Economic impact of immigration to Canada

Immigration to Canada

According to Canada's Immigration Program (October 2004), Canada has one of the highest per capital immigration rate in the world, 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. In 2004, Canada received 235,824 immigrants. Canada is also unusual among western nations in the widespread popular support for high rates of immigration, and in recent years support for immigration has increased in Canada. All of Canada's major political parties support either sustaining or increasing the current level of immigration.

Economic rationale for immigration

There is no agreed view on the net impact of immigration in current times. Historically, Canada's unusually high immigration rates 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. Canada has thus faced acute labour shortages and has responded by actively searching for immigrants. In the late 19th century this included bringing Chinese migrants to build the Canadian Pacific Railway 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.

Another factor that contributes to the immigration question 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.

In 1995 economic research firm DRI-McGraw Hill Inc. reacted 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.

The economic dangers of population decline are not universally accepted. Organizations like the Fraser Institute 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. The study's authors conducted a series of studies using large amounts of census data (844,476 individuals) and conclude that immigrants who arrived from 1987-2004 paid only 57% of the taxes paid by average Canadian in 2006, with the effect that taxes from immigrants do not exceed the government expenses relating to them (a gap of $23 billion annually according to their numbers). A study by the C. D. Howe Institute suggests that immigration cannot keep Canada's population young and could possibly contribute to population ageing in the near term. Employment statistics also bring into question whether skilled worker immigrants, with a 34% unemployment rate, are successfully meeting existing labour market needs in Canada. Many developed nations have much lower fertility rates than Canada but have not embraced immigration.

The first detailed analysis of Canadian immigration policy came from the Economic Council of Canada; 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, noting that "a historical perspective gives little or no support to the view that immigration is needed for national prosperity", it also concluded that 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". In 2005 a report by the Royal Bank of Canada called for boosting Canada's immigration rate by 30% to 400,000 per year to ensure continued economic growth.

Education levels

The Canadian system puts great emphasis on finding skilled immigrants. Immigrants to Canada are more skilled than immigrants to the United States. George J. Borjas compared immigrants to Canada and the United States finding those to Canada being better educated and receiving higher wages once settled. He accredits this to Canada's points based immigration system, and argues for the United States to more closely emulate the Canadian method.

Within the Canadian economy, immigrants are mostly found at the highest education levels. In Canada, 38% of male workers with a post-graduate degree are immigrants to the country. 23% of Canadians are foreign born, but 49% of doctorate holders and 40% of those with a master's degree were born outside Canada. 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. 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. 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. 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.

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, but Citizenship and Immigration Canada established the Foreign Credentials Referral Office to provide something like a directory assistance service for immigrants. The Government of Ontario enacted the Fair Access to Regulated Professions Act, 2006 to help immigrants qualify for 34 provincially regulated professions. 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. Other provinces have made similar commitments.

Wages

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%).

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 compensated than their native born counterparts. Immigration scholar Jeffrey Reitz calculated that in 2001 native Canadian employers were benefiting from, and immigrant employees were losing out on, between $2 and 3 billion per year due to this imbalance.

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. 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 immigrant's background and thus less willing to offer the same salary as to a native. Immigrants, especially visible minorities have different values than native-born Canadians as they tend to favour living in Toronto, Montreal and Vancouver as opposed to other places much more than native-born Canadians. Due to lower mobility, they do not access better paying jobs, such as in Alberta and Saskatchewan. This has been changing with Calgary already surpassing Montreal in terms of percentage of visible minorities. Visible minorities in Saskatchewan earn higher wages than native-born Canadians.

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. 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%

Income

Higher rates of unemployment and lower wages combine to give newcomers 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. 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%." 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. 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. 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.

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 hypotheses have been advanced to explain these issues.

1. The selection process is flawed;
2. Government and corporate policies deliberately shift immigrants to secondary sector occupations. These are jobs characterized by high instability, hazardous work environments, and low pay. Inherently those involved in these sectors will have lower wages and more periods of unemployment. In several European countries the immigration system is almost fully designed to try to fill these positions. This is less the case in Canada, but significant recruitment programs for sectors such as agriculture and oil and gas recruit many workers to perilous jobs.
3. Newer immigrants from outside of Europe are victims of racial discrimination.
4. Canada's social programs create incentives that conflict with the employment objective; and/or
5. 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.

A January 2007 study by Statistics Canada analyzed the drop in income of economic immigrants from several perspectives. 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 drop occurred during the 1990s and early 2000s despite the percentage of immigrants arriving with degrees in the economic class (including principal applicants, spouses, and dependents) rising from 29% in 1992 to 56% in 2003.

Stating an intention to reduce a backlog of immigration applicants of all classes, and to better target the required skills needed in Canada, the federal government passed a law in 2008 that gave the immigration minister new powers to alter immigrant selection. Many expected that these powers would be used to favour workers in skilled trades over immigrants selected on the basis of education through the points system.

While the well being of immigrants has declined in recent years, this has not affected second generation immigrants, or those who came to Canada as a child. This group is one of the most successful in Canada, with education and earning levels well above that of their parents and also above the Canadian average.

Long term outcomes

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. Beiser 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. Beiser 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.

Government and social assistance

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, which on a per capita basis is 3 times more than the 15,000 U.S. Citizenship and Immigration Services employees. 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%.

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. The majority of the $350 million was allocated to Quebec under the Canada-Quebec Accord, at $196 million per year, even though immigration to Quebec represented only 16.5% of all immigration to Canada in 2005. The $350 million is budgeted to increase by an additional $90 million by 2009. 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, because 43% of new immigrants settle in the Greater Toronto Area resulting in certain challenges for that region. 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." 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. 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. 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.

Government finances

There is no consensus on the net impact of immigration to government finances. 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. 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. 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. Immigrants are less likely than native Canadians to receive employment insurance, social assistance, and subsidized housing. Immigrants are also much less likely to become homeless or suffer from mental illness. 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. Results from a study from the Fraser Institute found that the immigrants who arrived between 1987 and 2004 cost governments $23 billion per annum (as of 2006) in excess of taxes raised from those immigrants, relating to universal social services (e.g., welfare, medicare, public education).

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. Canada's economy is heavily centered on international trade, which accounted for 36% of GDP in 2006. 86.9% of Canadian exports go to the United States.

This has been good for the source countries of immigrants to Canada, but not for Canada. For many years, expanded markets for trade has been a common rationale and justification for high immigration from the developing world. However, 2014 data from Statistics Canada reveals that the trade balances with countries from which Canada receives most of its immigrants deteriorates as more immigrants arrive. Total bilateral trade increases, but to the detriment of Canada. Current data, 2014, shows that only India has balanced trade with Canada:

[Pakistan]: Canada imports $216,556,026, and exports $119,197,121

[Philippines]: Canada imports $991 million, and exports $527.9 million

[China]: Canada imports $38,054,497,501, and exports $14,224,945,364

[Iran]: Canada imports $1.887 billion, and exports $754,302 million

[South Korea]: Canada imports $7.3 billion, and exports $3.4 billion

[Haiti]: Canada imports $3.983 billion, and exports $2.705 billion

[Mexico]: Canada imports $1,926,537,019, and exports $412,490,687