Bank of Canada Governor talks about using immigration to balance the national labor market

Bank of Canada Governor talks about using immigration to balance the national labor market

Posted Nov 23, 2022 8:00 AM EST

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In two recent speeches on November 10 and 14, Bank of Canada (BoC) Governor Tiff Macklem explained to participants and the media that immigration could be the key to ensuring labor market stability and correcting the course of inflation.

His speeches addressed “the future of workers and jobs” by addressing issues such as:

  • Why are companies not finding enough workers?
  • Are we going into a recession?
  • Do [a recession] mean a sharp increase in the unemployment rate?
  • What is the Bank of Canada’s role in supporting as many sustainable jobs as possible?

What Tiff Macklem had to say about the link between immigration, labor and inflation in Canada

Focused on explaining how employers can expand the pool of workers available to address labor market issues and rising inflation, the following is a summary of Macklem’s speeches regarding the role of immigration in helping to balance the Canadian labor market.

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Governor Macklem’s first mention of immigration came as he pointed out that Canada’s current labor market has more demand than supply for labour.

According to the Governor of the Bank of Canada, labor shortages put upward pressure on wages across the country and subsequently drove up inflation. Therefore, Macklem urges Canadian employers to continue to hire immigrants – and recent immigrants in particular – to meet growing labor demand and fight inflation accordingly.

“[One] The best way to rebalance supply and demand is to increase the supply of workers,” Governor Macklem said, adding “the more we can do on the supply side, the less we will need to do on the demand side.” Hiring more immigrants should help better regulate high wages, which the BoC says is much needed because “wages will need to slow to bring inflation under control.”

The state of immigration in Canada since 2020

After reviewing the immigration downturn Canada experienced in 2020 at the height of the COVID-19 pandemic, where the country missed its immigration target of around 100,000 workers, Macklem also noted that “immigration is [now] bounce back as border restrictions return to normal.

Evidence of Canada’s immigration returning to normal is clear in the country’s latest immigration levels plan for 2023-2025, released on November 1. 2024 and 500,000 in 2025 – Canada is clearly rebounding and aiming even higher, after slow immigration at the height of the pandemic.

And after

Therefore, immigration will contribute to the balance, growth and stability of labor market inflation in Canada, especially relative to other countries in the world. Indeed, “Canada’s strong immigration targets suggest that…immigration will account for more than two-thirds of Canada’s projected potential output growth”.

In other words, immigrants add potential workers to the Canadian labor force, which combats the declining labor force participation rate in this country due to our aging natural population and, by therefore, helps to begin to remedy the economic problems that we are currently facing.

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Note: The full transcript of Governor Tiff Macklem’s Nov. 10 speech at Metropolitan University of Toronto is available on the Bank of Canada’s website, as is the full video of his Nov. 14 speech at the Diversity Conference , equity and inclusion in economics, finance and central. Bank (Part 1 and Part 2).

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