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Scotland must introduce a Canada-style immigration system to overcome a shortage of vital workers, says a think tank.

More workers must be attracted from the rest of the UK and Scots living outwith the country encouraged to return home, says the report from the David Hume Institute.

But, more importantly, the country needs more international immigration and a different system from England, it concludes.

Scotland has a lower birth rate than all other parts of the UK, as well as 29 of the 36 OECD member countries. The population is also ageing fast: since 1998, there has been an increase of 31% in the number of people in Scotland aged at least 75, and a decline of 8% in those aged 15 and under.

By 2041, Scotland’s pensionable-age population is projected to increase by 265,000, while the working-age population is only projected to increase by 38,000. This will have a major impact on Scotland’s health and social care sector.

Report authors Jane-Frances Kelly, director of the David Hume Institute, and Mark Mitchell of the Fraser of Allander Institute, wrote: “Scotland’s future immigration needs are distinct from those of England: in particular, we need higher rates of migration. This means that we require a system which can take account of different needs in different parts of the UK, as well as different needs across Scotland. The immigration system will also need to be able to target high and lower skilled migrants, since a significant proportion of lower-skilled jobs are currently occupied by non-UK workers.

“It is possible technological innovations might alter demand for some types of labour in ways that overwhelm demographic changes in labour supply, though it would be brave to rely on this when technological transformations have so often been over-predicted in the past.

“There is room to increase participation: male employment rates – especially among older men – are still well below historical highs. But while increasing participation will be important (not least for achieving an inclusive labour market), it is unlikely to be enough to cover the scale of expected shortages."

The report examined the Canadian immigration system. The Canadian Government promotes immigration as part of the solution to “challenges such as an ageing population and declining birth rate”. The country’s fertility rate has been below the replacement level for more than 40 years. This means that Canada is largely reliant on immigrant labour to expand its workforce.

The report says: “European Union migration to Scotland has masked underlying demographic trends of an ageing population coupled with one of the lowest birth rates in the developed world. Now that net migration is falling, and we face the coming challenge of Brexit, we find ourselves once again facing a major demographic challenge.’’