Canada is currently experiencing a unique challenge in its modern history, as highlighted by economists at the National Bank of Canada. The nation is grappling with a “population trap,” a situation where the population growth rate is outpacing the economy’s capacity to adapt. This phenomenon, previously observed in emerging economies, is now a reality in Canada, presenting complex economic and social implications.

Understanding the Population Trap

The concept of a population trap, as defined by the Oxford Dictionary, occurs when population growth is so rapid that all available resources are consumed to maintain the existing ratio of capital to labor. This situation makes it nearly impossible to improve living standards. Solutions to break free from a population trap typically involve increasing savings, reducing population growth, or combining both.

Canada’s Population Growth and Economic Strain

In 2023, Canada witnessed a population increase of 1.2 million, a figure described as “staggering” by National Bank economists Stéfane Marion and Alexandra Ducharme. This surge is unparalleled in Canada’s history, with the last significant increase occurring when Newfoundland joined the country in 1949. From a broader perspective, Canada’s population growth rate of 3.2% last year was quintuple the average rate of the Organisation for Economic Co-operation and Development (OECD) countries.

Challenges in Infrastructure and Housing

The rapid population increase has put immense pressure on Canada’s infrastructure and capital. Economists Marion and Ducharme emphasize that Canada currently lacks the necessary infrastructure and capital to effectively absorb this population growth and enhance the standard of living. This strain is most noticeable in the housing sector, where the supply has not kept pace with the growing demand, leading to various economic and social challenges.

Conclusion and Implications

The report from National Bank adds to the growing concerns regarding the recent influx of immigrants, many of whom are temporary workers or students. While some experts warn against the economic consequences of abruptly reducing immigration, it’s clear that Canada must find a balanced approach to manage its population growth and economic development.

Source: https://financialpost.com/news/canada-in-population-trap-economists-warn