With move to limit temporary residents, Ottawa is ‘attacking the demand curve now’

Good analyst by Matt Lundy of the Globe. Sensible comments by academics and economists, more self-serving ones by the business community and organizations. And interesting that the “head of inclusion and resilience economics” at Bank of Nova Scotia seems to have a contrary position to the Bank’s overall economic assessment (Raising the Bar, Not Just Lowering the Number: Canada’s Immigration Policy Confronts Critical Choices):

…“The cap on temporary-resident admissions isn’t a silver bullet since supply and demand in the housing market are currently extremely imbalanced,” Royce Mendes, head of macro strategy at Desjardins Securities, said in a note to clients. “However, by way of just slowing the upward momentum in shelter inflation, this reinforces our view that the central bank will cut rates more forcefully than” investors are predicting.

Also on Thursday, the federal government announced a partial curtailment of the Temporary Foreign Worker Program. Starting on May 1, employers in four sectors, including hospitality, will see the share of staff they can hire through the program’s low-wage stream lowered to 20 per cent from 30 per cent. (Employers in health care and construction will be exempt from the reduction.)

Most employers are subject to the 20-per-cent cap, which was raised from 10 per cent as part of a 2022 overhaul of the program. At the time, the government set a temporary 30-per-cent limit for a handful of industries with acute labour shortages.

“We are disappointed in the announcement on temporary foreign workers, as this will make it even more burdensome to fill the current 100,000 job vacancies in the food-service industry and create more red tape,” Kelly Higginson, president and CEO of lobby group Restaurants Canada, said in a statement.

“Ottawa should be careful when placing arbitrary caps on immigration,” Diana Palmerin-Velasco, senior director on the future of work at the Canadian Chamber of Commerce, said in a statement. “Temporary residents, including temporary foreign workers, can be a critical pool of talent for some sectors of our economy.”

Rebekah Young, head of inclusion and resilience economics at Bank of Nova Scotia, said Thursday’s announcements were largely “backward-looking,” in that Ottawa is trying to manage the accumulation of temporary residents.

Ms. Young said the federal government needs to articulate its objectives for economic immigration. As an example, she said those goals could be tied to gross domestic product per capita, which has tumbled to multiyear lows of late.

“That gives you a hard metric to evaluate all your programs,” she said.

In theory, the new limits on temporary residents will marginally change the relative cost of labour versus capital, Ms. Young said. However, business investment in Canada has been weak for a long time, predating the population surge.

“We need more of a productivity agenda that looks at what are the really big levers to unlock substantial business investments,” she said. This “is ultimately what will drive welfare gains.”

Source: With move to limit temporary residents, Ottawa is ‘attacking the demand curve now’