How Canada Can Unlock the Full Potential of Skilled Immigrants and International Graduates

Canada is faced with an unpredictable and highly volatile geopolitical and economic environment, given the political development in the United States and globally. The Canadian economy is highly competitive, albeit export-oriented, and hence vulnerable to external shocks. One way to protect and enhance national economic growth is to ensure that the economy and the labour market make the most of their internal assets, including, in particular, the country’s highly educated and talented labour force. Canada is the most educated country in the world, with 60% of its population aged 18 to 65 having a tertiary degree. This is an important asset for the country, which has been fuelled by its immigration system, that selects based on human capital (education, skills, language). 

Despite holding strong educational credentials and in-demand skills, both new immigrants who completed their education abroad and international graduates (new immigrants who completed their tertiary education in the country) have long struggled with underemployment and skills underutilization—challenges that have been extensively documented in academic and policy research. These issues, already persistent, have been further exacerbated by recent policy shifts. 

In the context of rising unemployment, increased cost of living, and growing housing pressures, the Canadian government has implemented measures to reduce the number of international students and temporary residents, restrict work permits for them and their spouses, and cut permanent resident admissions by 21% in 2025, with further reductions ahead. These policy changes are framed as necessary to protect job opportunities for Canadian workers, particularly amid an overall unemployment rate of 6.6% and a youth unemployment rate of 13.6%. 

Yet, these policy shifts risk exacerbating existing dysfunctions in Canada’s labour market and undermining the competitiveness of the country’s economy at a time when it is most needed. Labour market challenges are not primarily driven by the number of newcomers but by deeper structural issues such as skills-job mismatches, barriers to recognizing foreign credentials, and discriminatory hiring practices. Restricting immigration may provide a short-term political response to economic concerns, but it harms Canada’s competitiveness, wasting immigrant talent without addressing persistent labour market issues. 

Unemployment and Underemployment: Disproportionate Challenges for Newcomers

While Canada’s rising unemployment affects all workers, newcomers have been disproportionately impacted. In 2024, the unemployment rate for recent immigrants reached 11%, more than double the 5.6% rate for Canadian-born workers.  

Underemployment is also a persistent issue for immigrants. In 2021, only 44% of immigrants who had arrived in Canada within the previous decade were employed in jobs that aligned with their education level, compared to 64% of Canadian-born workers aged 25 to 34. 

The overeducation rate—the proportion of university graduates working in jobs for which they are overqualified—was significantly higher for immigrants (26.7%) than for their Canadian-born counterparts (10.9%). 

According to a Statistics Canada report, as of May 2021, about one-quarter of economic principal applicants who arrived in 2018 or 2019 were employed in lower-skilled (skill level C) or labourer (skill level D) jobs. 

Immigrants, particularly those with foreign credentials, are significantly more likely to experience these job-education mismatches compared to Canadian-born workers. Approximately two-thirds of recent immigrants hold a degree from a foreign institution. The overeducation rate for these immigrants was 24% higher than that of younger Canadian-born workers.

A key factor driving these disparities is employers’ preference for Canadian experience, a bias that persists despite being legally prohibited in Ontario. Many hiring managers rely on referral networks, which often exclude newcomers and frequently undervalue international credentials—even when assessed by recognized organizations like World Education Services. Additionally, employers often struggle to assess foreign work experience and may perceive a lack of familiarity with Canadian workplace norms as a hiring risk.

Ultimately, hiring decisions are shaped by risk aversion. Managers tend to opt for candidates with familiar backgrounds, as a bad hire can reflect poorly on them, whereas an exceptional hire may not offer equivalent recognition or rewards. 

Persistent underemployment may lead to the loss of highly skilled economic immigrants. On average, 14.6% of immigrants leave Canada within 15 years of obtaining permanent residence. Most immigrants (34%) leave Canada within the first five years after arrival, suggesting that early employment challenges and unmet expectations may drive their decision to leave.

The Paradox of Canadian Experience 

International graduates with Canadian degrees generally achieve better labour market outcomes than those educated entirely overseas, benefiting from higher earnings and improved job matches. However, they remain disadvantaged in the labour market relative to Canadian-born graduates. A study by Statistics Canada reveals that former international students earned 20% less than their domestic counterparts in the first year after graduation and 9% less five years after graduation. 

