DeepDive: Canada needs a pro-worker AI plan

DeepDives is a bi-weekly essay series exploring key issues related to the economy. The goal of the series is to provide Hub readers with original analysis of the economic trends and ideas that are shaping this high-stakes moment for Canadian productivity, prosperity, and economic well-being. The series features the writing of leading academics, area experts, and policy practitioners. The DeepDives series is made possible thanks to the ongoing support of the Centre for Civic Engagement. Vice President JD Vance’s address to world leaders this spring, and the subsequent Trump administration’s AI Action Plan, present a compelling framework for how Canadian policymakers in general and conservatives in particular should be thinking about AI policy. In particular, Vance’s message about leveraging AI technology to boost worker productivity and reduce our reliance on mass low-skilled immigration requires examination. This isn’t only a good policy framework, but it can be good politics for Conservatives seeking to consolidate support among working-class voters. It’s a basic economic insight that capital and labour are substitutes for one another. Firms can boost the productivity of their workforce through technology or expand their workforce to boost output. Canada’s economy overall has chosen the latter option. Record-high immigration levels have strained infrastructure, suppressed wages, and undermined productivity. Vance’s vision of AI-driven economic growth offers a compelling alternative that would better serve working-class Canadians. Rather than relying on mass immigration to fill labour demand, Canadian policymakers should champion AI technology as a productivity multiplier that empowers Canadian workers and boosts living standards. Rising living standards occur when workers produce higher economic value and receive higher wages, not one where mass immigration artificially inflates output and, in turn, masks underlying economic weakness. This DeepDive makes the case for a pro-worker AI strategy that sees the technology’s deployment in Canada’s economy as a productivity-enhancing substitute to large-scale immigration. In particular, governments should ensure that the regulatory environment encourages AI adoption, work with the private sector to develop worker training programs, enable the development of infrastructure to support AI adoption, and, in general, set the conditions for markets to deliver an AI-based productivity revolution for Canadian workers. The recent surge in immigration and the productivity crisis Under Prime Minister Justin Trudeau, the federal government pursued a deliberate policy of unprecedented immigration levels that fundamentally altered the country’s economic and social landscape. In 2024, Canada welcomed a record of over 483,000 new permanent residents, representing approximately 1.2 percent of the total population, which is the highest single-year intake relative to population size in decades. When combined with temporary foreign workers (TFWs), who now number over 800,000, and other temporary residents, Canada’s population grew by 3 percent between July 2023 and July 2024, which represented a total net increase of over 1.2 million people, which was only slightly lower than the highest annual growth rate in 66 years in 2023. A major impetus for the immigration spike was business claims about demographic-induced labour shortages. But the economic data reveal significant hidden costs for workers and the economy as a whole. While importing labour—particularly low-skilled labour—may be advantageous for businesses, it systematically undercuts wage growth and reduces incentives for domestic innovation and private sector investment. Causation is difficult to precisely calculate, but there are good conceptual reasons to assume that rising immigration has contributed to stagnant and even declining productivity. Labour productivity rose just 0.2 percent in 2024, following years of decline—far below what’s needed for long-term growth in average living standards. Simply put, if Canada can’t produce more output for a given input, it risks repeating another lost decade of economic stagnation. Rising labour supply without corresponding increases in capital investment, the amount of capital available to an average worker will fall, impacting how productive Canadian workers can be. It’s also true, though, that labour and capital are substitutes such that immigration-induced increases to the labour supply enable firms to avoid having to invest in productivity-enhancing technologies. TFWs are, of course, a big part of this story. As it stands, temporary foreign workers through both the International Mobility Program (IMO) and the Temporary Foreign Workers Program (TFWP) account for roughly 7 percent of Canada’s labour force or 1.58 million workers, according to government documents. This constituted an 88 percent increase in the TFWP and a 126 percent increase in the IMP between 2019 and 2023. Most work in low-wage roles that not only compete directly with young Canadians for employment, but they’re also often in sectors experiencing declining productivity. It’s not a surprise that a Canadian Conservative MP has recently called for this program to end. The consequences for Canadian-born workers have been severe. Research has previously demonstrated that mass immigration can create downward pressure on wages, particularly for working-class Canadians. The Bank of Canada found that aggregate nominal wages would have been 0.7 percent higher in 2023-24 had the level of language proficiency, education, skills, and prior work experience of temporary workers remained unchanged over the past decade. Low-wage TFW streams have been shown to suppress wages specifically in vulnerable labour markets. Responding to political pressure, the Liberal government has already begun reducing its annual targets for permanent residents from 500,000 in 2024 to 395,000 new permanent residents in 2025, 380,000 in 2026, and 365,000 in 2027. Yet these numbers remain high in relative terms and are only slowing the growth rate, especially when one compounds the knock-on effects of the record