Toronto's Population Boom: Building Growth on a Fragile Foundation

In economic development – like most other fields – it is possible to have too much of a good thing. For Toronto that ‘thing’ is population growth. The recently released population estimates from Statistics Canada show that the Toronto metro grew by a record 269,000 people (3.9%) between 2023 and 2024 and its population has now exceed 7 million people. Toronto was in good company, with Montreal and Vancouver also experiencing significant growth. The rise in non-permanent residents (NPR) – which includes temporary workers, international students, and asylum seekers – was the key driver for growth, followed by new immigrants.

Toronto’s growth is particularly remarkable when comparing the metro to our US neighbors. In 2023, Toronto had the highest absolute population growth across Canada and the US, almost 70,000 greater than the second on the list (Dallas-Fort Worth-Arlington). Despite their relative size, Canadian metros accounted for five out of the top ten metros by population growth.

Surely, this is a remarkable achievement and something to be celebrated. It’s a reflection of our attractiveness as a place to live, work, and learn. However, it is also a reflection of our inability to shake-off a population-based model of growth and an inability to make difficult policy decisions to address our economic challenges. 

Here are three policy areas where our current approach has attempted to mask structural challenges in our economy:

For decades, immigration has been a key lever for growing our labour force and addressing labour shortages. Indeed, immigrants accounted for 63% of the growth in Ontario’s labour force since the mid 2010s. Many firms leverage specific immigration streams to hire temporary foreign workers to fill key workforce needs. Still, immigration is but one tool that should be used to address labour gaps. While immigration can relieve vacancies in a particular industry, it stimulates demand for additional goods and services and may be worsening labour shortages across the economy. This is akin to a game of whack a mole – the shortages just end up showing up somewhere else.

Our aging demographic undoubtedly impacts our ability to sustain economic growth and adds fiscal pressure on governments to maintain services. Immigration is widely believed to be an effective solution, except its shown to have a marginal impact on our aging challenge. In its 2018 report, C.D. Howe was clear about the limitations of a focus on immigration as an antidote. Economist Frances Wooley believes that even C.D. Howe is “insufficiently pessimistic” about immigration’s ability to offset aging dynamics as it didn’t explicitly consider that immigrants have parents too. Her analysis demonstrates this would further diminish its impact on population aging.

In the face of insufficient government funding coupled with a long-standing tuition freeze, Ontario’s post-secondary institutions saw a way out – international students. The system (particularly colleges) became increasingly reliant on higher tuition paying international students for funding, leaving them financially vulnerable. We’re seeing the aftermath of this vulnerability today as the federal government’s cap on international students has had drastic effect – Ontario universities are estimated to lose close to $1 billion in revenues over the next two years and colleges a decline of at least $1.7 billion. 

To be abundantly clear – our ability and willingness to attract new immigrants and international students is a strength and comparative advantage for Toronto and Canada. The federal government’s policy changes to scale back immigration and NPRs have arguably been too blunt and drastic. Still, for too long they've been used as a crutch to address ongoing policy issues that require other tools, namely:

• Technology adoption and better HR practices to address workforce needs;
• Health care supports and policies that enable people to work longer and expanding access to affordable childcare;
• Enabling financial sustainability for our post-secondary education system. 

We've chosen to throw people at our problems, leaving us caught in a population trap and lower growth prospects. It was never a sustainable model for growth.

This is emblematic of our broader approach to public policy. Our house is in poor shape and we're choosing to add more bricks without reinforcing the foundation. We need to get serious about prioritizing policies that boost productivity and drive sustainable, long-term growth. This includes rethinking how we attract and support immigrants while also ensuring that our workforce has the skills they need to succeed. More on that to come from the Board in the coming months. 

The latest projections from Statistics Canada estimate that by 2074 the Canadian population could reach 59 million under a medium-growth scenario or 80 million under a high-growth scenario. While the total number will certainly shape Canada’s future, our collective living standards will depend on tackling our economic challenges head-on— without relying on a strategy that continues to throw people at our problems.

It's time to put the brick down and pick up the blueprint.