The topic of immigration is a frequently recurring point of controversy in Canadian politics. The divisiveness surrounding the issue makes open dialogue difficult, inciting emotions from both critics and proponents. Be this as it may, accusations of ‘xenophobia’ and ‘virtue-signaling’ can only go so far. The majority of Canadians can come to terms with one thing, and that is the real economic ramifications of policy. How immigration fares for the bottom line of the average Canadian may be useful in reaching a tenable political consensus.
This article will explore the intricacies of Canada’s immigration policy, in relation to its impact on the Canadian economy. The essence of this question is concerned with the degree to which immigration is necessary; revealing how many migrants should be incorporated into the Canadian economy on a yearly basis.
The majority of Canadians can come to terms with one thing, and that is the real economic ramifications of policy. How immigration fares for the bottom line of the average Canadian may be useful in reaching a tenable political consensus.
In 2019 Canada took in 313,580 immigrants, proportional to 0.83 percent of the domestic population. Previous years have had somewhat lower levels of immigration, and others somewhat higher, but ultimately the immigration rate has been between 250,000 to 330,000 per year since the late 1970s. In addition, the number of temporary foreign workers admitted into Canada has drastically increased from 232,600 in 2001, to 613,200 in 2016.
The total volume of migrant arrivals in recent years, and future targets proposed by the government, are some of the highest in Canadian history. In fact, Canada’s immigration and net migration rates are among the highest in the world – well above most developed countries. Canada is experiencing an explicit policy of large-scale, or mass, immigration. The distinction between large-scale, regular, or limited immigration rates should be noted.
Four sections will outline the immigration question. First, brief details will be provided about the Canadian immigration system and its history. Next, common arguments about immigration will be presented from the bias of three main theoretical frameworks: an economic liberal case, an economic nationalist case, and some perspectives from critical theory. Thereafter, immigration research will be presented to hold the prevailing theories up to academic scrutiny. In the conclusion, the desired rate of immigration will be answered and some additional ideas will be discussed.
Canada uses a point system for the admission of its immigrants. It was introduced in 1967, and immigration was expanded significantly thereafter as a result. Conventional wisdom suggests that this change was a consequence of the economic benefits that skilled workers would bring to the country. This is not true. The introduction of the point system was largely a result of domestic and international pressure for Canada to liberalize its otherwise racially discriminatory immigration policy. This effort came primarily from the Canadian media and progressive activists, but also other Commonwealth countries and the United Nations.
Following the introduction of the point system, and preceding the expansion of immigration, Canada weathered several global recessions in 1972, 1981, 1991 and 2008, causing unemployment/underemployment and the demand for labour to fluctuate. The immigration agenda persisted against these economic forces, increasingly becoming a priority of the Canadian government. Though Canada faces different economic concerns today, the approach of this current global recession is of considerable note.
The Canadian government divides migrants into four classes. Each class is provided, followed by a rough targeted proportion from 2019: Economic Immigrants (58%), Family Class Immigrants (27%), Refugee and Protected Persons (14%) and Humanitarian & Other Levels (1%). The proportions of these classes are only estimates, as provided by the government of Canada, yet remain broadly consistent over the years. Furthermore, Canada also has a robust Temporary Foreign Workers Program (TFWP) that complements the aforementioned classes. Permits include foreign students, high and low skill workers, family members and refugees.
Mainstream classical economics largely posits that higher migration rates are beneficial to the economy. There are four primary common rationales in favour of immigration, applied to the Canadian context:
First, more migrants are instrumental in accommodating the demand for sectors that native Canadians otherwise are not participating in. This argument has two dimensions. On one hand high-skill immigrants fill intellectually intensive occupations that Canadians are not sufficiently educated to participate in; whereas low-skill immigrants occupy labour intensive jobs that native Canadians do not want to do as a consequence of low wages. The conditions that necessitate these two types of economic class immigrants are similar in that they stem from a business cost minimization analysis. Immigrants mitigate the need for training costs, higher wages and increased benefits, that would otherwise attract pre-existing domestic labour. There is no reason to incentivize native Canadians towards appropriate sectors when the pool of labour is so vastly expanded due to high rates of immigration. This in turn keeps prices for goods and services low, which benefits consumers and stimulates the economy overall.
The second argument in favour of immigration is that it is necessary in order to draw a young workforce into the country in order to mitigate the effects of the increasingly aging population in relation to Canada's inadequate replacement rate. Canadians are not having enough children, and therefore immigrants are necessary in order to accommodate this fact. Immigrants also tend to have more children, contributing to Canada’s fertility rate.
