Research to Insights: Immigration as a Source of Labour Supply

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Release date: June 22, 2022

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About Research to Insights

The Research to Insights series of presentations features a broad range of findings on selected topics of research. Each presentation will draw from and integrate evidence from many different studies that use innovative and high-quality data and methods to better understand relevant and complex policy issues.

Based on applied research of valuable data, the series is intended to provide decision makers, and Canadians more broadly, a comprehensive and horizontal view of the current social, economic and health issues we face in a changing world.

Context: Short-term pressures on the labour supply as businesses emerge from the COVID-19 pandemic

  • Canada’s labour market has tightened substantially as restrictions related to the COVID-19 pandemic ease and economic activity continues to strengthen.
    • Employment rates among core-aged men and women (25 to 54 years) are well above their pre-pandemic baselines. Employment rates among youth have also fully recovered.
    • The national unemployment rate fell to a record low 5.2% in April. Among core-aged workers, the rate was 4.3%.
    • More recent core-aged immigrants are working now than before the pandemic.
  • Almost 4 in 10 businesses anticipated worker shortages in early 2022, while a similar percentage expect challenges in recruiting skilled employees. Job vacancies in late 2021 were 80% above pre-pandemic levels.
  • High levels of immigration over the near term will be critical in addressing current labour market imbalances.

Context: Structural trends point to persistent labour supply challenges over the longer term

  • Canada’s working-age population (15 to 64 years) has never been older. More than one in five working-age Canadians are approaching retirement age.
  • Currently, working-age Canadians make up 64.8% of the population; in three decades, it could fall below 60%.
  • Immigration has been the driving force behind Canada’s labour supply for many years. During the 2010s, over four-fifths of the growth in Canada’s labour force came from immigration.
  • Modest, sustained increases in immigration levels will not fully offset the longer-term impacts of an aging population, but are critical for alleviating the effects of aging on the labour market over time.

Recent years had the highest annual admission levels of the past century

  • After the interruption caused by the pandemic in 2020, 405,800 immigrants were admitted in 2021, the highest level in the history.
  • Since 2010, 60% of immigrants were in the economic class, 26% were in the family class and 13% were refugees.
  • There has been an increased share of refugees since 2016.

Chart 1: Annual level of immigration, by class

Data table 
Annual level of immigration, by class
Table summary
This table displays the results of Annual level of immigration. The information is grouped by Year (appearing as row headers), Economic class, Family class, Refugees , Others and Total (appearing as column headers).
Year Economic class Family class Refugees  Others Total
1990 97,717 73,917 40,204 3,593 215,431
1991 86,835 86,755 54,001 4,227 231,818
1992 95,650 100,437 52,309 5,538 253,934
1993 105,417 111,951 30,566 7,741 255,675
1994 102,176 93,557 20,437 7,425 223,595
1995 106,560 76,754 28,112 727 212,153
1996 125,066 67,974 28,857 3,465 225,362
1997 128,095 59,669 24,616 3,078 215,458
1998 97,672 50,631 23,060 2,320 173,683
1999 109,000 54,973 24,552 841 189,366
2000 135,958 60,252 30,240 297 226,747
2001 155,306 66,361 27,978 124 249,769
2002 138,052 64,895 25,173 89 228,209
2003 122,350 70,705 26,010 1,463 220,528
2004 134,093 63,698 32,721 4,835 235,347
2005 156,153 64,413 35,784 5,429 261,779
2006 138,145 74,827 32,505 5,631 251,108
2007 131,017 71,828 27,970 5,363 236,178
2008 148,806 71,603 21,857 4,348 246,614
2009 153,316 71,629 22,849 3,791 251,585
2010 186,664 65,229 24,695 3,483 280,071
2011 155,849 61,036 27,874 3,362 248,121
2012 160,643 69,476 23,094 4,028 257,241
2013 148,167 82,963 24,138 3,235 258,503
2014 164,888 67,210 24,053 3,356 259,507
2015 170,420 65,485 31,540 4,395 271,840
2016 156,030 78,005 58,490 3,845 296,370
2017 159,285 82,465 41,075 3,685 286,510
2018 186,375 85,165 45,465 4,050 321,055
2019 196,655 91,300 48,500 4,720 341,175
2020 106,395 49,305 25,490 3,395 184,585
2021 253,080 81,300 59,790 11,625 405,795
2022 241,850 105,000 76,545 8,250 431,645
2023 253,000 109,500 74,055 10,500 447,055
2024 267,750 113,000 62,500 7,750 451,000

