Economic impact of immigration to Canada

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The economic impact of immigration to Canada is a much-debated topic in Canada. Over the years, federal government initiatives have fostered a higher per-capita immigration rate than most industrialized nations. One of the core principles of these policies is the theory that it results in a stronger Canadian economy. Several recent studies have contradicted this economic benefit rationale.

[edit] Economic rationale for immigration

According to Canada's Immigration Program (October 2004), Canada has the highest per capita immigration rate in the world,^[1] 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.^[2] There are three main official reasons given for the high level of immigration to Canada, one specific to each immigration category:

A. The social component – which relates to family class immigrants.

B. The humanitarian component – which relates to refugees.

C. The economic component – which relate to economic class immigrants.

Canada wishes to attract skilled workers and business immigrants who will contribute to the economic life of the country and fill labour market needs. Objective 3(1)(c) states the goal of “… support[ing] the development of a strong and prosperous Canadian economy ….”

One of the supporting factors the government points to 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. This is based on the assumption that governments receive more revenue from immigrants than any expense incurred in support of them. Another theory is that Canada can use the skilled worker immigrant program to fill existing labour market needs. There are other less quantifiable economic arguments that are also advanced.

The economic benefit theories 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.^[3] 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.^[4] Employment statistics also bring into question whether skilled worker immigrants, with a 34% unemployment rate,^[5] are successfully meeting existing labour market needs in Canada, and Statistics Canada explains that although progress was made in reducing poverty (as measured by the low-income rate) with non-immigrants, this progress was more than offset by the income profile of new immigrants, resulting in a net widening of the income inequality gap in Canada during the 1990s.^[6] And a more recent 2007 Statistics Canada study shows that the income profile of recent immigrants deteriorated by yet another significant amount from 2000 to 2004.^[7] Another Statistics Canada study also shows that immigration reduces overall wage levels in Canada.^[8]

[edit] Economy-wide impacts

[edit] Expanded economy

Population growth through immigration boosts GDP, a measure of the size of the overall economy.^[9] It increases the number of consumers for all products, including housing, durable goods, and services.

When referring to Canada's full immigration history, the term migrant may be more appropriate than immigrant, because from a legal perspective, prior to 1 January 1947 there was no official immigration law (see History of Canadian nationality law).

The aboriginal and visible minority demographic information can be used as a very rough proxy for the proportionate historical economic impact of human migration from various sources:

• Approximately 83% of Canada's population are neither visible minorities nor aboriginals, and would largely represent migrants or descendants of European ancestry.
• Visible minorities comprise 13.4% of the population. The largest minority groups are Chinese, South Asian, Black, and Filipino, representing past migration from the applicable areas.
• Aboriginal peoples in Canada comprise 3.3% of the population. Depending on one's viewpoint, they are either descendants of migrants of many centuries ago, or they are indigenous people.

This is very imprecise as there would be differences in affluence and economic contribution between the groups. Such a proxy also ignores the time element, as groups that migrated earlier would have made more established contributions to the economy. In addition, historically there may have been specific economic impacts derived from migrants from specific regions. For example, many thousands of navvies from Europe and the Chinese provinces of Fujian and Guangdong (along with Chinese veterans of the gold rushes), worked on and completed the Canadian Pacific Railway in the 19th century, creating key transportation infrastructure, which was very important to Canada's economic development.

For more historical information, see History of immigration to Canada and Economic history of Canada

[edit] Per capita income

The impact to Canada's per capita income depends on whether immigrants have an income above or below the national average, whether immigration results in changes to overall wage levels in Canada, and whether the skills they bring or their low cost labour improves the competitiveness of the Canadian business environment.

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.^[10] 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%."^[6] 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.^[7] 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, compared to 13% in the early 1990s.

