Canada needs immigration reform to escape ‘population trap,’ economists say

There is a need to reduce Canada’s immigration levels as the country faces what National Bank of Canada economists are calling a “population trap,” where the country is finding it difficult to absorb the number of new arrivals.

In the report published Monday, economists Stéfane Marion and Alexandra Ducharme say they agree immigration is good for the gross domestic policy (GDP), “but all good things have their limits.” They argue that Canada does not have the infrastructure or “capital stock” to both bring in the amount of people currently planned, while also improving our standard of living.

Marion, who is National Bank’s chief economist, addressed these concerns during an Economic Club of Canada forum last week.

“For the first time in Canadian history in 2023, our capital labour ratio declined,” Marion said during the discussion.

“That’s a population trap. Historically, it’s normally associated with emerging markets. We’re the only country that’s ever experienced this. So this is why we have this urgency to deal with this immigration policy, because it is absorption capability that is undermining living standards.”

A “population trap,” according to Oxford Reference, is defined as a situation where no increase in living standards is possible, because the population is growing so fast that all available savings are needed to maintain the existing capital-labour ratio.

In Monday’s report, Marion and Ducharme, said Canada’s annual total population growth should not exceed 300,000 to 500,000 in order to avoid that “trap.”

National Bank notes Canada’s population grew by more than 1.2 million last year, a “staggering” number that would be halved were the government to commit to levels put forward by the bank.

The federal government