Canada’s population slump is becoming an economic crisis

Birth rates are collapsing, immigration is slowing and more people are leaving. That means fewer workers, weaker businesses and less prosperity

Canada’s population is falling. Does it matter? It matters a great deal if we want a thriving economy, rising living standards and plentiful job opportunities. Countries rarely prosper when their populations are shrinking.

People are consumers, spending their money on the goods and services that they want and need. It is the level of spending that tells us how well Canada is doing. Consumer spending is the most important part because it is the largest (about two-thirds) part and our level of consumption determines our standard of living. Fewer consumers mean less consumption.

Businesses need consumers as customers; the more, the better. Shrinking markets are not appealing.

But people are not only consumers. They are also the producers. Automation notwithstanding, it is impossible to imagine any business with no staff at all. People and the talents, knowledge and experience they bring are vital. But no company will be workerless and a growing population provides a bigger pool to draw employees from.

There are two sources of population growth: natural increase (births minus deaths) and net immigration (immigrants minus emigrants). Until very recently, Canada’s population has been rising, mainly due to immigration.

Since the baby boom of the 1950s and 1960s, the birth rate in Canada has not been high enough to maintain, let alone increase, our population.

As a result, Canada cannot rely on natural population growth to support future economic expansion. A birth rate of 2.1 children per woman is needed for a steady population because it roughly replaces the parents’ generation. Anything below 1.3 is considered an ultralow rate.

Currently Canada’s birth rate is 1.25. Among women under 40 in Canada and the United States, about half have not yet had children. Those having children are, on average, 31 years of age at first birth, making it much less likely that they will have more.

Many factors contribute to the increase in childlessness. Family formation is down and occurring at older ages. Men are less anxious to take on family responsibilities. Women want the security of their own career. Housing is unaffordable and, apart from a tiny number of subsidized spaces, childcare is very expensive.

It is immigration that, until recently, enabled our population to grow. However, policy changes have curtailed the inflow of both temporary and permanent migrants. At the same time, Canada’s diminishing opportunities and falling standard of living have led to increasing numbers of both former immigrants and others leaving Canada. We are now in a vicious cycle where a weak economy is deterring population growth and the lack of population growth is weakening our economy.

There are solutions to this problem, but first, there are some traps that must be avoided. The usual response to a weak economy is for government to increase its own spending and reduce taxes so that others can spend more. However, if the poor economy is caused by a lack of people, particularly workers, such policies will only lead to inflation and not growth.

A significant increase in the supply of housing that is both affordable and family-friendly would go a long way to encourage the production of more babies. The recent declines in both rents and home prices look like a rounding error compared to the galloping increases that preceded them.

Much new home construction consists of apartments that are small and skewed toward studios and one bedrooms and most of those are costly. We need homes that people can afford and in which they would want to raise a family. We need to look outside the box for new rules, regulations and tax structures so that such homes can be built.

Reductions in both permanent and temporary immigration were intended to alleviate the housing shortage, but they did not work. Appropriate housing is still largely unavailable or unaffordable.

Educational institutions, both public and private, are crippled by the lack of income from foreign students, who typically pay much higher tuition fees than domestic students, and employers in many areas and industries are struggling to find workers.

Opening the doors to more of the kind of people that Canada needs will help offset the diminishing numbers of Canadians. It will enable our educational institutions to flourish and our businesses to staff up and grow. Perhaps it will generate enough prosperity that we will start to have more babies of our own. A stronger population would strengthen our economy as well.

Dr. Roslyn Kunin is a respected Canadian economist known for her extensive work in economic forecasting, public policy, and labour market analysis. She has held various prominent roles, including serving as the regional director for the federal government’s Department of Employment and Immigration in British Columbia and Yukon and as an adjunct professor at the University of British Columbia. Dr. Kunin is also recognized for her contributions to economic development, particularly in Western Canada.