Despite their Canadian credentials, many still face significant barriers to securing employment in their fields, largely due to employers’ preference for specific “Canadian experience” and biases in assessing their skills.

Although a substantial number of international students (277,400 in 2018) gain Canadian work experience during their studies—often in customer-facing, low-wage sectors such as accommodation and food services, retail, hospitality, and tourism—this experience is frequently dismissed as irrelevant to professional roles. 

This creates a paradox: employers require Canadian experience for entry-level positions in their field, yet without prior professional experience, graduates struggle to get hired in the first place.

In addition, employers often lack clarity regarding international graduates’ visa statuses, work permit durations, and long-term stay in Canada. Constantly shifting immigration policies further exacerbate this uncertainty, making employers hesitant to invest in hiring and training international graduates. 

What Must be Done Now

Canada’s long-term competitiveness is hindered not by immigration but by systemic labour market discrimination and inefficiencies that prevent skilled newcomers from fully contributing to the economy. The lack of recognition of foreign talent has a detrimental effect on the Canadian economy by under-utilizing valuable human capital.  

Eliminating biases related to Canadian experience and soft skills is key to retaining newcomers and ensuring they can fully contribute to the economy. To build a more inclusive labour market, a credential recognition system should support employers in assessing transferable skills and experience to mitigate perceived hiring risks related to immigrants.

An employer engagement approach, supported by settlement services and training programs, can ensure that policy decisions are responsive to employers’ needs and changing labour market trends. Strengthening collaboration with employers will help establish clear retraining pathways, enabling skilled immigrants to gain Canadian-equivalent qualifications through internships, on-the-job training, and other experiential opportunities. 

For international students, enhanced career services at educational institutions are critical. Participation in career services and work-integrated learning opportunities increases their chances of gaining Canadian work experience and improves the alignment between their employment, field of study, and career goals. 

Strengthening partnerships between universities, colleges, and employers can expand internships, co-op placements and mentorship programs, providing students with relevant Canadian work experience before graduation. Such collaboration is also key to implementing employer education initiatives that address misconceptions about hiring international graduates and highlight their contributions to the workforce. This, in turn, will support their retention by strengthening pathways to permanent residency and ensuring their long-term contributions to the labour market.   

Digital Technology and Artificial Intelligence (AI) can play a crucial role in objectively assessing the skills required versus those possessed, reducing hiring biases, and enhancing job matching for new immigrants and international graduates. Our recent report, which gathered insight from civil society, the private sector and academia, highlights the following technology-based and AI-driven solutions:

• Universities and employers can collaborate to establish digital mentorship platforms, like TMU alumni initiatives and Seneca’s 1:1 resume and interview preparation services.
• Wage subsidies and government-endorsed AI tools can alleviate employers’ hesitations and promote equitable hiring practices.
• Tools like Toronto Metropolitan University’s AI resume builder, Mogul AI, and Knockri can help match skills to roles, neutralize hiring bias and promote equity.
• Wage subsidies and AI tools can encourage equitable hiring, while AI-powered programs can help human resources recognize and reduce biases.
• Tools like the Toronto Region Immigrant Employment Council’s Mentoring Partnership can connect newcomers with mentors, track their skills and match them to employer needs.

Canada’s Choice: Lead with Talent or Fall Behind

Canada stands at a pivotal moment. Will it continue to impose short-sighted immigration restrictions, or will it build a future where talent drives economic success? 

To boost economic growth and stay competitive, Canada must go beyond simply welcoming newcomers—it must create pathways that fully leverage their skills. This means investing in credential recognition, employer engagement, and AI-driven hiring tools while strengthening collaboration between post-secondary institutions and industry. Cutting immigration is not the answer—rethinking how talent is assessed and utilized is. 

Creating meaningful employment pathways for skilled immigrants and international graduates is essential for ensuring a resilient and competitive future economy, particularly as global trade dynamics shift. With the prospect of a new Trump administration introducing protectionist trade policies and tariffs, Canada will need to strengthen its workforce and innovation capacity to navigate economic uncertainties. Highly skilled immigrants and international graduates could be Canada’s key advantage in achieving these goals. The question is no longer whether Canada needs immigrants but whether it is prepared to remove systemic barriers and unlock their full potential. The choice is clear: utilize talent or fall behind.