In the 2010s, immigrant workers accounted for 84% of the growth in the total labour force, 55% of the growth in high- and medium-skilled jobs and offset decline in low-skilled jobs among Canadian-born workers

  • While employment in low-skilled jobs fell among Canadian-born workers and grew among immigrant workers in the 2010s, the share of low-skilled jobs fell for both Canadian-born and immigrant workers.
  • Between 2019 and 2021, growth in high-skilled jobs offset the decline in other jobs.

Chart 2: Change in employment by occupational skill level and immigration status, 2010 to 2019

Data table 
Change in employment by occupational skill level and immigration status, 2010 to 2019
Table summary
This table displays the results of Change in employment by occupational skill level and immigration status Total, Canadian-born, New immigrants, Recent immigrants, Long-term immigrants and Temporary residents, calculated using change in employment in 1000s units of measure (appearing as column headers).
Total Canadian-born New immigrants Recent immigrants Long-term immigrants Temporary residents
change in employment in 1000s
Managerial -7.1 -94.6 7.4 14.0 55.4 10.7
High-skilled 743.6 323.4 53.6 57.7 259.8 49.0
Medium-skilled 1009.1 470.5 61.9 98.5 304.9 73.4
Low-skilled 99.8 -399.7 63.4 106.3 236.7 93.2

Chart 3: Change in employment by occupational skill level and immigration status, 2019 to 2021

Data table 
Change in employment by occupational skill level and immigration status, 2019 to 2021
Table summary
This table displays the results of Change in employment by occupational skill level and immigration status Total, Canadian-born, New immigrants, Recent immigrants, Long-term immigrants and Temporary residents, calculated using change in employment in 1000s units of measure (appearing as column headers).
Total Canadian-born New immigrants Recent immigrants Long-term immigrants Temporary residents
change in employment in 1000s
Managerial -55.8 -48.3 0.4 -0.9 -4.1 -2.9
High-skilled 472.9 227.0 57.8 29.1 137.7 21.2
Medium-skilled -99.1 -198.7 9.6 -1.2 73.4 17.8
Low-skilled -341.8 -298.7 -34.0 1.2 -12.1 1.7

Since 2010, the share of new and recent immigrant workers grew the fastest in transportation and warehousing, professional services and accommodation and food services

  • In 2021, the share of new and recent immigrant workers reached 13% in the accommodation and food services sector, 11% in the professional services sector, and 10% in the manufacturing and transportation sector.
  • Between 2010 and 2021, the labour force in the manufacturing sector fell by 159,000 among Canadian-born workers and was partly replenished by new and recent immigrants (+46,000).
  • Between  2019 and 2021, there was a large drop in the accommodation and food services sector among Canadian-born workers (-21%) and new immigrant workers (-31%) as well as in the agriculture sector among temporary foreign workers (TFWs) (-29%).

