Government Reports Miss Impact of Non-Permanent Residents on Unemployment, Wage Growth: Study

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The growing number of non-permanent residents in Canada is becoming increasingly underrepresented in federal labour market data, skewing key economic metrics like unemployment rates and nominal wage growth, a new report suggests.

This underrepresentation in Statistics Canada’s Labour Force Survey makes it difficult for policymakers and analysts to create effective economic policies, according to a newly released report from the C.D. Howe Institute.

“Canada’s temporary resident population has more than doubled in recent years, yet our labour market surveys fail to reflect this shift accurately,” says report author and University of Waterloo professor Mikal Skuterud.

“This data gap is no longer a technical issue—it has broad implications for informing … monetary policy decisions and collective bargaining negotiations across the country.”

StatCan’s labour force survey (LFS) encompasses all people aged 15 or older whose usual place of residence is in Canada. This includes both non-permanent residents—those with a work or study permit, their families, asylum claimants, protected persons and related groups—as well as permanent residents and the Canadian-born population.

Data released by StatCan last November suggests there were three million non-permanent residents in Canada in the third quarter of 2024.

If their employment rates were to hold steady at the 2021 level, half of them—in this case, 1.5 million—would receive income from their employment, StatCan said.

The problem with the StatCan’s numbers, Skuterud said, is that its survey fails to account for the large number of international students in Canada.

Canada’s non-permanent resident (NPR) population has grown from roughly 3 percent in 2020 to 7.4 percent as of last fall. International students account for a significant share of those residents which, in turn, could be a significant driver of rising youth unemployment rates, the report said.

“The accuracy of the LFS’s estimates of nominal wage growth and unemployment rates are critical in informing the Bank of Canada’s monetary policy decisions,” Skuterud said.

“As IRCC introduces policies to rein in NPR entries, understanding whether international students are, in fact, crowding out and suppressing the wages of existing residents is essential.”

Survey Shortcomings

The StatCan labour force survey has consistently underestimated the population by 900,000 between 2006-2021, a shortfall of 2.5 percent, the report noted.

The gap widened considerably beginning in late 2021 with the StatCan survey population trailing the official population estimate of 41,012,563 by 3.9 percent as of the second quarter of 2024.

When focusing on the population of those aged 15 and older, the survey’s population estimate was found to be 3.8 percent lower than the official estimate of 33,906,265 recorded in July 2023. This discrepancy aligns with the rapid increase in non-permanent resident population growth, Skuterud said.

The StatCan survey estimated one million fewer non-permanent residents in Canada than the official estimate of 2.8 million by the second quarter of 2024, amounting to a 36 percent shortfall. That represents a significant change from 2006 to 2010, when survey estimates of the non-permanent resident population exceeded the official estimates, the report said.

There were 122,620 study permit holders in Canada on Dec. 31, 2006, comprising 0.37 percent of the population, according to IRCC data. That figure had risen to 1,040,985 representing 2.55 percent of the population as of Dec. 31, 2023, marking a more than a six-fold increase.

StatCan’s survey failed to accurately reflect the substantial population growth, estimating fewer than 400,000 international students in Canada on Dec. 31, 2023. This figure represents a shortfall of more than 60 percent compared to the estimates provided by the IRCC, Skuterud said.

NPRs made up 6.8 percent of Canada’s population by the second quarter of 2023, but comprised just 3 percent of individuals sampled in the labour force survey, he said. That is an issue because the demographic tends to be young and, in recent years, are more likely to be in the low-wage service sector. Their lack of representation in the labour force survey impacts the overall results because of the difference in their employment patterns and wage outcomes, Skuterud said.

“Changes over time in average wage rates and unemployment rates are not driven by workers who are established in their jobs,” he said. “Rather, these changes are driven by new labour market entrants. In recent years, this has overwhelmingly been NPRs in Canada. The fact that the LFS is unable to identify this growing segment of the population is a first-order problem that needs to be addressed.”

Skuterud is calling for urgent reforms to StatCan’s labour force survey. These include updating survey questions to more accurately identify non-permanent residents by inquiring about study and work permits, conducting additional surveys to evaluate existing measurement inaccuracies, and linking survey data with immigration records.

“These changes would enhance the accuracy of labour market metrics, providing a clearer picture of how NPRs influence wages, employment, and economic trends,” he said. “Failing to address this issue makes it harder for policymakers to create effective economic policies and understand our workforce.”