Canada is far from a full house
The country is vastly underpopulated, posing a very real threat, Doug Saunders writes
In his new book, Maximum Canada, Doug Saunders chronicles the ways in which a ‘population deficit’ is hampering opportunity and posing a genuine threat to social programs, livable cities and a cleaner environment. As ambitious as it sounds, a goal of 100 million Canadians may be worth aiming for, he writes, but we must start planning now to get it right
If you’re stuck in traffic on Vancouver’s Lions Gate Bridge, squeezed shoulder-to-shoulder on the King streetcar in Toronto, or trying to find a free seat on a terrasse on Montreal’s Plateau any summer evening, you might find it hard to believe that Canada has a shortage of people.
Our population problem becomes tangible only when you set out to do certain things that require an audience, a market, or the support of an institution or medium that only a populous country can provide. Then you discover that there’s just not enough Canada.
If you’re an entrepreneur seeking venture capital, an activist fighting for better public services, or a professional searching for the best credentials, you have probably, at some point, run up against the limits of Canada’s population, currently sitting at about 35 million. Same if you’re an artist or writer looking for an audience big enough to provide you with a living, a band-council leader hoping to make your community’s next generation independent and well-educated, an online entrepreneur seeking Canadian clicks, a mayor hoping to fill your city with decent public transit, or an environmentalist seeking a big shift to green technology in energy and transportation.
For many individual Canadians, the first visible reality of underpopulation is the discovery that you need to leave the country to succeed in your career, your education or your craft. At least three million Canadians live abroad – almost one in 10 of us. This shouldn’t be seen strictly as a net loss; even in a fully equipped country, it’s admirable to use the wider world to expand yourself. The problem, in Canada, is that there’s often no other way: The audiences, markets, clusters of expertise are often located somewhere else, somewhere with more people.
A decade and a half ago, I started looking into the core questions of Canadian population. How did we end up with so few people? How does our low population density affect our livelihood? And what is Canada’s ideal sustainable population level? The results of my research are published in my new book, Maximum Canada.
It concludes that we are still struggling with a population deficit dating from more than a century of failed trade, immigration, population and economic policies – beginning in the pre-Confederation decades – that drove people away from Canada.
In most of the decades from 1850 to 1950, a time when tens of millions of ambitious people flooded out of Europe and Asia for the New World, Canada experienced a net migratory loss. By the end of the Second World War, Canada had attracted 6.7 million immigrants, but had lost 6.3 million Canadians – generally our more educated and successful citizens – who emigrated to other countries, mainly the United States.
The “minimizing” politics of Canada’s first century of Confederation – a mutually reinforcing set of policies that restricted North American trade, maintained imperial resource-economy ties, limited much immigration beyond the British and the rural, valued farming over commerce, treated Indigenous peoples as problems rather than partners, and discouraged entrepreneurship – worked to keep the country’s population growth extremely limited. This was true even during the official immigration drives of the 1870s and 1930s, both of which failed.
We are still struggling with the legacy of that past. It has left us with cities that sprawl rather than concentrate, with Indigenous, francophone and minority populations still recovering from more than a century of subjugation, with poor rates of business creation, with major companies that depend on subsidies rather than markets – and with a level and density of population inadequate to create the markets and institutions this century will require.
Only today, after another half-century spent wrestling with those consequences, does Canada have a national, cross-partisan consensus around a broadly expansionist vision for the future. We have reached the point where we can talk honestly about our need for more Canadians.
The challenge now is how to talk about addressing that need – because it is not simply a matter of adding more people.
A question of capacity
On the most basic level, population doesn’t matter. Having more people does not by itself make a country more successful.
Rather, the issue is one of capacity. Do we have the right people, in the right numbers, concentrated closely enough together in the right places, to do the things together that we want and need to do? Given our huge geographic expanse, our widely dispersed communities and our wavering dependence on larger, foreign markets, do we have a sufficiently high density of taxpayers, consumers, audiences, inventors, specialists, investors, elders and healers, entrepreneurs, caregivers, scholars, activists and leaders to create the things we need to sustain our standard of living through a potentially difficult future?
There are several crucial ways to look at our population. We can look at it as a market – that is, as people who will consume the goods and services created by other people, allowing their enterprises to succeed. As taxpayers – people of working age who can provide a fiscal base that will support public institutions and infrastructure, in great enough numbers to keep tax rates reasonable. As a labour force – people whose skills and strengths can be put to work, in sufficient numbers to make enterprises thrive. As an audience – people who consume and support the information services, the cultural and media institutions and the online resources of the country. As clusters of expertise – groups of skilled and educated people who work closely together, sharing knowledge, opportunities and funding, in order to create new products, services and scientific advances. Finally, as cities – pools of people living closely together and sharing resources.