Chart 4: Percentage of new and recent immigrant workers, by industrial sector

Data table 
Percentage of new and recent immigrant workers, by industrial sector
Table summary
This table displays the results of Percentage of new and recent immigrant workers 2010, 2019 and 2021, calculated using percent units of measure (appearing as column headers).
2010 2019 2021
percent
Agriculture, mining 3.16 3.75 3.57
Utilities and construction 4.16 5.78 5.15
Manufacturing 7.59 9.45 10.28
Wholesale and retail trade 6.10 7.52 8.29
Transportation and warehousing 6.03 10.01 9.82
Professional services 7.29 9.80 10.58
Educational services 4.58 5.50 5.73
Other services 7.22 7.93 8.54
Accommodation and food services 9.96 13.02 12.93
Public administration 3.03 3.09 2.93
Health services 5.69 7.87 8.23

Skill utilization stable among young Canadian-born workers, but decreased among recent immigrant workers

  • Over the 2001 to 2016 period, the percentage of workers in jobs requiring a university degree stayed close to 60% among young Canadian-born workers with at least a bachelor’s degree.
  • Over this period, the percentage of university-educated immigrants in high-skill jobs decreased from 46% to 38% among recent immigrants with a degree.
  • Employment growth among young Canadian-born workers was concentrated in jobs requiring a university education, while the growth among recent immigrants with a degree was in jobs not requiring a university education.

Chart 5: Percentage of workers with at least a bachelor's degree working in jobs requiring a university degree

Data table 
Percentage of workers with at least a bachelor's degree working in jobs requiring a university degree
Table summary
This table displays the results of Percentage of workers with at least a bachelor's degree working in jobs requiring a university degree. The information is grouped by Year (appearing as row headers), Immigrants in Canada for 10 years or less and Canadian-born workers aged 25 to 34, calculated using percent units of measure (appearing as column headers).
Year Immigrants in Canada for 10 years or less Canadian-born workers aged 25 to 34
percent
2001 45.7 58.6
2006 41.7 60.1
2011 41.1 60.9
2016 37.7 59.0

For more information: Hou et al. (2019). Recent trends in over-education by immigration status.

The employment gap between new immigrants and Canadian-born workers smallest in a decade

  • Since the early 2010s, recent immigrants experienced faster growth in the employment rate than Canadian-born workers—an 8-percentage-point increase from 2010 to 2021, compared with a 2-percentage-point increase among Canadian-born workers.
  • The employment rate gap between recent immigrant workers and Canadian-born workers decreased from 13 percentage points in 2010 to 7 percentage points in 2021.
  • The COVID-19 pandemic had a similar impact on the employment rate by immigration status.

Chart 6: Employment rate by immigration status among individuals aged 25 to 54, 2006 to 2021

Data table 
Employment rate by immigration status among individuals aged 25 to 54, 2006 to 2021
Table summary
This table displays the results of Employment rate by immigration status among individuals aged 25 to 54. The information is grouped by Year (appearing as row headers), Immigrants in Canada for 10 years or less, Immigrants in Canada for more than 10 years and Canadian-born, calculated using percent units of measure (appearing as column headers).
Year Immigrants in Canada for 10 years or less Immigrants in Canada for more than 10 years Canadian-born
percent
2006 70.3 82.0 83.1
2007 70.5 82.2 83.8
2008 70.6 81.7 84.1
2009 68.1 79.3 82.1
2010 68.6 79.4 82.4
2011 68.9 79.8 82.9
2012 70.9 80.4 83.2
2013 71.6 80.6 83.3
2014 70.9 79.9 83.1
2015 70.9 80.9 83.3
2016 72.4 80.7 83.2
2017 73.6 82.0 84.0
2018 75.5 82.1 84.5
2019 75.6 83.1 85.2
2020 71.8 77.8 81.7
2021 76.6 80.7 83.9

Steady increase in the initial earnings of new economic immigrants

  • Earnings in the first full year rose 39% among economic immigrants between the 2010 and 2018 entry cohorts, driving the trend for all new immigrants.
  • Earnings growth was also large among family class immigrants—27%.
  • Growth among refugees was 9%.