The third reason is that immigrants are by and large more entrepreneurial than native Canadians by virtue of their situation. To immigrate means making a calculated risk assessment, and those who immigrate are more likely to start businesses and innovate in the economy.
Lastly, population growth, in this case through immigration, is economically beneficial. It necessarily increases the size of labour and consumers, which in turn motivates and attracts domestic and international investment. Canada is a vast country with an abundance of living space and natural resources. If there is a capacity to expand the economy, it should be taken in order to benefit Canadians.
Contrasting economic liberalism, typical arguments will be provided in opposition to immigration in the same sequence of points provided above:
First, immigration damages the economy in that labour conditions for native Canadians are strained as a result. Wages are suppressed and job opportunities diminished by the abundance of cheap and accessible labour supplied by immigrants, in all sectors. The job market is made non-competitive as a consequence, and the benefactors of immigration are businesses; not the average citizen who is supposed to see the fruits of the economy. Canadians who are underemployed are forced to squander their potential; and those who are unemployed cannot contribute to the economy, and become dependent on social security.
In addition, the aforementioned immigration point system does not expansively target immigrants and their skills according to sectors with high labour demands. Rather the criteria puts a priority on an applicant based on the number of years they’ve worked in any given professional field, rather than the particular type of field. Many economic class immigrants entering Canada are not as skilled as claimed. One could argue that the point system could be revised to accommodate for this deficit, but this would necessarily lead to a reduction of immigration regardless.
The next argument is concerned with how immigration mitigates the dependency load placed on the labour force by the elderly. Though this is true, it is not a solution but rather a remedy. The majority of immigrants are middle aged, and get older just as fast as native Canadians do. Without a higher fertility rate in order to reach replacement, leveling out the dependency ratio and alleviating the load is not possible through immigration. The government’s priority on immigration, as opposed to incentivizing native Canadians to have children, is compromising its political will to solve the issue in totality.
The third liberal argument posits that immigrants are more entrepreneurial. This is doubtful, as many immigrants are forced into starting businesses due to their inability to integrate into the Canadian job market. These immigrants tend to take four to seven years before they start businesses, usually relying on Canada’s social safety net during that period. The entire process has arisen from a structural flaw, and the entrepreneurial demand could be instead filled by native Canadians while cutting out the initial social security costs of new immigrants.
Addressing the fourth rationale, the economic benefits of a larger population does not accommodate for the problems rapid immigration rates pose. With a large influx of migrants to Canada, specifically targeted at Metro Vancouver and the Greater Toronto Area, the real estate bubble is being further inflated. There is limited space for these cities to expand, and rent and housing prices have become unaffordable for Canadians. Some proponents of population growth suggest that the future of immigration to Canada is in locating immigrants to rural communities. The Canadian government is attempting this, but finding that immigrants are largely unwilling to live outside major urban centres.
Deeper analysis reveals further impacts of immigration on the Canadian economy left unanswered by the prevailing liberal and nationalist economic theories. From a critical, particularly ecological, frame:
Population growth in developed countries like Canada would be economically damaging long-term. The harm would come from the overconsumption of finite resources, and increased pollution and carbon emissions as a result. The economic ramifications of climate change in particular would pose significant challenges to economic stability.
From a critical postcolonial angle, there are two sides of the debate. Those in disagreement with immigration, or emmigration, cite human capital flight (brain drain) as a major economic drawback. The emigration of skilled labour and human investment from developing countries to Canada serves to disproportionately benefit Canada, and disadvantage said countries. Alternatively, proponents of immigration suggest that Canada's border restrictions against the free movement of people perpetuates ethnocentric restraints on the disadvantaged and vulnerable – particularly people of colour. Both postcolonial cases go beyond the scope of this article, as it is only concerned with Canada’s economic conditions. That being said, they are interesting contributions to the discussion.
The aforementioned theories have a clear basis of logic, but observing quantitative economic research will reveal evidence about the effects of immigration on the Canadian economy:
Using an economic simulation model called FOCUS, a study from the IZA – Institute of Labour Economics (Dungan, Fang, Gunderson) found that over the course of 10 years the macroeconomic effects of immigration increases would have a noticeably positive impact on the Canadian economy. Real GDP per capita would increase by $6.5 billion, and per capita income would rise by 0.37 percent. Unemployment would not be affected whatsoever, due to the increased demand for goods and services created by immigrants. Productivity across native and immigrant workers would increase as a result of gains in the investment sector in relation to consumption. Government expenditure would be offset by taxes immigrants pay into the system, amounting to a total of $14 billion dollars across all levels of government ($8 billion at the federal level). Despite many of these favourable findings, immigration would have no effect on the Canadian population’s age imbalance.