At the moment, we have enough people to make things function reasonably well in many of these areas. But if we examine each of these population groupings and their ambitions, we start to see the capacity that is missing, the potential that is untapped or unavailable, and the missing human resources that leave us unprepared for a more challenging
When scholars and governments talk about population shortfalls these days, they are most often looking at the demographic and fiscal challenges of a population that’s growing slowly and aging quickly.
This looming demographic crunch is not the most grave or insoluble problem of underpopulation, and it is largely a medium-term problem, set to unfold over the next 40 or 50 years. But it happens to be one that terrifies governments, economists and investors, having as it does the potential to measurably lower our productivity and quality of life.
Because our lacklustre family policies do little to encourage larger family sizes, Canada’s population growth currently depends entirely on immigration. But our immigration numbers are modest – we’d need to take in two million people a year to approach the population levels of the early 20th century. As a consequence, the number of baby boomers turning 65 each year outnumbers the babies and children joining Canada’s population through childbirth and immigration. For the first time in our history, there are now more Canadians over 65 than there are Canadians 14 and younger.
At the moment, roughly 16 per cent of Canadians are 65 and older. By 2035, at current population-growth rates, that proportion will have risen by more than half, to 25 per cent.
In the meantime, by 2026, more than 2.4 million Canadians over 65 will require continuingcare support (long-term care, medical support, in-home care and so on). That’s a 71-per-cent increase from 2011. By 2046, there will 3.3 million such Canadians.
Those numbers affect the dependency ratio: the number of working-age people (who contribute the lion’s share of taxes) compared to the number of retirement-age people (who tend to consume considerably more tax-supported services). In Canada, this ratio is shifting quickly. At the moment, there are four working-age Canadians to support each of those who have made it to retirement age. By 2031, that ratio will be halved: For a couple of decades, as the baby boom enters its final years, we will have only about two taxpayers to support each senior. This will be expensive. According to the Conference Board of Canada, spending on continuing care for seniors will need to increase from $29-billion in 2011 to an extraordinary $184billion – in today’s dollars – in 2046. Two-thirds of that bill is paid for by governments.
An older population is also more prone to expensive health troubles. As a result, health-care spending by provinces, currently coming in at $150-billion a year, will increase from 37 per cent of government revenue today to 44 per cent by 2042. Likewise, the share of federal tax earnings that will have to be spent on Old Age Security – Canada’s largest government cost – will have to rise by 20 per cent by the 2030s.
Most of this adjustment will need to come from large-scale reductions to other government departments and programs, including education, transit infrastructure, the social safety net and environmental protection – that is, almost every area considered central to generating future growth and sustainability. The potential result: a vicious cycle of economic, demographic and ecological decline.
That is not the only possible future. It could be a lot tougher. According to Conference Board forecasts, if immigration were restricted to half its current level in coming decades, the effect on population would cause economic growth to fall to an average of 0.6 per cent annually, from the currently projected 1.5 per cent.
By contrast, if Canada were to pursue a growth strategy aimed at tripling its population by 2100 through modest immigration and family-policy incentives, projected economic growth would rise to 2.6 per cent annually. And, as a further consequence of this larger, younger population, both government expenditures and tax burdens would drop dramatically during the crunch years of the 2030s and 2040s.
More importantly, that added population would provide lasting benefits to our economic, ecological and cultural life.
Markets and critical mass
If you’re working in a business that operates at a national or international level, you probably already know this: Canada’s desire to build a more diversified, innovation-based economy often hits the brick wall of a limited domestic market. Or it runs aground on Canada’s comparatively sparse distribution of investors and venture capitalists, top technical minds and skilled specialists.
Our existing population is well equipped for the country to become a creative-economy leader: Canadians are now among the most educated people in the world. Two-thirds of us have postsecondary educations. And Canada is in the top handful of nations in measures of patents, research papers and Nobel Prizes per capita.
But anyone in business will tell you that there are real limits to what can be accomplished, given Canada’s low-density population – a small market, spread across five time zones, two official languages and 13 political jurisdictions. And those limits will become only more evident if the trade-protectionist threats of Donald Trump and his fellow demagogues in other countries succeed in curbing world trade.
Over the past 20 years a substantial volume of research has been conducted by economists into the factors that allow companies to achieve “takeoff” into the global economy. And there is a strong consensus that market size is critical – not just the consumer market, but the markets in skills, employees, services, patents and expertise. Harvard economist Alberto Alesina, in an oft-cited study, found that a country’s physical size matters little, but that the size of its domestic markets – and their concentration within a particular geographic space – matters a lot.