Chart 7: First full-year earnings of new immigrants, aged 20 to 54 at landing, by landing year and class

Data table 
First full-year earnings of new immigrants, aged 20 to 54 at landing, by landing year and class
Table summary
This table displays the results of First full-year earnings of new immigrants. The information is grouped by Landing year (appearing as row headers), All immigrants, Economic immigrants, Family immigrants and Refugees, calculated using in 2019 $ units of measure (appearing as column headers).
Landing year All immigrants Economic immigrants Family immigrants Refugees
in 2019 $
2000 29,701 33,869 23,798 19,870
2001 26,691 29,041 23,184 20,065
2002 25,468 27,752 22,215 19,913
2003 25,207 27,637 22,579 21,123
2004 27,127 30,605 23,002 21,681
2005 27,449 30,240 24,038 23,305
2006 29,496 33,949 24,949 22,827
2007 31,251 36,275 25,942 22,914
2008 30,876 35,538 24,673 21,284
2009 30,450 34,643 24,282 21,197
2010 30,878 34,156 24,555 22,372
2011 31,806 35,731 25,636 22,244
2012 33,385 37,242 26,277 23,792
2013 34,106 38,430 27,105 23,761
2014 36,963 41,669 26,888 23,426
2015 36,047 40,573 27,014 21,317
2016 36,995 43,489 28,405 21,142
2017 40,372 46,266 30,846 23,584
2018 41,563 47,571 31,285 24,415

The recent improvement in labour market outcomes is partly related to the two-step selection of economic immigrants

  • Among economic principal applicants who landed in 2020, about 67% worked in Canada before immigration, an increase from 12% in 2000 and 33% in 2010.
  • This increase was related to the expansion of provincial programs that relied more on TFWs and the introduction of the Canadian Experience Class.
  • The increased reliance on TFWs tended to improve the economic outcomes of immigrants.

Chart 8: Percentage of economic principal applicants with pre-landing Canadian work experience

Data table 
Percentage of economic principal applicants with pre-landing Canadian work experience
Table summary
This table displays the results of Percentage of economic principal applicants with pre-landing Canadian work experience . The information is grouped by Year (appearing as row headers), All, Federal skilled workers, Canadian experience, Other federal programs and Provincial programs, calculated using percent units of measure (appearing as column headers).
Year All Federal skilled workers Canadian experience Other federal programs Provincial programs
percent
2000 11.62 8.86 Note ...: not applicable 38.19 11.29
2001 11.22 8.33 Note ...: not applicable 41.13 11.42
2002 11.57 8.41 Note ...: not applicable 41.45 13.21
2003 13.20 8.05 Note ...: not applicable 59.06 13.87
2004 15.90 11.54 Note ...: not applicable 57.65 14.23
2005 15.06 9.82 Note ...: not applicable 57.60 13.88
2006 22.77 17.07 Note ...: not applicable 56.11 20.95
2007 25.95 21.14 Note ...: not applicable 59.16 22.98
2008 31.18 24.53 Note ...: not applicable 63.71 26.09
2009 34.60 24.37 97.07 60.89 29.95
2010 33.06 19.01 97.00 64.49 29.79
2011 32.86 14.37 97.37 55.96 30.03
2012 39.70 16.75 97.22 74.84 38.51
2013 45.08 16.01 97.64 63.50 49.28
2014 57.86 24.59 98.18 78.32 46.47
2015 58.74 14.47 98.34 83.33 59.25
2016 58.57 33.15 97.74 85.13 53.46
2017 67.00 22.30 97.12 94.52 56.23
2018 58.01 10.86 95.51 94.40 60.97
2019 56.48 8.60 97.06 88.30 65.95
2020 66.72 13.68 97.19 84.76 72.41

For more information: Hou et al. (2020). Two-step immigration selection: Recent trends in immigrant labour market outcomes.

Temporary foreign workers account for a rising share of the employed labour force

  • In 2019, TFWs accounted for 4.1% of the total T4 earners in Canada, a large increase from 1.9% in 2010.
  • The reliance on TFWs is particularly high in the agriculture (15%), the accommodation and food services (10%) and the administrative and support, waste remediation management services (10%) sectors.
  • TFWs are also overrepresented in the professional, scientific, and technical services sector and in the  information and cultural industries.