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%).^[8]

In 1991, the Economic Council of Canada concluded 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."^[11] 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.^[12]

[edit] Government finances

Federal and provincial government social programs can experience greater expense without corresponding tax revenue due to the low employment rate of immigrants (see employment statistics below). The Fraser Institute 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).^[3] In addition to the universal social services considered in that study, recent immigrants are also significant users of subsidized housing, with 42% of immigrants who arrived after 1990 having a "core need" (as defined by CMHC) for subsidized housing as of 2001 compared to 17% for the non-immigrant population.^[13] 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.^[14] The majority of the $350 million was allocated to Quebec under the Canada-Quebec Accord, at $196 million per year,^[15] even though immigration to Quebec represented only 16.5% of all immigration to Canada in 2005.^[16] The $350 million is budgeted to increase by an additional $90 million by 2009.^[17]

The Citizenship and Immigration Canada department employs 5,000 staff,^[18] which on a per capita basis is 3 times more than the 15,000 U.S. Citizenship and Immigration Services employees.^[19] 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%.^[20]

Provincial governments in Canada have established citizenship and immigration departments, such as the Ministry of Citizenship and Immigration (Ontario), which employ hundreds of additional staff. The Ontario department is also involved in a spending controversy. In contrast, large states with significant immigration, such as California, have no equivalent department or agency.^[21]

[edit] Employment statistics

The economic impact of immigration differs by immigration category. For example, according to Statistics Canada, there are significant differences in the labour force participation rates. 2001 labour statistics by immigration category:^[5]

Data source: Statistics Canada, 2001, Longitudinal Survey of Immigrants to Canada.

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

In 2001, the overall unemployment rate of immigrants was 37%. Combined with the overall participation rate of 70%, this means that only 44% of landed immigrants aged 15 years and higher were working in 2001 (i.e., a majority of 56% were not working). The 44% employment rate was significantly lower than the average 2001 employment rate in Canada of 61%.^[23] Immigrant unemployment levels do not reduce to the Canadian average during at least the first 10 years of residing in Canada.^[24]

Statistics Canada has updated the study to coincide with the 2006 census;^[25] however, so far they are only reporting on a more narrow age range called core working-age immigrants (ages 25-54) on the basis that they are more likely to be employed, which, of course, shows more favourable employment statistics. As a result, there is no 2006 update available yet for the overall employment numbers.

[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. Canada has an unemployment challenge relating to landed immigrants as even skilled worker immigrants, who are selected on the basis that they have the skills required to meet existing labour market needs in Canada, have a 34% unemployment rate.

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^[26]), 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.^[22] The employment rate for dependants aged 15 and older of skilled worker applicants is only 36%, compared to 60% for the principal applicants.^[5]

A January 2007 study by Statistics Canada analyzed the deterioration in the economic performance of Economic immigrants from several perspectives.^[7] 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.

[edit] Possible explanations for the deterioration in the economic status of immigrants

[edit] Criticism of Canada relating to foreign credentials

The difficulty in transferring foreign credentials is often cited within Canada as a reason for employment difficulties.^[27] However, 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.^[28] The foreign credentials criticism also does little to explain the significant deterioration in the income status of recent immigrants to Canada over the past few decades, as foreign credentials were not more easily transferred to Canada pre-1980 compared to today. Nevertheless, criticism within Canada relating to foreign credentials is popular with Canadian immigrant advocates and politicians of all parties as it is seen to be the most "pro-immigrant" explanation for the employment challenges.^[27][29][30]

The setting of standards for, or recognition of, almost all professional credentials (see Category:Professions) does not fall within the federal government's control and are therefore not determined by either federal laws or Citizenship and Immigration Canada policies,^[30] but Citizenship and Immigration Canada established the Foreign Credentials Referral Office to provide something like a directory assistance service for immigrants.^[31] The Government of Ontario enacted the Fair Access to Regulated Professions Act, 2006 to help immigrants qualify for 34 provincially regulated professions.^[32] 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.^[33] Other provinces have made similar commitments.

[edit] Other possible explanations

Other possible theories for the deterioration in the economic status of recent immigrants include the following:

1. The per capita immigration rate is simply too high;^[34][35]
2. The selection process is flawed;^[3]
3. 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;^[36][25]
4. Canada's increasingly generous social programs create incentives that conflict with the employment objective;^[3] and/or
5. Increased job competition (if that is even true in the current era of low unemployment rates) 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.^[37]

[edit] Economic impact to Toronto

Immigration 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,^[38] because 43% of new immigrants settle in the Greater Toronto Area resulting in certain challenges for that region.^[35][39] 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."^[6] 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.^[40] 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.^[41] 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.^[42]

[edit] See also

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

[edit] Footnotes