It is clear that this study provides evidence aligning with the economic liberal case in favour of increased immigration rates. However, the study also suggests that many of its findings stand in contradiction to the majority of research on the topic. Accordingly, in Canada and across other developed countries, immigration tends to have a insignificant, and even marginally negative, impact on domestic labour markets “Four outcomes are utilized: wages, employment, labour force participation and unemployment … Most (58%) of the estimates across the four outcomes are statistically insignificant implying no effect, about 25% show a statistically significant negative impact while about 17% show a statistically significant positive impact on domestic workers”.
Furthermore, a clear trend acknowledged by the study shows recent immigrants are finding it increasingly difficult to integrate into the Canadian economy, with many falling into poverty. One could argue that this is due to structural barriers that are unfavourable for newcomers. It must be questioned whether it is too costly to integrate immigrants into the economy, or if that integration can pay off through enhanced participation. Where immigration does excel, according to this survey of research, is in providing a greater tax base to pay for services, such as pension plans and healthcare. Most immigrants will not make immediate use of these services in proportion to what they provide, entering the country at a prime median age of 32.5 to pay taxes.
Significant research that the IZA study cites, and contrasts, reveals immigration between 1971 to 2001 to have had some negative effects on the Canadian labour market. Aydemir and Borjas found in their simulations that as immigration rose by 10 percent, the wages of native Canadians dropped as much as 3 to 4 percent. Though wages were suppressed, the study found that wage inequality had also narrowed due to the amount of high-skilled migrants immigrating to Canada. Furthermore, high-skilled immigration in particular played a greater role in suppressing wages of high-skilled native workers; with reduction in wages by 7 percent for Canadians with post-graduate degrees. (Exploring further into the history of Canadian wage earning, Dufour and Russell find that as profits shares have risen since the late 1970s, labour share has fallen significantly to an unprecedented low).
In terms of employment, immigrants suffer with unemployment significantly more than native Canadians. In 2016 recent immigrants sat at an unemployment rate of 9.6 percent, compared to more established immigrants (6.8 percent) and native Canadians (5 percent). That being said, immigrants do not have a substantial effect in substituting native Canadians in the job market, but rather act as a complimentary labour force. The effects Immigrants have on the real estate market, however, is decidedly negative; as research finds that wealthy immigrants inflated housing prices by 1.7 – 2.6 percent in neighbourhoods targeted by the now defunct investor immigration program.
Canada’s immigration policy has mixed implications for the Canadian economy. On one hand immigration is broadly beneficial, especially to the government and businesses; with real and noticeable fiscal and productive contributions. On the other, immigrants and native Canadians can find themselves at significant odds in the labour and real estate markets.
Based on the research it would be wise for Canadian government to scale back its large-scale immigration intake in order to provide a break for native Canadians; yet still retain a high enough rate in order to advance the economy overall. Because economic conditions are stable presently, the advent of the current recession may motivate further needs to restrict immigration. In addition, it is clear that immigration will make a negligible long-term impact on Canada’s age imbalance and concurrent dependency load. The impending necessity to increase the national fertility rate may further detract from the demand for immigrants in the labour force.
Based on the research it would be wise for Canadian government to scale back its large-scale immigration intake in order to provide a break for native Canadians; yet still retain a high enough rate in order to advance the economy overall.
With the data taken into consideration, perhaps an appropriate immigration rate for Canada may be within the range of 150,000 – 200,000 migrants per year. This advice, however, does not consider some other factors left unexplored in this article. The ecological impact of immigration was briefly mentioned, but not addressed fully, as it is decidedly more concerned with population growth (including fecundity) rather than immigration specifically. Another worry is the decline of social capital, and the ethnocultural tensions that could emerge as a result of continued large-scale immigration. Concerns of international standing, global citizenship and humanitarian aid also have a significant role to play.
Canada has the capability to help those in need of refuge from persecution, or have a desire to pursue better economic conditions for themselves and their families. Alternatively the country can put the interest of its citizens first, focusing on enriching labour and living conditions for native Canadians. All things considered, this cultural dichotomy of nationalism versus cosmopolitanism may be just as relevant as economic utility in informing Canadian's thoughts on immigration in the future.