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Immigration impact on Canada’s Economy

Canada has a very liberal immigration policy that doesn’t seem to be as controversial as it would be in the U.S. Canada allows 250,000 to 300,000 immigrants to enter the country legally every year, which is about 1% of the population. No matter where you go in the country, society is exceptionally diverse. Immigration works, and it’s a huge economic engine. In simplest terms, gross domestic product is output, and if you have more people working at a constant level of productivity, you have more output. Sure, Canada has a few economic issues, its most important industry, energy, is in a sort of perma-recession. The government refuses to allow the construction of pipelines and Prime Minister Justin Trudeau’s carbon taxes are a drag on growth. Still, population growth, mostly through immigration is strong and have made up for those negatives.

Various economic studies have shown that countries where the population is declining, suffer from low growth and low inflation. Conversely, those with growing populations have faster growth and positive inflation. The economic riddle that is Japan is pretty easy to figure out: deflation won’t reverse until the population decline reverses. Japan’s fertility has declined for cultural and technological reasons. If Japan continues to restrict immigration, it will continue to experience deflation, no matter how much currency they print. Demographics are the primary driver of inflation and interest rates, and nothing else.

Attracting talent from around the world should be a top priority for Canada and it has pretty much prevented it from doing lasting economic harm to itself.


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