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Andrew Grantham, Senior Economist at CIBC Capital Markets talks with the Hon. Lisa Raitt about his recent research paper which uses provincial data to assess the economic impact of immigration.
Learn more about the research paper referenced in the episode: https://economics.cibccm.com/cds?ID=406c97a6-1b1c-4a06-b4ba-4b55f08e69b5&amp;TYPE=E

Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I&#8217;m your host, Lisa Raitt. And in this podcast, I&#8217;m going to share insights on current hot topics in the areas of public policy, politics and business with some guests along the way.  Welcome back to The Raitt Stuff. Today I have with me, guest, Andrew Grantham, who&#8217;s the Executive Director and Senior Economist here at CIBC Capital Markets. Andrew with Catherine Judge, just published a really interesting piece of work that I think is timely given the conversation that we&#8217;re having in this country with respect to housing affordability, housing shortage and immigration. In this paper, Andrew actually draws all of these things together to come to a conclusion of whether or not is immigration responsible for the decline in per capita GDP or in the problem we&#8217;re having with respect to housing. Thanks very much for joining me today, Andrew.
Andrew Grantham: It&#8217;s my pleasure. Thank you for having me.
Lisa Raitt: So you looked at provincial level data, and you came to the conclusion that even though population growth is having an effect on housing, there&#8217;s not as much evidence to see whether or not it&#8217;s having an impact on inflation or per capita GDP. Were you surprised by these results?
Andrew Grantham: We were a little bit surprised because, you know, you think about it, immigration, the rapid population growth that we&#8217;re seeing is unfortunately getting increasingly bad press at the moment. It&#8217;s been blamed for some of the inflationary pressures that we&#8217;re seeing. It&#8217;s being blamed for the decline in per capita GDP that we are seeing. So we wanted to kind of challenge some of those notions that you&#8217;ve been reading about in the press by, as you mentioned, looking at, you know, some of the provincial data within Canada and think it&#8217;s quite interesting. Obviously, population growth, immigration, the provinces that we are seeing that come through and having the biggest population growth, there&#8217;s no denying that those areas of the country are seeing the biggest upward pressure in house prices. They are seeing the biggest upward pressure in rental prices. So it has been inflationary in that regard because we are not building enough homes to to fit this population growth. What is interesting though, is that outside of housing, we&#8217;re not really seeing any correlation necessarily between population growth, immigration and other areas of inflation, or we&#8217;re not really seeing any correlation between where we are seeing immigration and, you know, any kind of changes in per capita GDP. So there&#8217;s no denying that it&#8217;s adding to housing costs. But, you know, there is some evidence that actually in other parts of the economy, it is being helpful rather than kind of hurting in terms of inflation.
Lisa Raitt: So let&#8217;s dig a little bit into the increase in population having an impact on rentals or in housing prices. You noted that three provinces have seen the strongest increases. Tell me a little bit about them, and I guess I&#8217;m a little surprised as to which ones they were.
Andrew Grantham: Yeah, Atlantic Canada is really the area, the part of the country that, you know, has seen the biggest population growth over the last. And we don&#8217;t just look at 1 or 2 years because there&#8217;s a lot of volatility, particularly in smaller provinces. So we look kind of relative to 2018, 2019. So over the last 4 or 5 years. And really it&#8217;s that part of the country that&#8217;s seeing the biggest increases in population, it is that part of the country that has been seeing the biggest increases in rental prices in house prices. But you know, obviously some of those provinces are starting from a much better position in terms of housing affordability than some other areas of the country. So they&#8217;re seeing the biggest increases in prices in rental costs. But still affordability is much better in those areas of the country than than maybe some other areas.
Lisa Raitt: In the chart, you&#8217;re using population growth percentage change, but I assume that within that population growth, are we seeing any of the COVID movement from province to province? It&#8217;s not just about immigration into the country.
Andrew Grantham: Yeah, this is immigration into the country, but it is also inter-provincial migration between parts of the country. And what we are seeing is a lot of people moving out of the most expensive areas of the country, Ontario in particular, and moving towards areas of the country that are more affordable. That is driving inflation and house prices. But again, still, affordability is key. And those areas include Atlantic Canada. Also, Alberta as well has seen a lot of inter-provincial migration out of Ontario towards Alberta.
Lisa Raitt: Is there any province in particular that you think is stable with respect to increasing population growth and inflation on rents and housing?
Andrew Grantham: One of the interesting or kind of more interesting provinces is Quebec, obviously, because Quebec hasn&#8217;t necessarily been as forthcoming in terms of accepting the same number of immigrants into the province as some other parts of the country. You know, they are still seeing some upward pressure on rents, on house prices. What was interesting, what stood out for us in terms of Quebec, is that because we haven&#8217;t seen that big influx of new immigrants into the province that hasn&#8217;t really kind of seen the big increase in the labour force that some other parts of the country have. You know, maybe they haven&#8217;t seen as much in terms of house price inflation, but actually inflation excluding shelter. So the rest of the inflation basket has actually been stronger in Quebec than some other areas of the country. And I think that just highlights that immigration can be beneficial from an inflation point of view, as well as harmful from a housing point of view, because immigration can lead to lower job vacancies, can fill some of those job vacancies that will lower wage growth, and that will kind of help in inflation in other areas. So Quebec was one of the kind of interesting provinces that stood out when we did this study.
