Marc Desormeaux Talks Immigration, Jobs and Housing

 As Canada heads into the final half of 2021, challenges, uncertainty, and an election loom.

The ongoing COVID-19 pandemic, the economic recovery, immigration targets, jobs, labour shortages, the search for affordable housing and remote work are just a few of the major life issues all Canadians and newcomers to this country are dealing with.

Canada, in particular, is facing a labour shortage as the pandemic and border restrictions continue to stall immigration, particularly from India. Ottawa is still hoping to meet its 2021 target of welcoming more than 401,000 immigrants by Jan. 1.

The impact of immigration, which intersects with all of the other challenges noted above, is top of mind for Scotiabank’s Senior Economist Marc Desormeaux .

Immigration will drive economic growth

Earlier this year, Desormeaux wrote that “importantly, we also estimate that beyond 2022 - once the boost related to reopening from lockdowns is behind us - immigration will account for about half of the economic growth generated in both Ontario and Quebec.”

The federal government's long-term ambitious immigration plan aims for 411,000 in 2022 and 421,000 in 2023. Those targets may rise substantially depending on the future needs of employers.

Desormeaux, who previously worked for the Conference Board of Canada, is scheduled to take part in Prepare for Canada’s Aug. 25 Canadian Job Market Outlook for Newcomers Summit. He took time in advance of that event to speak via video with rentalsfornewcomers.com about key issues facing the country.  

 Marc, in your March economic report for Scotiabank you mentioned that immigration is a key element of economic growth in any economy but that it is especially true here in Canada. With regards to the various sectors that make up the economy (infrastructure, housing, education etc.), where do you see Canada's ambitious immigration targets for the next few years having the biggest impact short and long term?

 

Well, economists tend to think of population and, by extension, immigration, as a fundamental ingredient in economic growth. So, it's something that impacts the entire economy, not necessarily something that impacts any one sector more than any other sector.

 Fundamentally, population growth impacts the size and the age structure, and the skill set of the pool of individuals who are available to work and produce goods and services in an economy.

 So, population growth, therefore, is one of the factors that drive economic growth over the longer run. And for Canada, there's actually a challenge in this respect in that our population is already ageing and we have one of the lowest birth rates in the G7. So we need immigration to help offset the impact of population ageing, and immigration allows us to inject our workforce with the pool of younger workers who are able to sustain that economic growth.

 But of course, it's not just about the raw numbers.

 Newcomers bring skills and new ways of thinking about our most complex and challenging problems that are of tremendous value in today's labour market, and that's already helping the Canadian economy grow.

 In addition, there are labour shortages that are emerging across the Canadian economy. In the first quarter of this year there were over 550,000 unfilled positions in the Canadian economy, so bringing those skilled newcomers in can help to fill those shortages, it can help generate economic growth and sustain that expansion, that higher standard of living across the Canadian economy, not just any one sector.

 And that's really the bottom line.

 We need immigration for all sectors to reach their full potential as we come out of the pandemic and as the population ages in the coming years.

 As we see so many sectors of the economy vying for talented newcomers, which ones do you foresee facing the greatest challenge in that search for talent?

 That's a great question.

 I mentioned that in the first quarter of this year there were over 550,000 jobs vacancies across the Canadian economy. So that's across the entire economy, something that impacts all sectors, and job vacancies are our problem because if firms can't find the right workers to meet demand, then they're not achieving their full potential.

 If we look at those 550,000 positions, the largest industry share was in health care. That was about 100,000, just under 20 per cent. There are also large numbers of shortages in retail trade, manufacturing, accommodation, and food services - a lot of industries that were impacted by lockdowns and by people's ability to congregate. These are the industries that have been slower to recover from the pandemic and took a harder initial hit during those lockdowns

 I guess what I would say is that housing affordability and availability are always important parts of decisions about where you live and work. And the recent trends where we've seen demand for and prices running up in some of those secondary markets 

 And so long as we're still grappling with the pandemic, we still have restrictions on how we can congregate, and people are still adjusting to it, these are the sectors that will likely face uncertainty as far as job shortages go.

 That's kind of the shorter-term or medium-term story.

 But over the longer run, a number of commentators have noted the potential for skill shortages in the technology sector in particular. Positions like software developers and different kinds of coders

 These are very specific skill sets that will be more and more in demand as we progress through the coming years. And these are industries that many analysts have said there will be need for more and more people with those particular skill sets if we are to fill those positions and ultimately help the Canadian economy grow over the longer run.

 Regarding the Canadian housing market, you wrote recently in your June economic provincial outlook report that you expect sharp rebounds for all of Canada's provinces as we escape lockdowns and as the U.S. bounces back. And there's been much written lately about the emerging strength of Canada's secondary cities and markets, particularly when it comes to housing affordability. Do you see this trend continuing, and what choices and options will it present to newcomers and employers?

 That’s a great question, and I think I'll answer the part about options first.

 I guess what I would say is that housing affordability and availability are always important parts of decisions about where you live and work. And the recent trends where we've seen demand for and prices running up in some of those secondary markets - those cities that are further away from the big cities - that changes the calculus a little bit that someone may go through as they're deciding where they want to settle.

 So broadly speaking, prices are being run-up in areas that are further away from the big cities during the pandemic. That makes those areas less affordable. So perhaps there's less of a price premium living further away from a big city like Toronto or Montreal or Vancouver.

 But on the other hand, there's also the potential for more remote work.

