How will Canada’s economy affect immigrant workers?

Overall, the economic outlooks shows strong employment growth over the next few years with many opportunities for newcomers.

At the beginning of the pandemic, immigrants who had landed in the last five years experienced higher unemployment levels than Canadian born workers.

However, over the course of the pandemic, that shifted.

As of January 2022, the employment rate for newcomers is now 7% above its pre-pandemic average.

“Immigrants had this major decrease initially in their total employment levels,” says Marc Desormeaux, senior economist at Scotiabank. “But there’s been a fast bounce back since – faster than the bounce back for Canadian born workers. Immigrant workers are now well above where they were before the pandemic.”

Desormeaux expects this to continue and sees it as a good sign for future immigrant job growth.

Canadian labour shortages

What’s concerning Desormeaux is the mounting labour shortages all sectors are currently experiencing.

“Labour shortages are a real constraint on economic growth and the economy’s ability to recover from COVID-19,” he says.

Labour shortages, which occur when businesses would like to produce more or operate more hours but aren’t able to do so because they can’t hire enough workers with the skill set they need, limit profit and economic growth. In the latest survey by the Canadian Federation of Independent Business, about half of respondents indicated that a shortage of skilled labour was holding them back.

“Canada had about 913,000 job vacancies in the third quarter of 2021. That was the highest ever recorded number for a single quarter,” says Desormeaux. “That rate isn’t typical — which speaks to the particular nature of this downturn. Normally, labour shortages are something that emerges after a period of extended growth. We’re seeing these very tight labour markets with a lot of labour shortages fairly early in the economic cycle.”

While no sector is immune to the difficulties of finding staff, Desormeaux reports that some sectors are experiencing higher rates.

“We’re seeing the tightest conditions in what we call ‘high contact sectors’ like accommodation, food service, and live performance or other industries where economic performance is most closely tied to people’s ability to congregate in groups,” he says. “But this is the same story across most industries. Financial services, technology, and construction have a lot of job shortages as well.”

Desormeaux believes that some of the labour shortages are the result of lockdowns in the high contact sectors, during which workers moved on to other fields or went back to school. But even before the pandemic, researchers were talking about skills shortages in areas like the tech sector, and large-scale investments in infrastructure revitalization is fueling construction skills shortages. Desormeaux expects immigrants to play a key role in helping Canada solve these skills challenges.

“Typically, economic immigrants have made up around 60% of admissions to Canada,” he says. “These are individuals selected based on their ability to contribute to the labour market. Newcomers have skill sets that are valuable and that are missing within the Canadian economy, which contributes to stronger economic growth and more profit for firms.”

According to Desormeaux, the tech sector will be a particular focus for immigration going forward, with shortages in the tech labour market set to cause significant issues in the industry if talent isn’t found elsewhere. He also sees construction as a key area of economic immigration.

“The construction industry is currently dealing with job shortages, and we’re going into a period where infrastructure is being built at the national and provincial levels as part of pandemic recovery efforts,” he says. “We’re also building more and more homes to try and deal with affordability challenges.”

Housing affordability will improve with the right policy

“Our view at Scotiabank Economics is that dealing with affordability is about getting supply and demand to align more closely,” says Desormeaux.

But that’s harder than it may seem since catching up with a lagging housing supply can take years, and current global supply chain disruptions are causing construction delays. Desormeaux advocates for policy changes to increase supply, such as eliminating zoning rules that ban townhomes and apartments in certain areas, increasing housing density around transit stations, and increasing the pace of construction.

He says that Scotiabank Economics recently estimated that Ontario would need at least 650,000 more homes to align its per-person housing stock with the rest of the country — and that’s just one province. To have the same dwellings to population ratio as our international peers, it would take at least 1.2 million more homes.

“We suspect it will take some time before housing price growth becomes more sustainable over the longer run,” he says. “But luckily, we’re not anticipating housing prices taking off like they did at the height for the pandemic, which happened, in part, because not enough supply was coming online because of restrictions.”

A positive outlook for newcomers

Overall, Desormeaux reports a positive outlook for newcomers.

“We have pretty strong immigrant employment growth built into the next few years,” he says. “For newcomers to Canada, determining what kind of lifestyle you would like and what kind of region you’d like to settle into could impact your experience, but we’re fairly optimistic about the overall economic outlook for the country.”

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