Economic impact of immigration to Canada

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The economic impact of immigration is an important topic in Canada. Throughout its history Canada has depended on a large stream of immigrants for its economic success. While the immigration rate has declined sharply from its peak early in the 20th century, Canada still accepts more immigrants per capita than any other major country. Modern economic theory^[2] posits that immigration and the free movement of labour are an overwhelming positive for an economy. Most Canadians agree, and in recent years support for immigration has increased in Canada.^[3] All of Canada's major political parties support either sustaining or increasing the current level of immigration.

The per capita immigration rate to Canada has been relatively constant since the 1950s, and recent years have seen a steady increase in the education and skill level of immigrants to Canada. However, over the last 25 years the economic position of newcomers to Canada relative to the native population has steadily declined. A 2007 Statistics Canada study shows that the income profile of recent immigrants deteriorated by a significant amount from 2000 to 2004.^[4] While immigration may be a boon to the nation as a whole, recent immigrants themselves are far more likely than native born Canadians to have low incomes, with income and employment rates increasing towards the national average with more time spent in Canada.

Contents 1 Need for migrants 2 Education levels 3 Wages 4 Employment 5 Income 6 Decline in economic well being 7 Support 8 Government finances 9 International trade 10 Economic class immigrants 11 See also 12 Footnotes

[edit] Need for migrants

According to Canada's Immigration Program (October 2004), Canada has the highest per capita immigration rate in the world,^[5] although statistics in the CIA World Factbook shows that a number of city states and small island nations, as well as some larger countries in regions with refugee movements, have higher per capita rates.^[6] Canada's unusually high immigration rates, and the equally unusual general popular support for a high rate of immigration, can be traced to the nation's unique economy. One factor is that Canada has one of the world's largest supplies of natural resources such as oil, metals, and lumber. It also has a sparse population spread over a vast landscape. Throughout its history Canada has thus faced acute labour shortages and has responded by actively recruiting immigrants.^[7] In the late nineteenth century this included bringing Chinese migrants to build the Canadian Pacific Railroad and actively advertising in Europe to find farmers with the Last Best West campaign. Today similar recruitment efforts are needed to staff the oil sands projects in Alberta.^[8]

Another factor that may lead Canadians to support high immigration levels is Canada's low birth rate (see List of countries by birth rate). The theory is that new residents can assist in meeting future government obligations relating to pay-as-you-go liabilities. The economic dangers of population decline are not universally accepted. Organizations like the Fraser Institute, a conservative think tank, question whether a declining population would reduce or increase per capita income, noting that in the short term, with a stable economy, fewer people would increase the per capita income simply because you divide the income among fewer people. They conducted a study that claims that the tax revenue received from immigrants does not exceed the government expenses relating to them.^[2] A study by the C. D. Howe Institute, another conservative think tank, suggests that immigration cannot keep Canada's population young and could possibly contribute to population ageing in the near term.^[9] Employment statistics also bring into question whether skilled worker immigrants, with a 34% unemployment rate,^[10] are successfully meeting existing labour market needs in Canada. This explanation for Canada's high rate of immigration also fails as many developed nations have much lower fertility rates than Canada but have not embraced immigration.

A wide array of scholars and organizations have supported Canada's immigration policy. In 1995 economic research firm DRI-McGraw Hill Inc. react with alarm to proposed reductions in immigration levels. They acknowledged that immigration comes with short term costs, but argued that in the long run immigration boosts employment and economic output.^[11] One of the most ringing endorsements of a high immigration rate came from the 1991 report by the Economic Council of Canada, the first detailed analysis of Canadian policy. It called for immigration to be increased to eventually bring Canada's population to 100 million. While it found that the economic benefits to Canada of immigration were fairly small, the benefits to the newcomers themselves were extremely large. The report concluded that "it would be hard not to recommend an increase when immigrants can gain so much and Canadians not only do not lose but actually make slight economic gains."^[12][13]

[edit] Education levels

Immigrants to Canada tend to be highly educated, and the Canadian system puts great emphasis on finding skilled migrants. Newcomers to Canada are more likely to hold an advanced degrees and are better educated than native Canadians^[14] Immigrants to Canada are also much more likely to be skilled than immigrants to the United States. Within the Canadian economy, immigrants are most found at the highest education levels. In Canada, 38% of male workers with a post-graduate degree are immigrants to the country.^[15] 23% of Canadians are foreign born, but 49% of doctorate holders and 40% of those with a masters degree were born outside Canada.^[16] A persistent problem for skilled immigrants is the recognition of foreign credentials. While Canada recruits people to come based on their degrees, many newcomers arrive to find employers and professional organizations not recognizing their foreign education.^[17] As the percentage of skilled newcomers as a share of total migrants has increased, so has this problem. From 2001 to 2006 56% of immigrants who arrived in Canada held a university degree, a sharp increase over the 28% who arrived prior to 2001.^[18] In other nations immigrants also find difficulties getting their credentials recognized. An international study by the Migrant Integration Policy Index, sponsored by the research division of the British Council and 100 other signatories, assigned its highest score (3 out of 3) to Canada for the "State facilitation of recognition of skills and qualifications" indicator in their 2006 study of 27 European countries and Canada.^[19] The sheer number of skilled migrants to Canada does make the problem a more significant one in that country and politicians of all parties have called for change in this area.^[17][20][21]

