increases demand for housing, infrastructure and services, it also contributes significantly to the supply of labour, including in the construction sector, to build new homes,” his spokesperson told BBC Mundo.

The government launched the Housing Accelerator Fund in March last year, to which it allocated US$4 billion until 2026-27 to encourage greater construction of residential buildings in cities.

This initiative aims to provide 100,000 additional units throughout the country in the coming years, stream
lining bureaucracy in planning and approvals.

However, the figure is considered insufficient to absorb the accelerated rate of population growth.

The new limit for students

Many foreigners who move to Canada do so through study programs.

International education contributes about $16.4 billion each year to the Canadian economy and generates more than 200,000 jobs, according to Immigration data.

Enrolling in a Canadian university guarantees foreign students a temporary visa that, over the years, can become permanent.

In 2023 alone, Canada issued 560,000 new student visas, just under half of the foreigners who moved to the North American country that year.

“This increase is also putting pressure on housing, health care and other services,” said Immigration Minister Marc Miller in mid-January, who recently announced a new measure to prevent this.

The government has limited the number of new visas for international students to 360,000 for two years from 2024, which will mean a 35% cut compared to 2023.

The reduction in the quota will be distributed among the provinces, according to the capacity of each of them to provide accommodation to new residents.

For its part, the government launched a pilot program to try to get new citizens to settle in rural areas and the north of the country, where demographic pressure is less.

This program “creates a path to permanent residence for skilled foreign workers, encouraging new immigrants to spread evenly throughout the country rather than settling in large urban centers where housing and the cost of living is less affordable,” the agency said. Immigration spokesperson.

Experts believe that the government's initiatives are helping to alleviate the effects of Canada's population explosion, although most are skeptical that it can solve the problems of the “population trap” and the housing shortage.

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