Kingston, Canada – July 2026 – The John Deutsch Institute (JDI) has released a new JDI Policy Insight paper, Understanding How Immigration Impacts the Economy, written by Luke Rawling, a PhD candidate in the Department of Economics at Queen’s University. The paper reviews decades of research on immigration’s economic effects and asks what happens to existing workers when a country admits more immigrants.

Answering that question is harder than it appears. Immigrants tend to settle in cities where the economy is already doing well, which makes it difficult to separate immigration’s effect on wages from the local conditions that attracted immigrants in the first place. Rawling reviews the methods economists have developed to get around this problem and makes the case that the most reliable estimates come from studies built around a single, unanticipated shock.

Those studies do not point in the same direction. After the 1994 peso crisis sent hundreds of thousands of Mexican migrants into the United States, wages for low-skill workers fell by as much as 1.4 percent in the first year, though the effect had mostly faded within five. A similar inflow of Czech commuters into Germany barely moved wages but cut native hiring sharply. In Denmark, refugee arrivals had no negative effect on low-skilled natives at all, and appear to have moved them into better-paying, less manual work.

Rawling treats this variation as the central result. Immigration adds to the labour supply, but it also spurs innovation, supports the creation of new firms, and produces complementarities that raise demand for existing workers. Which of these forces dominates depends on local economic conditions, the skills immigrants bring, and how individual firms choose to respond.

For Canada, where immigration levels are set by federal and provincial governments rather than by employers, that has practical consequences. Immigration has been at record highs while key sectors continue to report labour shortages, and immigrants remain underrepresented in construction and public administration, two of the sectors under the most strain. Rawling recommends:

1. Align targets with private-sector demand. Immigration targets should reflect the labour needs firms actually report, since firms are where new arrivals are ultimately absorbed.
2. Prioritize business-creating entrepreneurs. Selection should give more weight to applicants who can show investor backing, since immigrant-founded firms create jobs as well as fill them.
3. Rebalance sectoral selection. Tools such as category-based selection and the Federal Skilled Trades stream, which currently accounts for about 0.5 percent of economic immigrants, could bring more newcomers into sectors where added labour would relieve pressure on housing.

With Canada’s labour force growth increasingly dependent on immigration, Rawling argues that these design choices matter as much as the headline admission numbers.

The full paper is available as JDI Policy Paper 26-0703 on the JDI website at jdi.queensu.ca.

About the John Deutsch Institute and the JDI Policy Insight series
The JDI at Queen’s University conducts rigorous, policy-relevant economic research to inform decision-makers in government, industry, and civil society. Through events, publications, and collaborations, the Institute fosters evidence-based dialogue on critical economic challenges facing Canada and the world. The newly launched JDI Policy Insight series provides balanced academic summaries of key policy issues, helping readers assess the benefits, costs, and risks of reforms and understand what we know and don’t know about policy.