After years of welcoming immigrants to tackle labour shortages and boost economic growth, Canada is shifting gears.
On October 24, Prime Minister Justin Trudeau’s government announced plans to cut immigration, citing the strain on housing, jobs, and public services.
This marks a significant policy reversal from a country known for embracing newcomers as essential contributors to its economy.
Canada’s immigration turnaround: What prompted the change?
Canada has seen rapid population growth, fueled by record immigration levels. The influx is comparable to adding an entire city the size of San Diego to Canada’s population every year.
With a population of just 40 million, this surge has stressed infrastructure, inflated housing prices, and pushed up the unemployment rate.
The strain on resources has led to shifting public opinion.
A recent survey by the Environics Institute revealed that nearly 60% of Canadians now believe immigration levels are too high—an increase from just 27% in 2022.
This shift in sentiment has fueled pressure on Trudeau’s government to act, especially as the opposition Conservative Party gains ground ahead of the 2025 elections.
A shift from past immigration policies
Historically, Canada’s immigration policies have been well-regulated and positively viewed.
Canada shares only one border with the US, and the government set annual immigration targets to ensure smooth population growth.
However, the post-pandemic influx—driven by relaxed travel restrictions and labor shortages—exceeded expectations, revealing cracks in the system.
While the surge helped several sectors recover, such as housing, retail, and telecommunications, the rapid pace soon outstripped the country’s capacity to absorb new residents.
This has caused GDP per capita, a key indicator of living standards, to decline for consecutive quarters. Younger adults and recent immigrants, crucial to the labor market, are feeling the pinch the most.
Breaking down the immigration system
Canada’s immigration system is essentially divided into two pools.
Permanent residents: These immigrants are selected through a points-based system that assesses factors such as education, language skills, and work experience. This pool has traditionally served as the main source of new citizens and economic migrants.
Temporary residents: This pool includes international students, foreign workers, and asylum seekers. Although these groups used to contribute minimally to population growth, recent policies allowing easier access to work visas have led to a surge in their numbers.
Temporary residents often aim to transition into permanent residency, using their work or study experience in Canada to gain an advantage in the application process.
However, the sudden growth of this group has added pressure on the housing market and public services.
Trudeau’s plan to reduce immigration
To address the challenges posed by high immigration, the government has announced tighter restrictions on both permanent and temporary residents.
Canada will reduce the number of new permanent residents to 395,000 in 2025, down from 485,000 in 2023.
The government will also introduce a first-ever cap on temporary residents, aiming to cut their numbers by 20% over the next three years.
The cap includes limits on student visas and restrictions on foreign labor, a move designed to ease pressure on housing and public services.
By 2027, Canada expects modest population growth of just 0.8%—a stark contrast to the 3% annual growth seen in recent years.
Economic implications of cutting immigration
While the new immigration policy is aimed at stabilizing the job and housing markets, it comes with economic risks.
Immigration accounts for almost all labour force growth in Canada, and a slowdown in new arrivals could hurt long-term economic performance.
Canada has relied on immigration to fuel consumer spending, which played a key role in avoiding recession during the Bank of Canada’s aggressive interest rate hikes.
A reduction in immigration could reduce the labour supply, hampering economic growth and even reigniting inflation as companies struggle to fill vacancies.
Balancing public sentiment and economic needs
The government’s decision to reduce immigration targets is partly driven by growing public discontent, but it risks complicating future economic stability.
Immigration has been instrumental in sustaining Canada’s labour force, and any significant decline could reduce productivity and growth.
Immigration Minister Marc Miller acknowledged the need for a balanced approach.
While we need to manage the flow of newcomers, immigration remains a vital part of our long-term economic strategy.
What lies ahead for Canada’s immigration policies?
The new immigration policy reflects a cautious approach to managing population growth, balancing public sentiment with economic needs. However, analysts warn that the changes could have unintended consequences.
A slowdown in labour force growth could hurt sectors such as healthcare, construction, and technology, all of which rely heavily on skilled immigrants.
Additionally, lower immigration rates may lead to reduced consumer spending, potentially slowing down economic recovery.
While Trudeau’s government aims to address immediate challenges, the long-term impact on Canada’s economy remains uncertain.
Whether the country can strike the right balance between population control and economic growth will determine the success of these new policies.
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