Canada’s economic immigration reset still lacks a purpose

As published on Substack

Two takeaways from Canada’s latest population figures released this week: policy is working and commentary isn’t changing. Media coverage continues to focus on policy-induced population declines, non-permanent resident targets, and near-term impacts on housing and economic performance—familiar ground from my time as a bank economist.

The more important question, and one not discussed enough, is what should come next for Canada’s economic immigration system.

Answering that requires stepping back from short-term fluctuations and clarifying what purpose economic immigration policy is meant to serve. Without addressing that fundamental question, efforts to recalibrate the system risk falling short.

A missing first principle

In recent years, immigration policy has been framed as a way to do many things at once: fill labour shortages, offset an aging demographic, support specific industries, sustain population growth, and strengthen under-served communities.

Public policy works best when grounded in a clear sense of purpose: what government is responsible for delivering, and where its role should be limited. As recent commentary on fiscal reform in Ontario argued, governments aren’t well suited to continuously fine-tune outcomes in response to short-term fluctuations. Their comparative advantage lies in setting clear objectives, establishing predictable rules, and creating conditions for long-term economic performance.

Immigration policy is no exception. Without a clear objective, it risks becoming a vehicle for competing short‑term political pressures rather than a tool for long‑term outcomes.

How we got here

Canada’s economic immigration framework now resembles a set of overlapping priorities rather than a consistent strategy.

In recent years, programs have been repeatedly adjusted to meet immediate pressures: eligibility criteria tweaked, sector-specific streams added, and temporary pathways expanded to fill perceived labour shortages. At the same time, large temporary resident inflows have been allowed to build, with increasing reliance on transitions to permanent status—blurring the line between the two and reducing the effectiveness of both.

These choices were often reasonable in isolation, given the shocks to the labour market since 2020. Taken together, however, they reflect a system trying to do too much and becoming harder to understand.

That challenge is structural. Immigration policy ultimately has only two core tools: how many people to admit and how to select them. Using those tools to pursue multiple objectives risks achieving none well.

Start with living standards

Policy should begin with a clear first principle. Among economists, there is broad agreement: economic immigration should raise average living standards over time, measured by GDP per capita.

This is not just a technical metric. In Canada, most immigrants become permanent residents. They’re part of the population whose living standards policy aims to improve.

From labour gaps to human capital

Once the objective is clear, the policy implications follow.

Selection of economic immigrants should emphasize long‑term human capital—people who will drive productivity, innovation and future demand. Canada’s points‑based system was designed with this goal in mind, and immigrants selected through Express Entry early after its inception continue to show strong labour market outcomes.

By contrast, more recent emphasis on in‑demand sectors and occupations expects permanent residents to solve immediate job vacancies. That’s a challenging proposition because predicting short- and medium-term labour shortages is difficult, especially now amid trade uncertainty and rapid technological change. It also increases the risk of more political intervention into a system designed for long-term stability.

Restoring clarity and trust

Amid housing affordability pressures, a system that appears increasingly ad hoc has eroded trust. While declining confidence in institutions is broader, the consequences here are tangible.

Uncertainty about labour supply often holds back investment and growth. Talent availability remains a concern for both large and small firms, adding to an already uncertain economic environment.

It also complicates government planning and service delivery. During my time in the Ontario finance minister’s office, rapid and unpredictable swings in population growth made budgeting and program design materially harder. Policy volatility at this scale has huge administrative and fiscal costs.

Restoring trust does not require a new model. It requires a return to first principles: a system anchored in a clear objective, governed by consistent rules, and insulated as much as possible from short‑term political pressures.

Beyond this week’s data

This week’s data show that Canada’s population is still adjusting, but the numbers don’t tell us whether economic immigration policy is achieving its purpose.

That purpose should be explicit: to raise living standards over time for Canadians. The issue is not simply the level of admissions, but whether the system supports sustained growth in productivity and GDP per capita.

Answering that question requires restoring discipline: keeping permanent and temporary programs distinct and ensuring each is used for its intended purpose.

Canada has previously operated a more coherent, rules-based system. Recommitting to that approach would improve predictability, support better planning and help rebuild confidence.

Until then, debates will continue to focus on short-term fluctuations instead of whether economic immigration policy is improving Canadians’ quality of life.