The Clear First Principle for Canada’s Economic Immigration Policy

From: Marc Desormeaux

To: Hon. Lena Metlege Diab, Minister of Immigration, Refugees and Citizenship

Date: July 15, 2026

Re: The Clear First Principle for Canada’s Economic Immigration Policy

Canada’s latest demographic data confirms that recent immigration policy changes are having an effect. As temporary resident numbers and admission targets have declined, so has population growth, as your government intended.

With the transition underway, now is the time to define clearly the federal government’s immigration goals. Public debate remains focused on short-term questions: How much population growth is too much? How quickly should temporary resident numbers fall? And what will be the immediate effects on housing and economic activity?

Yet to answer those questions, policymakers need to first ask a more fundamental one: What is Canada’s economic immigration system designed to achieve? My view is that its primary purpose should be to raise living standards over time.

The federal government recently concluded consultations on proposed changes to Express Entry and economic immigration selection. Before making additional adjustments, policymakers should establish a clear objective against which success can be measured. Without that anchor, immigration policy risks becoming a series of responses to short-term pressures rather than a framework for improving long-run economic outcomes. Unexpected swings in population growth also complicate budgeting, infrastructure planning and service delivery for governments, and investment decisions for businesses.

In recent years, economic immigration has been expected to solve multiple problems simultaneously. It has been used to address labour shortages, support population growth, offset demographic aging, and meet sector-specific workforce needs. The result is a system that increasingly reflects overlapping priorities rather than a consistent strategy.

This evolution is evident in repeated changes to eligibility criteria, the introduction of occupation- and sector-specific streams, and growing reliance on transitions from temporary to permanent status. Many of these measures were understandable responses to extraordinary labour-market pressures following the pandemic, but together they’ve made the system less transparent and predictable, more difficult to administer and evaluate.

A more coherent approach should begin with a simple principle: For economists, the most useful measure of that objective is growth in GDP per capita. This distinction matters. Between 2022 and early 2025, Canada recorded some of the fastest population and GDP growth in the OECD, yet real GDP per capita declined for several consecutive quarters. Aggregate economic expansion alone does not guarantee rising living standards. A successful economic immigration policy should result in tangible improvements in productivity, higher incomes and better economic performance on a national per-person basis.

A focus on living standards also provides clearer guidance for immigrant selection.

Canada’s points-based system was originally designed to identify individuals who possess the characteristics associated with long-term economic success, including education, language proficiency, skills and labour-market adaptability. Evidence referenced in recent C.D. Howe Institute research shows that the introduction of Express Entry in 2015 to select immigrants led to stronger labour-market outcomes after arrival.

More recent emphasis on category-based selection and in-demand occupations represents a shift away from that model and risks reversing these gains. While targeting immediate shortages is often politically attractive and easily executed, forecasting labour-market needs several years into the future is difficult. The sectors experiencing shortages today may not be the sectors facing shortages tomorrow.

A permanent immigration system designed around human capital accepts the possibility of some short-term mismatches in exchange for stronger long-term productivity outcomes.

A system focused on current vacancies does the opposite: it may improve labour-market matching today but risks selecting for occupations that are no longer in shortage tomorrow. It also increases the scope for political intervention in a system that has historically derived much of its strength from transparent and predictable selection criteria.

The challenge is not that immigration policy is pursuing the wrong objectives, but that objectives can become misaligned without a clear North Star. Labour shortages, demographic pressures and regional development all matter. Yet no immigration system can maximize every objective simultaneously. Making the primary objective of improving long-run productivity and living standards explicit would help guide trade-offs and decision-making during the current period of high economic volatility and beyond.

Canada's immigration debate has become increasingly focused on admission levels and population growth. The more important question is whether economic immigration is improving living standards. A successful immigration reset should make that objective explicit and use it to guide trade-offs across competing goals.

That means maintaining a clearer distinction between temporary and permanent programs and keeping permanent economic immigration focused on human capital and long-run growth. A more predictable, rules-based system would support better investment decisions, improve government planning and help rebuild confidence in one of Canada’s most important economic institutions.

Marc Desormeaux is vice president, policy and economist at the Business Council of Canada. He previously served as chief economic advisor to Ontario’s Minister of Finance.

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The views expressed here are those of the author. The C.D. Howe Institute does not take corporate positions on policy matters.