increases. They also don’t account for non-permanent residents, including TFWs. As of the third quarter of 2024, the total number of non-permanent residents rose to over 3 million and continues to grow despite commitments from the Liberals to slow the rate of growth. To put this in perspective, Canada has effectively the same number of non-permanent residents as the entire population of our third-largest metro area, Vancouver. It is no surprise then that Canada is looking at the youth unemployment rate at 14.6 percent, which is the highest rate since September 2010. While a drastic reduction or pause in immigration levels will help reverse the economic and social trends that have negatively impacted working-class Canadians, governments should also assess how public policy can catalyze the adoption of productivity-enhancing AI tools that could boost worker productivity, wages, and the average living standards of Canadians. AI adoption, businesses, and Canadian workers Early evidence from Statistics Canada indicates that AI is augmenting, rather than displacing, Canadian workers. Employees are leveraging AI to manage routine tasks, allowing them to focus on higher-value, creative, and strategic activities. In Q2 2025, for instance, 12.2 percent of businesses reported using AI in their workflows or production, which is up from 6.1 percent in Q2 2024. Despite this rapid growth, which has been concentrated primarily in the information and cultural industries, 89.4 percent of businesses reported no change in employment levels following the introduction of AI tools. This aligns with the fact that adoption remains centred on software rather than hardware investments. Currently, only 6 percent of businesses plan to adopt AI hardware, compared to 18 percent for AI software. Manufacturing, however, shows significant growth potential. In 2025, 11.3 percent of manufacturing firms reported plans to adopt AI, an increase from just 3.6 percent in 2024. This trend suggests substantial opportunities for productivity gains as hardware adoption accelerates in the sector. This has the potential to counteract the consumption-based economic growth model’s addiction to immigration and instead move Canada to more of a production-based economic growth model focused on productivity gains. Overall, the early data reinforces the view that AI offers workers more opportunities than risks. While adoption rates remain low at the firm level, which could limit immediate visibility in productivity statistics or the eventual impact on labour markets, the optimistic trajectory in Canada points to meaningful long-term gains for workers as AI integration deepens. Pro-worker AI framework Drawing inspiration from Vice President Vance’s vision, Canadian policymakers should adopt an approach where AI adoption is not seen as replacing labour, but rather empowering workers, raising productivity, and lifting wages by reducing working families’ necessity to compete with imported labour. In his speech, Vance decisively rejected dystopian narratives about AI’s wholesale replacement of workers, arguing that “[AI] is not going to replace human beings…we believe, [it] is going to make us more productive, more prosperous, and more free.” This perspective recognizes AI as a productivity multiplier rather than a job destroyer. It’s precisely this optimistic and softer framing that could both appeal to working-class workers weary of AI and help soften an economic message around reducing mass immigration, one that’s not seen by Canadian voters as negative towards the multicultural consensus on immigration. Think of it as an economic strategy that aims to boost investment in Canadian workers rather than replacing investment with foreign labour. This represents a fundamental shift from viewing labour as a commodity to be imported at will, toward viewing workers as valuable assets whose productivity can be enhanced through investments in technology. Building on the vice president’s speech, the White House’s recently announced AI Action Plan attempts to operationalize Vance’s framework by focusing on accelerating AI innovation, building domestic infrastructure, and leading on AI diplomacy and security. It includes over 90 near-term policy recommendations and new executive orders, signaling a shift toward deregulation, market-driven growth, and a central role for American workers. The Action Plan places heavy rhetorical emphasis on empowering American workers but generally avoids new regulatory worker protections. Instead, it focuses on expanding worker training and AI integration into apprenticeship programs to enable American workers to take advantage of new opportunities created by AI. The Action Plan suggests that existing U.S. laws are sufficient to address emerging labour challenges, recommending their flexible application to AI-related issues as they arise. It aims to fuse a market-driven regulatory approach with a pro-worker focus on training and workforce development, which is far likelier to succeed in generating the wealth and productivity gains for the working class than a protectionist regulatory approach that limits the ability of markets to function. What is notable for Canadian conservatives is the lack of an emphasis on subsidies to drive this innovation agenda. While there is arguably some role for industrial policy in the innovation economy, government intervention in the AI industry as it is developing could be detrimental to workers. Industrial policy can work when there is a lack of private capital being invested in domestic firms, and if left unaddressed, can hollow out industrial capacity, destroying communities and jobs. AI does not have that problem. In fact, the “Magnificent 7” technology companies (Microsoft, Apple, Google, Amazon, Nvidia, Meta, and Tesla) have invested over $300 billion USD in AI and related data centre infrastructure in the past 12 months. There is more capital ready to be deployed than investment opportunities, and the Americans recognize this through their emphasis on a policy that sets the conditions for bottom-up adoption, trusting that markets will work as the most efficient and effective mechanism for that capital to be