Canada Needs A Population Strategy: Balancing Immigration, Growth and Aging

According to the United Nations Population Division, there is an 80% probability that the size of the global population will peak during the 21^st century and then begin to fall, the first time this would occur in nearly 700 years.

The number of young children (0-4) in the global population already reached its apogee nearly a decade ago, in 2017. In 2020, the population of all children under 15 peaked, and the number of children and youth under the age of 25 probably peaked in 2024.

This means that, inevitably (unless fertility trends change dramatically and quickly), the global working-age population will begin to decline, probably around the middle of the century. When birth rates fall, especially if that is accompanied by increased longevity, populations become older. 

Understanding Global Demographic Shifts

The case of China is sobering: when it began a period of sustained economic growth, around 1990, the average age of the population was just 24. At the same time, China’s fertility rate tumbled. The average age of the Chinese population is projected to rise to 48 by 2040 and to peak at a staggering 62 in the 2080s.

At the opposite end of the spectrum, between now and 2050, sub-Saharan Africa (with the world’s highest fertility rate) will account for all of the net growth of the global population less than 50 years old.

Unless demographic trends change, by the end of this century, the world will, essentially, be an ocean of aging populations with a few islands of youth, most notably in Africa.

Significantly, economists have found that age is strongly correlated with consumption, adaptivity to technological change, innovation, and work intensity. From a productivity perspective, the ideal workforce would have an average age in the late 30s. This will simply not be the case for most of the world in the latter part of this century.

Canada’s Transition to an Aging Population

These demographic dynamics are also at play in Canada.

Recent projections by Statistics Canada (SC) suggest that an important milestone will be reached between now and 2030: natural increase will turn negative. Unless Canadians start having more children, this unprecedented situation will continue for at least half a century.

The impacts of Canada’s demographic transition have already been felt in the labour market. Fifty years ago, there were twice as many Canadians aged 10 to 19, and about to enter the labour force, compared with those who were about to retire (aged 55-64). Since 2010, the latter group has outnumbered the former.

Canada already depends on immigration to restock its labour force and, very soon, immigration will be responsible for all of Canada’s population growth.

Why Canada Needs a Long-Term Population Strategy

This means that, for the first time in Canadian history, the scale of population growth will be determined by public policy.

How has the Canadian government chosen to exercise this awesome responsibility? The 2002 Immigration and Refugee Protection Act stipulates that the government must issue an annual immigration plan each year.

In 2017, the minister of the relevant department, Immigration, Refugees and Citizenship Canada, expanded this to introduce running three-year plans and in 2024, for the first time, the annual immigration plan included targets for temporary residents.

That is, Canada’s immigration system mainly responds to the needs of the day, and there has never been a long-term strategy for the size of the population. 

And yet, each decision made about Canada’s immigration system will, by default, affect its demographic future.

Population Growth and Policy Decisions

To make this more concrete, around the turn of the century, Canada’s annual immigration target was around 0.6% of the total population. Over the course of the Trudeau government, this fraction more or less doubled, to around 1.2%.

But as public opinion turned against high immigration, the target was scaled back for 2025 and the next few years to about 0.9% of the population.

Statistics Canada has projected the population of Canada in 2071 under these three scenarios, and it would be, respectively, 45.7, 67.2, and 55.6 million.

According to the 2021 census, the average household size in Canada is 2.4. If the 2024 rate of immigration (1.2% of the population) had persisted, Canada would need approximately 10.7 million new dwellings by 2071. With the current rate of immigration, that number can be scaled back to 5.8 million. This huge difference in housing demand is the result of a policy decision made in the heat of the moment, and not a long-term plan.

Canada’s Population Strategy: Setting a National Vision

I argue that it is, finally, time for Canada to face up to the core demographic question: how large should the Canadian population be?

Once that is settled, there will be an overarching logic to immigration planning, much like what we see in the relationship between inflation and the Bank of Canada interest rate. Once this logic is communicated and understood, Canadians can make informed decisions about investing in the future.

What core principles should be incorporated into the creation of a Canadian population strategy and the immigration policy that would sustain it?

Aligning Immigration with Housing and Infrastructure Capacity

First, a credible immigration plan must be aligned with Canada’s capacity to accommodate newcomers and population growth.

We have seen, just recently, the negative turn in public confidence in Canada’s immigration system that was precipitated by a widespread public perception that growth was outstripping the capacity of the housing market and health and education systems to accommodate increased demand.

Therefore, once a strategy is defined, it must be accompanied by appropriate infrastructural development. 

Managing the Trade-Off Between Population Growth and Aging

Second, the plan should be based on the recognition that the scale of immigration is, ultimately, a trade-off between the pace of population growth and the pace of aging.

When the rate of immigration increases, population growth accelerates, while the age structure of the population remains younger. With reduced immigration, the pressures of population growth lessen, but the fiscal challenge of serving the needs of an aging population mounts.

This leads to a crucial point: given that population growth and aging are trade-offs, and policy will strike a balance between them, Canada will experience at least some population growth and some aging. The Canadian population will become both larger and older over the long term. 

Beyond Immigration: A Comprehensive Population Strategy

Third, while some level of immigration is structurally necessary for Canada, it cannot solve Canada’s demographic challenges alone.

A larger and older population calls for a suite of policies beyond immigration that include:

• Support for families to enable and/or enhance fertility
  
  
• Support for a growing elderly population
  
  
• Inclusive policies that ensure newcomers can be quickly and productively incorporated into the labour force and develop a sense of attachment to Canada
  
  
• Inducements for the private sector to invest in productivity improvement
  
  

Regional Differences Must Shape Canada’s Population Strategy

Fourth, a population strategy must be mindful of another trade-off: demographic dynamics and attendant challenges differ profoundly across Canada.

The most acute pressures associated with population growth occur in large cities, while the fiscal strain of supporting elderly populations will be felt most forcefully in non-metropolitan areas.

To appreciate the salience of this point, note that in 2021, for the first time in history, more Canadians resided in metropolitan Toronto than in all of rural and small-town Canada, combined (i.e., all places in Canada with fewer than 10,000 people).

In a society where all immigration accounts for all population growth, places that attract few immigrants stagnate. Efforts to encourage a more geographically dispersed pattern of immigrant settlement have only been partially successful.

Fulfilling Canada’s Global Responsibilities

Fifth, Canada’s population strategy should be framed in conjunction with its foreign policy.

Given the profound global demographic transition that is occurring, the sources of immigrants to Canada will inevitably shift.

The ethics of inviting young people to relocate to Canada from countries with rapid population growth and underemployed youth cohorts are, arguably, very different from those associated with emigration from countries that are experiencing, or about to experience, demographic contraction.

This is especially true given that Canada prioritizes immigrants who are well-educated and capable of making substantial economic contributions.

One way to at least partially address the ethical dilemmas involved would be for Canada to direct its foreign aid to the places in the global south where it is recruiting talented young people.

Having A National Conversation About Canada’s Demographic Future

Finally, how should all of these vital policy questions and trade-offs be resolved? For example, what is the ideal balance between aging and population growth?

I believe that these are, ultimately, socio-political questions that must be informed by logic and evidence, but cannot be answered by an algorithm, no matter how complex, or by experts.

For example, would Canadians prefer more populous and congested cities (more immigration), or to delay their retirement age (less immigration)?

It is time to face up to the dilemmas of a low-fertility world and decide, collectively, how to move forward under a new set of extraordinarily challenging circumstances.