Tuesday, March 28, 2023

Testing to destruction

This is Joseph

One of the great paradoxes of Canada is how we can take a very good idea and then push it until it starts to show cracks. Today, the example is immigration. Immigration is a massive social good, creating benefits for everyone involved. But the question of just how much there should be is complicated. 

Canada's population's increase hit a million for the first time. The rate of 2.7% is on pace to match other fast growing countries, like Nigeria. The mix was 97% of growth due to international immigration. In fact, this is a very fast pace of growth:
If it stayed constant in years to come, such a rate of population growth would lead to the Canadian population doubling in about 26 years.

The United States is running around 0.38%, by comparison. 

So why do I worry that we are pushing this otherwise good things. Well, housing costs 40% more in Canada than the United States.  The conventional wisdom as to why (supply, low interest rates, and foreign buyers) are all deeply linked to immigration, except for the interest rates which do not explain why it is so much cheaper in Canada than the US (which has also had a period of affordable rates). Housing starts in Canada are low, for example Ontario is clearly under target

The issue is that you need to be able to house all of the new Canadians if you want a brisk growth rate. 

International students also create a risk if we ever stop being a popular destination for students. Ina  recent auditor report, Ontario noted that one College (Algoma):

As a result, international students accounted for 76% of Algoma’s tuition revenue for all campuses combined in 2020/21.

Obviously this makes the College extremely exposed to changes in the international studies market and means that a change in these volumes could impact the solvency of the institution.

That said, immigration is very, very good for a country. People do not want to move to weak and failing states. Immigration is a sign of strength and prosperity. But if you want to do a massive amount of it then it makes sense to plan for a general expansion of the capacity of the country.  

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