The setting of standards for, or recognition of, almost all professional credentials does not fall within the federal government's control and are therefore not determined by either federal laws or Citizenship and Immigration Canada policies,^[21] but Citizenship and Immigration Canada established the Foreign Credentials Referral Office to provide something like a directory assistance service for immigrants.^[22] The Government of Ontario enacted the Fair Access to Regulated Professions Act, 2006 to help immigrants qualify for 34 provincially regulated professions.^[23] The Act also established the position of Fairness Commissioner (Ontario). In 2007, the Government of Alberta signed an agreement with federal government that will accelerate the process of foreign credential recognition for new immigrants by licensing bodies in that province.^[24] Other provinces have made similar commitments.

[edit] Wages

One important effect of this steady influx of highly skilled immigrants is the reduction of income inequality in Canada. A steady stream of doctors and engineers into the economy reduces wages for these professions. Since immigrants play a smaller role in unskilled fields, these wages are relatively higher in comparison. In the United States immigration patterns are reversed, and income inequality is much higher as a partial result.^[25] In terms of the impact of immigration to economy-wide wage levels, Statistics Canada estimates that for every 10% increase in the population from immigration, wages in Canada are now reduced by 4% on average (with the greatest impact to more skilled workers, such as workers with post-graduate degrees whose wages are reduced by 7%).^[26]

In part because of the credential issue, many immigrants are forced to find work below their education level and at lower wages. However, even for doing work of the same skill level immigrants are much less well compensate than their native born counterparts. Immigration scholar Jeffrey Reitz calculated that in 2001 native Canadians were benefiting from, and immigrants were losing out on, $55 billion per year due to this imbalance.^[27]

There are a number of possible explanations for why newcomers earn less than native Canadians in the same jobs with the same skills. Lower hourly wages might be an indication that the labour productivity of immigrants is lower, and employers thus have reason to pay them less. Racism is also a possibility. The wage imbalance is especially true for visible minorities, indicating that racism plays a role.^[28] New workers are also less familiar with the Canadian labour market and will thus not be able to maximize their salaries. Employers will also be less familiar with an immigrants background and thus less willing to offer the same salary as to a native.^[29]

A Statistics Canada study shows that immigration reduces overall wage levels in Canada. For every 10% increase in a countries population, wages fall between 3 and 4%.^[26]

[edit] Employment

In recent years the unemployment rate for newcomers has also increased. In 1981 those who had just arrived had a high rate of unemployment, but those who had been in the country five years were more likely than average to be employed. By 2001 the transition period had expanded, and now it takes ten years before newcomers reach the same employment rate as those born in Canada.^[30] In 2006, the unemployment rate of recently arrived immigrants year was 11.5%, considerably above the native Canadian average of 4.9%. For more established immigrants who had been in Canada between 5 and 10 years the rate fell to 7.3%^[31]

Labour force rates	Immigrants - Female	Immigrants - Male	Native born - Female	Native born - Male
Participation rate	76.6%	91.0%	84.3%	91.4%
Employment rate	71.2%	85.2%	80.8%	86.8%
Unemployment rate	7.0%	6.3%	4.1%	5.0%

Data source: Labour market outcomes of immigrants aged 25 to 54, by sex and period of landing, Canada

For clarity: Employment Rate = Participation Rate * (1 - Unemployment Rate)</small

Unemployment rates	In Canada <5 years	In Canada 5-10 years	Native born
Age 15-25	17.2%	15.8%	11.2%
Age 25-54	11.5%	7.3%	4.9%
Age 55+	15.4%	12.3%	5.1%

Data source: The Canadian Immigrant Labour Market in 2006a

One of the most important studies of the economic impact of immigration to Canada is Morton Beiser's Strangers at the Gate. This study looked at the arrival of the Vietnamese boat people who began to arrive in Canada in 1979 to much controversy. The total number of refugees was 60,000, the largest single group of refugees to ever arrive in Canada. Besier first studied the boat people upon their arrival, finding that few spoke English or French, that most were farmers with few skills useful in Canada, and that they had arrived with no assets with which to establish themselves. Besier then followed the progress of the boat people to see what effect they would have on Canada. Within ten years of arrival the boat people had an unemployment rate 2.3% lower than the Canadian average. One in five had started a business, 99% had successfully applied to become Canadian citizens, and they were considerably less likely than average to receive some form of social assistance.^[32][33]

