In many developed countries, a reliable engine of economic expansion is losing momentum.
For years, the steady influx of migrants has been a crucial factor in buoying economies like Canada, Australia, and the United Kingdom against the challenges of aging populations and declining birth rates. However, this trend is now facing obstacles as a surge in arrivals, following the reopening of borders post-pandemic, collides with a chronic shortage of housing to accommodate them.
Canada and Australia have managed to avoid recessions since their contractions due to Covid, but their citizens have not been immune, facing significant per-capita downturns that have eroded living standards. While the UK’s recession last year appeared mild in raw data, it was more severe and prolonged on a per-person basis.
According to an exclusive analysis by Bloomberg Economics, thirteen developed economies were experiencing per-capita recessions by the end of last year. Although there are other contributing factors, such as the transition to less productive service jobs and the tendency for new arrivals to earn lower wages, housing shortages and the resulting strains on cost of living are a common thread.
Does this signal the demise of the immigration-driven economic growth model? Not entirely.
In Australia, for example, the influx of approximately one million people, equivalent to 3.7 percent of the population, since June 2022 has helped alleviate chronic labor shortages in sectors such as hospitality, aged care, and agriculture. Similarly, in the UK—where the economy is close to full employment—arrivals from countries like Ukraine and Hong Kong have filled the void left by a lack of workers following Brexit.