Chart 9: The share of temporary foreign workers among all T4 earners, by industry, 2010 and 2019

Data table 
The share of temporary foreign workers among all T4 earners, by industry, 2010 and 2019
Table summary
This table displays the results of The share of temporary foreign workers among all T4 earners. The information is grouped by Class title (appearing as row headers), 2010 and 2019, calculated using percent units of measure (appearing as column headers).
Class title 2010 2019
percent
Agriculture, forestry, fishing and hunting 7.8 14.7
Mining, quarrying, and oil and gas extraction 0.9 1.0
Utilities 0.5 0.7
Construction 1.1 2.0
Manufacturing 1.2 3.4
Wholesale trade 1.2 3.2
Retail trade 1.3 5.0
Transportation and warehousing 0.9 3.4
Information and cultural industries 1.4 4.7
Finance and insurance 0.8 2.2
Real estate and rental and leasing 2.2 3.2
Professional, scientific and technical services 2.5 5.5
Management of companies and enterprises 1.6 3.4
Administrative and support, waste management and remediation services 2.9 9.7
Educational services 2.4 3.6
Health care and social assistance 0.8 1.3
Arts, entertainment and recreation 3.7 5.0
Accommodation and food services 4.6 9.9
Other services (except public administration) 4.2 2.7
Public administration 0.1 0.2
Overall 1.9 4.1

For more information: Lu & Hou (2019). Temporary foreign workers in the Canadian labour force: Open versus employer-specific work permits.

Higher rate of transition to permanent residency among temporary foreign workers with lower occupational skills

  • From the early 2000s to early 2010s, the share of higher-skilled TFWs decreased from 58% to 44%, while the share of lower-skilled TFWs increased from 32% to 39%.
  • Higher-skilled TFWs have more pathways to apply for permanent residency but have a lower transition rate than lower-skilled TFWs.
  • Opportunities and motivations jointly determine the transition rate.

Chart 10: Rate of transition to permanent residency by fifth year after receiving the first work permit among temporary foreign workers

Data table 
Rate of transition to permanent residency by fifth year after receiving the first work permit among temporary foreign workers
Table summary
This table displays the results of Rate of transition to permanent residency by fifth year after receiving the first work permit among temporary foreign workers Period of obtaining the first work permit, 2000 to 2004, 2005 to 2009 and 2010 to 2014 , calculated using percent units of measure (appearing as column headers).
Period of obtaining the first work permit
2000 to 2004 2005 to 2009 2010 to 2014
percent
Higher-skilled 11.34 21.99 26.69
Lower-skilled 29.63 29.90 29.65
Skill level undetermined 23.11 17.79 13.40

For more information: Picot et al. (2022). Transition to permanent residency by lower- and higher-skilled temporary foreign workers.

International students have become an important source of labour supply

  • Between 2000 and 2019, the number of international students with T4 earnings increased from 22,000 to 354,000.
  • This was a result of the increasing number of international students and their rising labour force participation rate (from 18% to 50%).
  • The increases were particularly large at the non-university postsecondary level where the labour force participation rate rose from 7% to 58%, and the number of participants rose from 3,000 to 173,000.
  • The largest increased occurred after 2015.