[edit] Income

Higher rates of unemployment and lower wages combine to give newcomers considerably less income than the Canadian average. Analysis of census data as of 2000 shows that immigrant incomes were at 80% of the national average after 10 years of residing in Canada.^[34] In previous decades, immigrant income levels did rise to the national average after 10 years, but in recent years the situation has deteriorated. A 2003 study published by Statistics Canada noted that "in 1980 recent immigrants had low-income rates 1.4 times that of Canadian born, by 2000 they were 2.5 times higher, at 35.8%."^[35] The study noted that the deterioration was widespread and affected most types of immigrants. The 2003 study explains that the low-income rate among non-immigrants declined in the 1990s, but this was more than offset by the income profile of new immigrants, resulting in a net rise in Canada's total low-income rate. An updated January 2007 study by Statistics Canada, explains that the deterioration continued into the next decade, with the low-income rate of recent immigrants reaching rates of 3.5 times that of Canadian born in 2002 and 2003, before edging back to 3.2 times in 2004.^[4] The 2007 study explains that this deterioration has occurred even though Canada implemented changes in 1993 to encourage more highly educated immigrants, with 45% of new immigrants having university degrees as of 2004.

In 1991 the Economic Council of Canada found that periods of immigration were not directly linked to periods of high growth. They noted that "a historical perspective gives little or no support to the view that immigration is needed for economic prosperity. In the 19th and early 20th centuries, the fastest growth in per capita real incomes occurred at times when net immigration was nil or negative. Later in the 20th century, the opposite linkage is seen but, clearly, there is no long-term correlation." However, the same report found that a high rate of immigration was good for Canada's future, and recommended expanding immigration rates to bring Canada's population to 100 million.^[36] A University of Montreal study published in 2002 by professor Marc Termote used different methods and studied different countries and concluded that immigration has no statistically significant impact to the per capita income of a country.^[37]

[edit] Decline in economic well being

Over the last 25 years the economic position of newcomers to Canada relative to the native population has steadily declined. A number of theories have been advanced to explain these issues.

1. The shift from European to Asian immigrants has reduced the French and English language fluency of new immigrants, thereby reducing their attractiveness to potential employers;^[38][39]
2. The selection process is flawed;^[2]
3. Newer immigrants from outside of Europe are victims of racial discrimination.^[40]
4. Canada's social programs create incentives that conflict with the employment objective;^[2] and/or
5. The per capita immigration rate is simply too high;^[41][42]
6. Increased job competition among even native-born Canadians has increased the importance of relying on networking to access the "hidden market," putting immigrants at a disadvantage given their lack of deep and broad networks.^[43]

A January 2007 study by Statistics Canada analyzed the deterioration in the economic performance of Economic immigrants from several perspectives.^[4] One of the more surprising facts is that Economic immigrants are now more likely to begin their stay in Canada with a "low-income" (less than 50% of the median income) than an immigrant in any of the other immigration classes (see Table 16 in the study). This deterioration occurred during the 1990s and early 2000s despite the percentage of immigrants arriving with degrees in the economic class (including principal applicants, spouses, and dependants) rising from 29% in 1992 to 56% in 2003.

To reduce a backlog of immigration applicants of all classes, and to better target the required skills needed in Canada, the federal government introduced a proposal in 2008 that would favour skilled workers over family class immigrants through a controversial process that would give more discretion to the immigration department.^[44]

[edit] Support

The government has a large department and a number of programs to try to ensure the well being of immigrants to Canada, and ameliorate their economic condition. The Citizenship and Immigration Canada department employs 5,000 staff,^[45] which on a per capita basis is 3 times more than the 15,000 U.S. Citizenship and Immigration Services employees.^[46] Citizenship and Immigration Canada recoups some of its department costs through landing fees. In 2006, the Canadian government reduced the landing fee per immigrant by 50%.^[47]

New immigrants are also entitled to settlement assistance such as free language training under provincial government administered programs usually called Language Instruction for Newcomers to Canada (LINC), for which the federal government budgeted about $350 million to give to the provinces for the fiscal year 2006-2007.^[48] The majority of the $350 million was allocated to Quebec under the Canada-Quebec Accord, at $196 million per year,^[49] even though immigration to Quebec represented only 16.5% of all immigration to Canada in 2005.^[50] The $350 million is budgeted to increase by an additional $90 million by 2009.^[51] Provincial governments in Canada have established citizenship and immigration departments, such as the Ministry of Citizenship and Immigration (Ontario).

