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Canada’s plans to reduce temporary residents could impact GDP and inflation

According to a new report by Desjardins, the plan to reduce non-permanent residents (NPRs) in Canada could impact real GDP growth and inflation, especially shelter costs. Fewer NPRs could boost per capita GDP and real wage growth. Despite the theory that higher wages might lure people back into the workforce, evidence is limited. Current underemployment rates and those wanting employment are historically low, with most sidelined due to illness or personal responsibilities. Sectors employing NPRs, like accommodation, food services, and retail, could face pressure from rising wages and labour scarcity. These sectors, already hit by the pandemic and an increase in insolvencies in 2024, may face more challenges with less low-cost, temporary labour but could also be forced to innovate.

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