Chart 11: Number of international students at the postsecondary education level with T4 earnings, by level of education

Data table 
Number of international students at the postsecondary education level with T4 earnings, by level of education
Table summary
This table displays the results of Number of international students at the postsecondary education level with T4 earnings. The information is grouped by Year (appearing as row headers), Non-university postsecondary, Undergraduate, Graduate, Other and Total, calculated using person units of measure (appearing as column headers).
Year Non-university postsecondary Undergraduate Graduate Other Total
person
2000 2,710 6,340 8,130 4,650 21,830
2001 3,480 7,970 8,930 4,740 25,120
2002 4,040 9,130 10,030 5,110 28,310
2003 4,950 10,460 11,680 5,680 32,770
2004 5,740 11,780 12,700 5,120 35,340
2005 6,470 14,540 13,780 5,100 39,890
2006 7,890 18,290 14,810 5,100 46,090
2007 9,660 22,070 15,480 5,740 52,950
2008 10,610 23,260 16,140 6,800 56,810
2009 11,630 21,700 17,360 7,520 58,210
2010 14,250 21,200 18,990 7,920 62,360
2011 19,010 22,240 21,320 8,270 70,840
2012 24,190 24,040 24,320 10,020 82,570
2013 28,280 26,360 27,640 12,190 94,470
2014 33,420 31,080 29,460 12,590 106,550
2015 30,310 32,400 26,340 9,190 98,240
2016 50,050 37,800 28,770 13,090 129,710
2017 98,900 49,690 41,160 23,690 213,440
2018 146,120 61,960 51,630 36,420 296,130
2019 173,790 75,150 60,570 43,980 353,490

For more information: Crossman et al. (2022). International students as a source of labour supply: Engagement in the labour market during the period of study.

Many international students transition to permanent residency

  • One-third of international students who arrived in the late 2000s and early 2010s became permanent residents within 10 years of being in Canada.
  • A declining share is moving directly from study to permanent residency, and an increasing share is obtaining a postgraduate work permit before the transition.
  • The transition rate reached 50% for students at the graduate level and 60% for those with Canadian work experience.

Chart 12: Cumulative rates of transition to permanent residency among international students

Data table 
Cumulative rates of transition to permanent residency among international students
Table summary
This table displays the results of Cumulative rates of transition to permanent residency among international students . The information is grouped by Years since first study permit obtained (appearing as row headers), 2000-to-2004 cohort, 2005-to-2009 cohort, 2010-to-2014 cohort and 2015-to-2019 cohort, calculated using percent units of measure (appearing as column headers).
Years since first study permit obtained 2000-to-2004 cohort 2005-to-2009 cohort 2010-to-2014 cohort 2015-to-2019 cohort
percent
1 4.3 3.5 2.0 1.4
2 8.4 7.3 4.2 2.8
3 13.1 11.4 8.3 4.7
4 17.1 15.4 14.5 6.7
5 20.5 19.2 21.4 Note ...: not applicable
6 23.3 22.4 26.8 Note ...: not applicable
7 25.7 25.4 30.3 Note ...: not applicable
8 27.8 28.2 32.1 Note ...: not applicable
9 29.4 30.5 32.9 Note ...: not applicable
10 30.5 32.1 33.1 Note ...: not applicable
11 31.3 33.1 Note ...: not applicable Note ...: not applicable
12 31.9 33.7 Note ...: not applicable Note ...: not applicable
13 32.3 33.9 Note ...: not applicable Note ...: not applicable
14 32.7 34.0 Note ...: not applicable Note ...: not applicable
15 32.9 34.0 Note ...: not applicable Note ...: not applicable

For more information: Choi et al. (2021). International students as a source of labour supply: Transition to permanent residency.

Takeaways

  • As businesses emerge from the COVID-19 pandemic, healthy immigration flows are essential to addressing the unmet demand for both high- and low-skilled workers in many sectors. Over the longer term, higher immigration flows will be critical for (partly) mitigating the impacts of Canada’s aging population on the labour market.  
  • The labour market outcomes of recent immigrants improved substantially in the years leading up to the pandemic. TFWs and international students, both of whom are transitioning to permanent residency in greater numbers, have become increasingly important sources of labour supply. 
  • While economic outcomes of recent immigrants have improved, substantial challenges related to their skill utilization continue to persist (including barriers related to credential recognition). Addressing these challenges will be key to improving social and economic mobility among newcomers while enhancing the skills and competitiveness of our workforce.
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