 That's something that we're seeing more and more companies embrace: more people are working remotely which gives you the chance to work further away from home comfortably, [with] less money and time being spent on the regular commute

 So, in a way, with that shift possibly going on, that makes living further away from the physical office more attractive and potentially less costly. So the key question from a price forecast perspective then is really how much population movements shift after the pandemic. If we do see more and more people deciding to permanently live further away from the large cities, so that's a trend we've witnessed during the pandemic - people moving out of the population centers, giving themselves a little more space and taking advantage of the capacity to work from home - if that's something that we see continuing after the pandemic, then there could be demand and more house price growth in those secondary cities in the coming years.

And we do think that it's likely that remote work will be here to stay in some form. Maybe not 100 per cent but that it is something we will see more and more people doing.

But that said, the big cities in Canada are dynamic and vibrant, they are where, at this moment, where most of the big companies operate and set up shops. We do expect them to continue to be magnets for people around the world after the pandemic ends as well.

So, there is a potential for more and more opportunities to live further away from those big cities like Toronto or Vancouver, Montreal, or Calgary after the pandemic, given the shift that has gone on in people's preferences in the way they work. But we also think that the cities in Canada will remain vibrant and exciting, and places that people will ultimately decide to settle over the longer run as well.

You had mentioned that you particularly see the ability for remote work in the IT sector. How do you see this trend playing out in the Canadian economy going forward? It sounds like for you the magnets for newcomers are still going to be the gateway cities.

Well, there's, certainly, there's still uncertainty. There's still a lot that has to play out. There's been a lot of progress in fighting COVID-19 in Canada, but the pandemic is not over yet. And there's still uncertainty about how some aspects of work will look after the pandemic.

You know, broadly speaking it stands to reason, in our view, that there will be more remote work in the future than we saw before the pandemic. Companies are embracing this, they've talked about it, there's more capacity for it now, more understanding for it. And a number of workers, quite a lot of workers, have reported productivity increases since doing that shift online. And there's actually a statistics Canada study that was put out a few months ago that provided a few early data points on this problem.

So that's the first thing I would say is that the pandemic, getting the pandemic under control, getting as many people vaccinated as possible … that's important from an economic perspective and it's important from an immigration perspective.

 Again, what seems likely at this point, based on that survey, is that the future will include a mixture of in-office and remote work with some differences across sectors. In that StatsCan survey, 90 per cent of survey respondents reported being at least as productive as they were before the pandemic when they moved over to telework which is auspicious in terms of this being a viable option going forward. And at least 80 per cent or so indicated that they would like to work at least half of their hours from home once the pandemic is over.

So generally, there was a mixture of majority of hours being worked at home and also some time being put in at the office. So this is kind of an early sense of worker preferences about how they would like to go about things after the pandemic.

And the early indications are that it will be a mixture of in-person and in the office and remote work as we've been doing during the pandemic.

The one thing that I would suppose mention is that there were some differences across the sectors. There's a higher preference for remote work in, for instance, professional, scientific, and technical services that would include lawyers and engineers, accountants, financial services as well more preference for remote work in public administration. Whereas the goods-producing industries and then industries such as education and health care where personal contact is more part of the day-to-day work, there was less preference for remote work there.

These are just some early data points and there is still uncertainty about how aspects of the future workplace will evolve.

 But at this stage when you look at some of the early Canadian data it appears that a mixture of in-office and remote work is a likely possibility across many sectors in Canada.

 Finally, numbers aside, what do you think is the greatest challenge that Canada's economy faces when it comes to sustaining immigration targets? Is it competition from other countries and if so, how do we stay ahead of that?

Well, without question at this point the pandemic is the biggest challenge we face in meeting our immigration targets in particular.

But broadly, in terms of our economy recovering and returning to some form of normalcy, because of border closures, travel restrictions, apprehension about travel last year during the pandemic, immigration to Canada fell significantly. It fell significantly around the world in fact because of these factors that I mentioned. We've seen gains to start this year in Canada, but we're still not quite at our target level yet. And so long as we are still grappling with the possibility of infections picking back up, still getting people vaccinated, the economy still recovering, hitting our targets is going to be challenging from an immigration perspective.

 So that's the first thing I would say is that the pandemic, getting the pandemic under control, getting as many people vaccinated as possible … that's important from an economic perspective and it's important from an immigration perspective.

 But the pandemic developments aside, the numbers are encouraging when it comes to immigration to Canada.

 There was a report put out in early 2021 by the Boston Consulting Group that actually ranked Canada as the preferred destination for skilled international immigrants, and that reflects both successful management of aspects of the pandemic as well as the policy environment that focuses on developing opportunities for skilled newcomers.

 And the other thing that's positive about Canada for immigrants is that we already have a significant immigrant population. So, in Canada, for instance, 26 per cent of the over 15 [year-old] population was made up of landed immigrants. And in a city like Toronto, it was even higher, up near 50 per cent.

 So, when you have that existing presence in a country already, that helps newcomers integrate, it helps them build networks and ultimately become successful within a new country, which is a challenging thing to do.

 So, then I guess there was a question about how do we remain a top draw, how do we build on our success? I mentioned controlling the spread of COVID-19 (and) getting as many people vaccinated as possible. That's an important thing to do for the economy writ large, but it has this particular dimension around immigration flows.

 And then the other thing I would say is to continue to focus on labour market integration, and Scotiabank has been a champion of this idea. We've argued, for instance, offering resources to advance financial literacy among newcomers, offering support to help build those personal and support networks that can help people integrate when they move to a new country,  and then finally workforce diversification initiatives that can help Canadian business harness the skills and the diverse perspectives of newcomers who arrive in Canada, because we'll need that if we're going to continue to grow and ultimately generate prosperity in the longer run in Canada.