Support for immigrants was also one of the key issues that formed the basis of the New Deal for Cities between Toronto (and other urban centres), the Province of Ontario, and the Government of Canada,^[52] because 43% of new immigrants settle in the Greater Toronto Area resulting in certain challenges for that region.^[42][53] A paper published by Statistics Canada noted that "Over the 1990s (1990 to 2000) the city's low-income rate rose 1.9 percentage points. All of this increase was associated with deteriorating outcomes among immigrants, which tended to increase the city's low-income rate by 2.8 percentage points."^[35] In other words, the low-income rate among non-immigrants fell, but the income profile of new immigrants resulted in a net widening of the income inequality gap in Toronto during the 1990s.

The needs of immigrants prompted the United Way of Greater Toronto, the largest United Way charity in Canada, to identify immigration services in Toronto as a top priority for their $100 million 2006 campaign to combat poverty and social exclusion.^[54] In 2006, the Daily Bread Food Bank in Toronto reported that over 40% of its clients are foreign-born, and that almost half of that group had been in the country for less than 4 years.^[55] While the less than 4 year group shows far above average need, the over 40% figure is in line with the general population as 44% of Torontonians are foreign-born.^[56]

[edit] Government finances

Immigrants on average contribute more to government revenues than the Canadian average. A 1990 study found that an average immigrant household paid $22,528 in all forms of taxes and on average each household directly consumed $10,558 in government services. By contrast an average native Canadian household paid $20,259 in tax and consumed $10,102 dollars in services. Across the country this means that immigrant households contributed $2.6 billion more than their share to the public purse. ^[57] A 1996 study found that over a lifetime a typical immigrant family will pay some forty thousand dollars more to the treasury than they will consume in services.^[58] Explanations for this include that immigrant households tend to be larger, and have more wage earners, increasing taxes. Newcomers are also less likely to make use of many social services. For instance immigrants are much less likely to become homeless or suffer from mental illness.^[59] Recent immigrants are also less likely to make use of subsidized housing than native Canadians of the same income level. In 2004 22.5% of low-income native Canadians lived in subsidized housing, but only 20.4% of low income recent immigrants did so, though this number was considerably higher among more established immigrants.^[60] The conservative, anti-immigrant Fraser Institute has also studied this issue claims that the immigrants who arrived between 1990 and 2002 cost governments $18.3 billion per annum (as of 2002) in excess of taxes raised from those immigrants, relating to universal social services (e.g., welfare, medicare, public education).^[2]

[edit] International trade

The presence within Canada of people representative of many different cultures and nations has also been an important boost to Canada's international trade. Immigrants will often have, expertise, linguistic skills, personal connections with their country of origin that can help forge international trade ties. Studies have found that Canada does have greater trade relations with those nations that have provided large numbers of immigrants. ^[61] Canada's economy is heavily centered on international trade with it accounting for 36% of GDP in 2006.^[62] 86.9% of Canadian exports go to the United States.^[63]

[edit] Economic class immigrants

The Economic class is the largest of the three main immigrant categories (the other two being the Family and Refugee classes). Immigrants to Canada, Economic class or otherwise, are generally not required to have pre-arranged employment (an exception being live-in caregivers). Canada uses a point-based system to assess about 20% of immigrants (skilled worker principal applicants). The points system awards points for education, language ability, employment experience, age, arranged employment and adaptability.

There are two types of Economic immigrants:

1. Skilled workers, the largest of the two groups, comprising 83.3% of Economic immigrants in 2005
2. Other economic, which is broken out in different ways at times, but can be mapped out as:
   1. Business immigrants
      1. Investors (with CAD$400,000 in capital and a minimum net worth of CAD$800,000)
      2. Entrepreneurs (with a minimum net worth of CAD$300,000)
      3. Self-employed (with the intent and abilities to create their own employment)
   2. Provincial/territories nominees
   3. Live-in caregivers

Along with the principal applicants, each Economic immigrant group also includes spouses and children (rather than classifying them as a type of Family class immigrant^[64]), and in the case of both Skilled workers and Other economic there are more spouses and children than principal applicants. So while Economic immigrants, as defined by the government, comprised almost 60% of all immigration, the majority of this group is made up of spouses and children of principal applicants. Skilled worker principal applicants comprised 19.8% of all immigration, and Other economic principal applicants comprised 3.6%, so the sum of those two principal applicant groups was only 23.4% of all immigration in 2005.^[65] The employment rate for dependants aged 15 and older of skilled worker applicants is only 36%, compared to 60% for the principal applicants.^[10]

[edit] See also

Geographic Labor Mobility; Immigrant Workers is included in JEL classification codes: J61

• Immigration to Canada
• Economy of Canada
• Immigration policy
• Poverty in Canada

[edit] Footnotes