Lisa Raitt: Yeah. And I think it&#8217;s fair to point out that they do have stricter limits with respect to immigration.
Andrew Grantham: Exactly.
Lisa Raitt: But if you pop up to the federal level, all the political parties are in agreement with respect to immigration, that it&#8217;s important to continue immigration, that it&#8217;s important for us to make sure that we&#8217;re bringing more newcomers to the country, that we&#8217;re we&#8217;re growing our GDP. There is, I would say, some veracity to the notion that bringing in immigration does, in fact, not eat away at your per capita GDP.
Andrew Grantham: No and that&#8217;s exactly what we showed in this study. And one of the reasons why we wanted to kind of push back at some of this negative press that immigration has had recently in the financial press. You know, you can tell by my accent, I wasn&#8217;t born here. I kind of have to be pro-immigration and think, you know, it definitely is one of the biggest advantages that Canada has relative to some other countries in the world at the moment. It&#8217;s very easy for us to look at the big increase in population, the fact that we&#8217;ve seen house price inflation and blame inflation on immigration. But you take a wider view, not just between provinces but in different countries. We have one of the lowest inflation rates among developed economies. So, you know, that tells me that immigration is actually helping lower inflation in some other areas. That&#8217;s what we&#8217;ve shown in terms of this provincial study as well. And then when it comes to growing GDP per capita, again, there&#8217;s some negative press out there, some negative comments at the moment that, you know, the reliance on maybe lower income or lower wage immigrants puts businesses off in terms of investing, which can then kind of grow the economy. We saw really no correlation between that when we looked at the provincial level and actually the provinces that have seen the biggest rise in terms of the immigrant workforce have actually been the ones that have been invest in the most in terms of business investment and actually have seen some of the higher rates of GDP per capita growth. So there doesn&#8217;t seem to be any evidence that immigration is bad for GDP per capita. In fact, you know, the study that we&#8217;ve done suggests there&#8217;s more evidence that it&#8217;s the reverse, that immigration can actually be positive for GDP on a per capita basis.
Lisa Raitt: And again, it&#8217;s Atlantic Canada leading the way here.
Andrew Grantham: Again, it&#8217;s Atlantic Canada leading the way. And you know I think the reason for that is that, you know, Atlantic Canada is probably a good signal of where the rest of Canada might be in 5 or 10 years time. And I say that because of the demographics, Atlantic Canada has an older workforce, an older population than the rest of Canada. So what we&#8217;ve seen there is that as people have retired, they&#8217;ve needed that influx of new people into the labour market to fill some of those job vacancies, to actually keep inflation low as people have retired and, you know, to maintain that supply. And we see that by, you know, still very low unemployment rates among new immigrants into the provinces in Atlantic Canada. What we&#8217;re seeing in the rest of Canada or some other provinces, Alberta stood out to us because Alberta actually has the youngest population, you know, relative to other areas. They are still seeing a big increase in immigration in population, and they are finding it a little bit difficult to absorb all these new people in the labour market. The unemployment rate is higher among new immigrants than it was before the pandemic. So for a lot of Canada, Atlantic Canada shows that immigration can be very positive in terms of growing per capita GDP for some provinces, maybe Alberta in particular. You know, this big influx of population is a little bit too much, a little bit too soon. We could be doing with this 5 or 10 years time where the population is the same age on average as Atlantic Canada is today.
Lisa Raitt: And not part of your research paper, so I&#8217;m kind of going out on a limb, but I am from Atlantic Canada, Andrew. So I&#8217;m bringing a little bit of my own perspective. And Nova Scotia and P.E.I. have a significant increase in student. Coming from other countries, international students in their universities, and they&#8217;re actually in the workforce, and that probably is having some kind of an impact or effect on the GDP and on the housing and the rentals.
Andrew Grantham: It&#8217;s increasing the housing prices and rental prices. But again, it&#8217;s also helping inflation in other areas. If they are entering the labour market, they are filling job vacancies in hospitality sector, for example, which is actually helpful for inflation in other areas. Think what Atlantic Canada is finding to a greater extent than you know. And again, your your experience. You can tell me if I&#8217;m right or wrong on this, but what Atlantic Canada is finding to a greater extent than maybe it was before the pandemic, is that people are studying there. They&#8217;re not necessarily leaving Atlantic Canada in as greater numbers as they were after their studies. You know, there are greater job opportunities. The fact that people can work remotely for large companies, you know, there are a lot of a lot more people studying there, but then also settling there after their studies.
Lisa Raitt: Very insightful, very interesting work, Andrew. My thanks to you and Catherine for this piece. You can find it on the CIBC Capital Markets website, I assume.
Andrew Grantham: You Can. Yep, CIBC Economics publicly available, so please read it. And anyone who has questions, feel free to reach out.
Lisa Raitt: Great. Thanks so much Andrew.
Andrew Grantham: Thank you.
Lisa Raitt: Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss, drop me a line at Lisa.Raitt@CIBC.com. Your interactions actually will make this better. I&#8217;m your host, Lisa Raitt, and this has been The Raitt Stuff.
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What to believe? A closer look at the economic impact of immigration

Lisa Raitt

Vice-Chair, Global Investment Banking

CIBC Capital Markets

Andrew Grantham

Senior Economist

CIBC

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