productively employed. While there may be political pressure to develop a made-in-Canada AI strategy that prioritizes Canadian technologies, the most effective path to success for Canadian firms and workers is a regulatory framework that allows markets to function efficiently, ensuring that AI-driven productivity gains benefit not only firms but also individual workers. This framework dovetails with pro-worker nationalism: Canada should not rely on mass immigration to fill output gaps. Instead, Canadian businesses should be incentivized to invest in productivity-enhancing tools, particularly AI, by reducing their availability to low-skilled immigration streams and the TFWP. This would encourage investment in productivity-enhancing tools, enabling fewer workers to produce more with better pay and greater job security. Policy recommendations Drawing from Vance’s approach, Canadian policymakers and conservatives should develop a comprehensive strategy centred on infrastructure investment and worker-centric development. At the provincial level, where Canadian conservatives are in power, they must build more power plants and manufacturing facilities, and invest substantially in the energy and technology infrastructure necessary for AI deployment. This includes expanding electrical grid capacity, improving internet connectivity, and developing domestic manufacturing and production capabilities. In the face of the continued economic competition and trade war with the United States, Canadian efforts to reduce red tape and speed up the building of AI infrastructure are critical to Canada’s national interest. The Trump Administration is attempting to aggressively roll back barriers to building AI infrastructure, and if Canada is focused on asserting its national interest in the face of American aggression, we should ensure that we have Canadian AI infrastructure, such as data centres, that is not reliant on the U.S.-based infrastructure. Canadian conservatives should continue to lead the effort for federal and provincial governments to make it easier to build infrastructure in Canada. If policymakers are to develop a pro-worker AI agenda, it also means expanding the production side of the economy. Few industries stand to benefit more from AI than our advanced manufacturing sector, and while many of these jobs are currently high-skilled labour, AI can play a role in increasing the productivity of lower-skilled working-class workers to help take on more value-added roles within our manufacturing sector through the increased adoption of AI hardware. Policymakers must ensure that our manufacturing sector can utilize AI tools to enhance productivity. While subsidies and various other industrial policies remain popular, effective regulation of AI is arguably more important. Any regulation must ensure businesses are able to adopt and scale new technologies in a way that will help both the workers and capital. We should align and compete with the U.S. efforts on AI regulation to ensure that they are pro-market and pro-worker. The objective of AI regulation should be twofold: ensure that Canadian innovators can take advantage of the tools to deliver new products, services, and ideas, and that Canadian workers’ productivity gains are directly translated into higher wages. Policymakers should fight to ensure that Canadian regulators and government officials do not follow the EU’s efforts to overregulate this space, as it will hinder the adoption and scale of AI. The strategy must also address immigration and workforce development in a coordinated fashion. Canada should significantly reduce both permanent and temporary immigration while the domestic workforce adapts to AI-enhanced productivity, allowing wages to rise naturally while providing time for workers to develop skills complementary to AI systems. This transition period requires substantial collaboration between government and industry on comprehensive programs to help workers develop AI-complementary skills, including both technical training for AI tool usage and enhanced focus on uniquely human capabilities like creativity, complex problem-solving, and interpersonal communication. Policymakers could explore innovative ideas like a scaled-up start-up-oriented apprenticeship system that could be adopted specifically for companies utilizing AI in advanced manufacturing techniques. Re-orienting a small amount out of the billions of dollars federal and provincial governments spend on retraining and labour market programming to focus on these AI-complementary and AI training skills could be a massive benefit to working-class Canadians. These reskilling initiatives should be viewed not as temporary measures but as ongoing investments in Canada’s human capital. Key takeaways: A path forward The current path of mass immigration, combined with stagnant productivity growth, has led to declining living standards for working-class Canadians. Housing has become less affordable, wages have stagnated relative to productivity, and workers are facing increasing competition from imported labour willing to accept lower wages and working conditions. Conservatives must present new ideas to address these issues if they’re to gain the trust of Canadians and lead effectively. Policymakers have an opportunity to prioritize AI deployment that enhances rather than replaces human workers, reducing immigration to allow labour markets to tighten naturally, and investing in the technological infrastructure needed for sustainable productivity growth. Simply put: Canada can create an economy that serves its existing workforce rather than exploiting it. This approach represents more than just economic policy. It embodies a fundamental commitment to an economic model that embraces production and not just consumption. Canadian workers deserve an economy that invests in them and rewards their productivity, not one that seeks constantly to replace them with cheaper alternatives. The choice is clear: Canada can continue down the current path of mass immigration and productivity stagnation, or it can embrace AI-driven productivity growth that empowers workers and builds a stronger, more prosperous nation for all Canadians.