Will Canada reduce its immigration targets #CanadaFinance

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Immigration Minister Marc Miller had a clear response about a year ago when asked if he would lower Canada’s immigration targets amidst concerns that the rising numbers could further exacerbate the country’s housing crisis.

“Looking at the numbers and knowing what I know and the needs that exist in Canada, I don’t see a world in which we decrease it currently,” he said in August 2023, barely a week after taking up the immigration portfolio from Sean Fraser.

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But with the federal government getting ready to release its new annual immigration targets on Nov. 1, the minister’s comments haven’t been as straightforward lately.

“I am considering a lot of things … we are putting together a number of propositions … and those choices will be ones that we will have to decide in cabinet, but you will know on November 1,” he said at a press conference on Sept. 18 after being asked again if he might consider reducing immigration targets.

Prime Minister Justin Trudeau, in response to a similar question at a press conference on Aug. 26, said government officials were having “ongoing conversations” about the overall immigration numbers and that they are “constantly adjusting” to the needs of the economy to make sure they meet “the moment every step of the way.”

The contrasting statements reflect the “dramatic shift in the discourse around immigration,” said Diana Palmerin-Velasco, a senior director at the Canadian Chamber of Commerce, which represents more than 200,000 Canadian businesses.

She pointed to a July poll conducted by Leger Marketing Inc. that said 60 per cent of respondents felt there were too many immigrants in Canada, a jump from 35 per cent in 2019.

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“Immigration has become a highly politicized issue. Honestly, we wouldn’t be surprised to see a decrease in the immigration targets,” she said. “In the past few months, Minister Miller has tried hinting at that.”

The apparent change in sentiment comes after Canada doubled the number of non-permanent residents — students, temporary foreign workers and asylum seekers — in the country to 2.8 million in mid-2024 from 1.3 million in 2022, according to Statistics Canada estimates, to help deal with a surge in job vacancies right after the pandemic.

The move helped Canada prevent a recession by increasing its overall economic output, but Miller said in a press conference on Sept. 18 that the government “allowed certain aspects” of the programs that bring in temporary residents “to get overheated” for too long.

As such, with job vacancies now on the decline and unemployment rising — especially among newcomers and youth — his team has taken several steps in the past year to cut down the number of temporary residents to five per cent of the overall population by 2026 from 6.5 per cent.

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Bank of Montreal chief economist Douglas Porter said this series of cuts suggests the need for a more “stable and predictable” immigration policy and should “teach us that it’s very tricky business for the government and policymakers to use immigration policy to fine tune the labour market and it can backfire spectacularly.”

Immigration plays a key role in Canada’s economy. Newcomers account for more than one-third of the workforce in industries such as accommodation and food services, transportation and warehousing and the professional, scientific and technical sectors, according to Statistics Canada. The country’s aging population is another reason why there’s a high reliance on immigrants.

As such, the federal government announces its Immigration Levels Plan each year to map out the number of permanent residents it wants to bring in for the next three years. The annual targets are generally increased every time they are announced.

For example, Canada in 2022 said it wanted to let in 465,000 permanent residents in 2023, 485,000 in 2024 and 500,000 in 2025. Last year, Miller didn’t increase the targets, but plateaued them at 500,000 for 2026.

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This year’s plan seems to be more anticipated than previous ones for a couple of reasons. For the first time, Canada is going to set targets for non-permanent residents instead of just permanent residents. Some analysts also think Miller could take the rare step of decreasing the targets.

“I wouldn’t be surprised to see the government revise the numbers lower over the horizon,” Bank of Nova Scotia economist Rebekah Young said. “There is near consensus … that we’ve exceeded the capacity to absorb this pace of population increase, both in economic terms and infrastructure capacities. The government will want its messaging to echo this consensus.”

Aside from the overall numbers, Ottawa also decides the type of permanent residents it wants to bring in. They are divided into four categories: economic, family reunification, refugees and humanitarian.

Businesses won’t be pleased if Ottawa cuts the number of economic immigrants since many are still facing labour shortages in certain sectors such as tourism and hospitality, Palmerin-Velasco said.

“There is a lot of pressure on the government,” she said. “A careful balance will need to be drawn between the political pressures and the needs of the economy.”

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Porter said he found it “very interesting” that the authorities are even “apparently considering rethinking” their permanent residency targets.

“That would be a very big step if they actually somewhat reduce that,” he said. “That would indicate that they have had some serious second thoughts on the wisdom of the very strong immigration flows that we have seen in recent years.”

But Benjamin Tal, deputy chief economist at CIBC World Markets Inc., doesn’t think there’s going to be a major difference.

“I think they will leave it at about 500,000, because the economy needs this number. It needs new immigrants,” he said. “But even if they do decrease, it won’t be a significant number.”

The main focus of the government will be on controlling the rise in non-permanent residents, he said.

The series of announcements Miller has made in the past year supports Tal’s argument.

Last week, Ottawa reduced the number of international study permits it plans to provide in 2025, which is on top of a two-year cap imposed on international students in 2023. He has also restricted the eligibility for work permits for graduates and their spouses, and Ottawa in August limited the number of temporary foreign workers entering the country.

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Despite these announcements, Canada’s population growth rate has continued to rise at three per cent, or more than a million per year, so some economists say more measures are needed.

The Bank of Canada in July said the government’s plan to reduce the number of temporary residents to five per cent of the population would take longer than its target of 2026, which would mean the population growth rate will not slow down as much as expected.

“We have seen a host of policy measures … but it’s not showing up meaningfully in population numbers just yet,” Young said. “A lag would be expected, but the longer it takes to start seeing the needle moving, the targets start to lose credibility.”

Porter said he hasn’t seen much action “on the ground” in terms of the official population numbers despite the string of cuts to the number of temporary residents.

A decline in the rate of population growth could take some steam off the housing and rental markets, he said, but while there are indications that rent growth has slowed in some cities, it’s not a trend across the country.

Miller’s responses regarding questions about immigration targets may not be as definite as 2023, but he is aware of how the situation has changed and the need to strike a fine balance.

“This is a country built on immigration,” he said at a press conference on Sept. 18. “But it is also one that needs to take into account a number of factors that Canadians have told us to take into account.”

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