The rising cost of living in Canada is being driven – at least in part – by labour shortages that could be alleviated by more immigration.

A paucity of people to fill vacant jobs is pushing up wages and leaving companies with little choice but to pass on these costs in the form of higher prices.

“One reason many Canadians are struggling with finances these days is the labour shortage that numerous sectors are experiencing,” states a report by trade publisher Human Resources Director.

When transportation companies have to raise wages due to a shortage of mechanics, they then raise bus and plane tickets. A lack of cooks results in higher menu prices at restaurants.

“Anybody can expect to bear some of the impacts of this shortage,” Canadian Federation of Independent Business (CFIB) chief economist Simon Gaudreault has reportedly said.

“This is all interconnected in ways that sometimes people underestimate.”

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Tradespeople are a particularly hot commodity in Canada as employers struggle to find qualified workers for those jobs.

In British Columbia, for example, there’s been a nine per cent uptick in the number of construction companies working on industrial, commercial and investment projects in the past five years but the number of tradespeople to get that work done has fallen by seven per cent.

Canada’s agriculture sector is expected to have 100,000 vacant positions by the year 2030.

Despite these labour shortages and their inflationary effect, Ottawa is planning to hold the line on permanent immigration in 2026 after hitting its target of 500,000 new permanent residents in 2025.

Under the 2024-2026 Immigration Levels Plan, Canada is planning to welcome 485,000 new permanent residents this year, 500,000 in 2025 and then hold the line on immigration in 2026 with another 500,000 newcomers.

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Given the growing Canadian population, the targeted level for 2026 would be a lower level of immigration in percentage terms.

Ottawa is also expected to start limiting temporary immigration to Canada this September and gradually work on reducing the number of these temporary residents by five over the coming three years.

In an announcement on March 21, Immigration Minister Marc Miller said he will be meeting with provincial and territorial immigration ministers in May to determine the specifics of these temporary immigration levels.

“Provinces and territories know their unique labour needs and capacity and need to assume responsibility for the people that they bring in as well,” said Miller.

Temporary Immigration Levels Plan Is Expected By The End Of This Year

The move to set temporary immigration levels came in the wake of Immigration, Refugees and Citizenship Canada’s (IRCC) cap of 606,250 new study permit applications this year for international students which was announced in January.

“The intent of these Instructions is to ensure the number of study permit applications accepted into processing by the Department of Citizenship and Immigration … within the scope of the instructions does not exceed 606,250 study permit applications for one year beginning on the date of signature,” the Canada Gazette reported on Feb. 3.

That cap on study permit applications is expected to reduce the number of new study permits this year by roughly 40 per cent.

Although some experts consider immigration to have a deflationary effect by providing the needed workers to get jobs done and lower pressure on wages, the sharp increase in the number of temporary residents in Canada has been widely blamed for the housing affordability crisis in Canada.

“Changes are needed to make the system more efficient and more sustainable,” said Miller.

“There should be an honest conversation about what the rise in international migration means for Canada as we plan ahead.”

In Temporary Workers, Temporary Growth? How a Slowdown in the Recent Migration Surge Could Exacerbate Canada’s Downturn, Desjardins principal economist Marc Desormeaux has warned, though, that the record numbers of temporary residents could soon ease off and stall the Canadian economy.

“History suggests the recent surge (in the number of temporary residents in Canada) could ease significantly, exacerbating a nascent economic slowdown,” cautions Desormeaux.

“That could have significant consequences nationwide, most notably in the largest provinces.”

In their most recent fiscal plans, British Columbia and Ontario have already included contingencies for the possibility of a downturn in temporary residents in an attempt to create buffers to the accompanying downturn in tax revenues to provincial coffers and a more sluggish economy should there be a drop in temporary residents.

In British Columbia and Ontario, he predicted a downturn in temporary residents could create a 0.8 to 1.9 percentage point drag on economic growth next year.

Desormeaux has recommended Canada beef up its data collection on the numbers of temporary residents in the country.

“We also reiterate our call for more and better data on temporary migration. For the foreseeable future, Canada and all its provinces will continue to grapple with the immense challenges of a rapidly aging population and a lack of affordable housing supply. To meet these challenges, we’ll need clear information about the individuals who can help address them.”