Canada turned to millions of temporary residents to solve its coming demographic shift, but will it work? RBC Economics has released a new analysis discussing the country’s recent surge in temporary residents. These temporary residents are providing essential labor, helping to resolve the sudden shortages after pandemic stimulus. However, the programs need better targeting, as the current inflow fails to meet the needs of critical industries while placing more demand pressure on areas like housing.
Canada’s Non-Permanent Resident Admissions Increased 53%
Canada’s soaring population has been largely due to a surge of non-permanent residents. Temporary residents increased 53% between 2020 and 2023, with Canada issuing over 1 million temporary worker and student permits in 2022 alone. It’s been a huge boost to the country by adding crucial labor, but it also applies new demand pressure.
Canada’s Non-Permanent Residents Are Filling Essential Roles, Especially On Farms
Canada’s aging population that’s retiring has created significant labor demand, which temporary workers help with. Nearly half of visas issued via the Temporary Foreign Worker Program (TFWP) were to farm workers, according to RBC. They also found significant contributions to childcare providers, food service supervisors, cooks, and seafood plant workers. Canada has encountered significant hurdles finding labor willing to work for the wages these industries provide.
Employment shortages have been on the decline, which the bank attributes to temporary workers. Unfilled positions have fallen by 200,000 roles (21%) since peaking, according to their research.
“But it’s been less successful in matching these skills to future shortages in industries facing looming waves of retirements,” said Rachel Battaglia, the RBC economist that prepared the analysis.
Canada’s Non-Permanent Resident Boom Is Also Contributing To Excess Demand
While a significant number of workers are coming to Canada, there’s a big skillset gap. Canada’s Baby Boomers are retiring, and temporary workers haven’t been able to fill the roles. For example, Battiaga warns that healthcare is short an “astonishing” 144,000 workers, and construction is short 64,000 employees.
It’s also worth considering the additional labor creates more demand for certain industries. As more people flow into Canada, the country won’t just have to replace those retiring—but also provide resources for the labor arriving. Clearly policymakers didn’t take into account that imported labor also requires things like eating, shelter, and healthcare.
Labor is just one part of the issue, with global commodity prices also being squeezed. Having more labor to build houses is nice, but it’s not cheap to outcompete global markets for lumber and steel to actually build them.
RBC touches on this issue, but only briefly. “A growing population means more demand for an already tight supply of housing and other services,” explained the bank.
Canada Needs To Maintain Lofty Temporary Worker Goals
RBC eventually sees demand for temporary worker visas running its course within the next five years. However, in the near-term they believe the intake will remain above pre-pandemic levels to fill the gaps for sometime. Unlike permanent residents, Canada doesn’t maintain targets for temporary workers, explains the bank.
“The mix of newcomers—including NPRs—will also need to shift along with emerging priorities. And as our previous research has shown, persistent labor market shortages across a variety of industries make lowering barriers to better utilization of newcomer skills more important than ever.”
Absent from the analysis is a point worth considering—stimulated demand over the past few years resulted in shortages. State stimulus helped to drive excess demand, helping to create labor shortages alongside an inflation crisis. Falling stimulus levels have also likely curbed labor demand, not just the filling of roles.
In addition, rising inflation has left Canadians with falling real disposable incomes. It’s a picture that looks even worse when adjusted for the rapid population growth. That’s going to be a limiting factor for future goods and service demand, especially with such highly indebted households.
Older advanced economies, such as those in the G7, are all facing a demographic time bomb with retiring Baby Boomers. However, it’s difficult to gauge how big of an issue is approaching when additional stimulus demand is thrown on top of the issue. Disarming a bomb is difficult. Disarming a bomb on a bus that can’t slow under 50 mph is a challenge only a Keanu Reeves movie could solve.