Canada’s most successful companies of the recent past, from the formerly dominant smartphone-maker BlackBerry to the currently booming conveniencestore giant Couche-Tard, have often taken a “straight-to-global” or “mini-multinational” approach by aiming for far larger worldwide consumer markets from the beginning. But that has become a more difficult path to follow during the past decade. Aside from the looming threat of protectionism under Mr. Trump, there are two new barriers to becoming internationally competitive.
First, many of the world’s largest governments are giving exclusive access to their own countries’ businesses when it comes to public-sector purchasing contracts. In 2009, at the peak of the financial crisis, the United States passed the sprawling American Recovery and Reinvestment Act, whose Buy American provision gives U.S. firms a huge competitive edge by guaranteeing them a gigantic and wealthy domestic client. Canada is theoretically exempt, but the act gives American firms a clear domestic-market advantage. The U.S. is not an outlier here: Since 2008, India, China and other giant economies (the EU is a lone exception) have introduced similar schemes.
In a second major change, since 2008 larger economies have begun pouring huge sums of public money into the R&D budgets of their favoured domestic companies and sectors – a form of subsidy that is not restricted by the World Trade Organization.
This is where Canada gets tripped up by its low population. Unlike companies headquartered in larger economies, Canada’s international businesses can’t fall back on the country’s domestic market – it’s just not big enough. And while we do subsidize favoured industries, our small fiscal base prevents us from dumping R&D funding into entire sectors on the same scale as does China or the U.S.
“We’re dependent on the international market,” says Dan Herman, the founder of the Centre for Digital Entrepreneurship and Economic Performance, based in Waterloo, Ont. “But the international market is increasingly looking inward. … China and India and the rest of Asia, they’ve become inward-looking. … That’s when you get back to the 34 million and you ask, ‘What can you sell to that market and actually build big companies?’ Not much. ‘What can you do for an international company in terms of government contracts?’ Not much.”
Greening through growth
There is also the effect of underpopulation on our ecological prospects, and it plays out in two important ways.
First, it forces us to use inefficient and highly polluting forms of transportation, heating and energy, because our larger urban areas are too thinly populated to support more energy-efficient technology. And it denies us the critical mass of people, and their tax dollars, that we need to build infrastructure for green-energy generation and low-energy national transportation networks, and to protect us against the effects of climate change.
Canada’s largest source of greenhouse-gas emissions during most years, accounting for a quarter of the carbon we emit, is transportation. Private passenger vehicles generate the largest share of those by far, and most of their output is in urban areas. The heating of buildings – especially single-family homes in cities and suburbs – accounts for another 12 per cent; and the use of inefficient fossil-fuel electrical generation, 11 per cent.
In other words, half of Canada’s atmospheric damage is caused by factors directly rooted in our low population density. We don’t have the masses of people needed to replace internal-combustion transportation with cutting-edge public transit and high-speed rail; we rely too much on sprawling single-family dwellings that lack heating efficiency; and we still don’t have the population size to pay for rapid replacement of fossil-fuel-based power generation with non-fossil energy sources (although that change is taking place, slowly).
Metro Vancouver, the Greater Toronto Area and Greater Montreal have reached particularly frustrating points in their development. They are now large and populated enough that they face a severe need for crucial infrastructure, such as more highspeed public transit and fast regional rail lines. But outside their downtown cores, they have not attained the population density that can provide the ridership levels to support high-efficiency rapid-transit developments. And they are not populous enough yet to have the revenues or voter clout to make such developments happen. They find themselves urgently needing the transportation networks of cities with two or three times their population. The result for their residents is gridlock, isolation and reduced mobility.
Research by Luis Bettencourt, a theoretical physicist and professor of complex systems at the Santa Fe Institute, has found a consistent world-wide pattern: As cities scale up in size, they generate more prosperity – and use much less energy – per person: “A city of eight million typically needs 15 per cent less of the same infrastructure than do two cities of four million each,” he says.
The ecological benefits of higher population density are particularly strong. As Dr. Bettencourt’s research has found, the largest cities in North America have the lowest per-capita carbon-dioxide emissions. That gain is not a result of green policies, he finds, but a simple byproduct of “energy-efficient public transportation and simple walking instead of driving” – a density-driven change to forms of transportation that are 10 times more energy-efficient.
In addition to greater density, an increase in the total number of Canadians – and thus, Canadian taxpayers – will also make it easier to address ecological issues. In the coming decades, governments will need to build coastal defences against rising sea levels, replace urban infrastructure so that it will be more resistant to volatile weather patterns, participate in a global drive to build carbon-removal technology, take measures to make our extractive industries more carbon-neutral, and shift to nonpolluting energy sources.
The cost of these shifts, for both the public and private sectors, will be huge. A 2011 research report by the National Round Table on the Environment and the Economy estimated that climate defences alone, even at a modest level, will cost Canadian governments somewhere be-