The Canadian economy has two great blessings, raw material wealth and significant population growth. The latter, thanks to immigrants looking for jobs, is significantly tied to the former.

Canada’s population growth rate is currently 1.1% per year. One-third of the gain is due to natural causes, with births exceeding deaths. Two-thirds of the increase is due to immigration.

Fertility rates among adult women in many nations are falling. Therefore, for a nation to experience population growth, immigration must play an important role. 

Canada is among only a handful of industrialized nations – the United States being another – experiencing solid year-to-year increases in new foreign-sourced individuals. 

America’s immigration gains have come in two opposite forms, legal and illegal. The second has been a political hot potato, with many citizens adamantly objecting to new arrivals sneaking in through the back door and taking work away from “locals”. 

Nevertheless, there is recognition that 11 million foreigners are already in the country under a cloud and something must be done to integrate them into the tax-paying base. New legislation proposes a series of steps leading to citizenship after 13 years.

Immigration reform is proceeding through both Houses of Congress with support from the Democrats on humanitarian grounds and from a Republican Party prodded by segments of the corporate sector looking to hire not just low-cost workers, but also others with unique qualifications.

A coalition of U.S. high-tech firms is spearheading the drive to acquire the best and the brightest regardless of where they were educated or came by their knowledge. 

Canada is now tightening the rules to bring in temporary workers when jobs can be filled at home. But we’re also becoming smarter about who to let in based on other employment criteria.

The emphasis in Canadian immigration has shifted away from “family chains” (i.e., adult children bringing over their parents, grandparents, cousins, etc.) and towards individuals with certain in-demand skills or access to entrepreneurial money. That way, they can hit the ground running and immediately make a contribution to both the social scene and the business community.

Many of the world’s most important economies are experiencing slow population growth or actual declines. Both Germany (-0.2% per year) and Japan (-0.08%) fall into this category.

Japan’s economy has been trapped in deflation for 15 years. Aging populations live on fixed incomes. A top priority then becomes stable (or even falling) prices. The citizens of Japan have certainly gotten their wish.

The Japanese economy, at least until its latest incarnation dubbed “Abenomics”, has stagnated. 

Germany thrives on export sales, which are possible only because the work force is disciplined enough to accept an unusual degree of wage restraint in order to keep costs down. Germany has also taken advantage of the fact that under the European Union’s constitution, there is unlimited employment mobility between member countries. It has also welcomed workers from Turkey.

Over the past decade, the number of jobs in manufacturing in Canada has dropped by half a million. Within Statistics Canada’s monthly industry-based gross domestic product (GDP) figures, manufacturing comprises only 11% of the total. New jobs are mainly in services, resources and construction. Much of the construction work is in building resource projects.

Both raw materials development and strong net immigration will be important factors for the Canadian economy in the years ahead. The staying-power of neither is assured absolutely. 

Canadian export sales growth will require that emerging nations continue to expand at a healthy pace and that their internal populations keep moving along a path to more affluence, with all that means in terms of greater purchases of consumer goods (resulting in demand for our agricultural exports, as just one example) and upgraded infrastructure (requiring our iron ore for steel).

Canadians need to understand how competitive the world trading environment has become. Potential competitors won’t just sit idly by while we try to sign up offshore customers.

For example, the U.S. is moving towards self-sufficiency in energy. By 2020, there will be enough surplus gas south of the border to warrant development of an export-oriented liquefied natural gas (LNG) industry. Completion of the Panama Canal’s expansion in 2015 will facilitate the movement of tankers from the Texas Gulf Coast to Asia. Also, Nicaragua is planning to build a second canal to the Pacific Ocean, with the $40 billion cost to be financed by Chinese money.

(The U.S. move towards energy self-sufficiency is based on the assumption that the nation’s energy reserves will keep expanding through the “fracking” of shale rock. All assumptions have potentially fatal flaws. A harmful environmental event could dramatically alter the outlook.)

Qatar and Australia are two other nations with large LNG export sales plans. Canada currently has only one LNG facility, in Saint John N.B., and it accepts imports rather than ships exports.

With support from the provincial government, six LNG export terminals in northern B.C. are on the drawing boards. Victoria’s record in erecting environmental roadblocks to resource projects, however, combined with opposition from aboriginal groups, dims the prospects.

Other resource projects across the county also face impediments. We’re about to return full circle to the second sentence in the opening paragraph of this article. But first, a few more words of explanation. Many of today’s problems in Europe and Japan result from demographic trends.

As populations age, there are fewer young workers to support the social safety net. Who’s going to provide the tax dollars to pay for the pension plans and medical care of the elderly?

Even China is caught in this trap. As a result of that nation’s one-child policy, instituted in the 1980s, the number of young people entering the work force is in decline. This contributes to both labour supply bottlenecks and higher wage rates. When fewer workers are available, they can demand more pay. Average earnings in China have risen by a factor of five in a decade.

The specter of aging populations is why so many governments have embraced austerity. They know they’re going to have difficulty paying their bills in a future that’s not so far away.

As long as we can maintain a desirable population growth rate in Canada, our problems will be less onerous than for many other nations. A healthy level of young immigrant arrivals will be crucial. But will people still want to come to Canada? The incentives include wide open spaces, vibrant urban lifestyles, health care benefits, quality schooling, ethnic diversity and so on.

But the list is headed by job opportunities. To a significant degree, available work will continue to be tied to opening up and expanding our resource sector to supply the world marketplace.

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News.