Immigration and Unemployment in Canada: An Empirical Assessment; Research by Asad Islam

Historically, Canada has maintained significant levels of immigration, with flows remaining relatively stable since the mid-20th century. Multiple waves of immigrants—from Europe, the USA, and later Asia—have shaped labor markets and demographic patterns. The literature offers mixed evidence: some theories predict higher unemployment from immigration, while others suggest complementary or positive effects through increased demand and job creation. What matters, according to theory and international evidence, are skill composition, labor market segmentation, and economic policy context.
Data and Analytical Strategy
This study uses quarterly and annual data on immigration, unemployment, real wages, and GDP (per capita), drawing from sources such as the Canadian Labour Force Historical Review and CANSIM II. Immigration is defined as permanent right-to-reside entrants and is measured as inflow per thousand Canadians. The methodology features:
* Descriptive analysis of labor market trends since the 1960s,
* Cointegration and vector autoregressive (VAR) modeling,
* Granger causality testing,
* Robustness checks for seasonality and macroeconomic shocks.

Key Results

No Causal Effect: Granger causality and cointegration tests provide no evidence that immigration increases the aggregate unemployment rate in Canada, either in the short run or the long run.

Lagged Adjustment: Short-term dynamics suggest that higher unemployment leads to reduced immigration in subsequent periods; there is no reverse effect.
Positive Macroeconomic Correlates: Long-run models show that higher immigration is correlated with increases in per capita GDP and real wage growth, reinforcing the notion that immigrants support national economic performance.
Skill-Based Immigration: Canada’s points system and selection criteria help align immigrant skill profiles with labor market needs, mitigating adverse outcomes.
Policy Implications
These findings are crucial for policymakers. Restrictive policies based on fears of job loss are not supported by Canadian evidence. Instead, skill-based, flexible immigration policies should be maintained to ensure continued economic benefits. The endogenous relationship revealed—where economic downturns reduce immigration but not vice versa—highlights the adaptive nature of migration in response to labor demand.
Read the complete findings:
https://scholar.google.com/citations?view_op=view_citation&hl=en&user=0NXsy30AAAAJ&citation_for_view=0NXsy30AAAAJ:u-x6o8ySG0sC