GLOBAL ECONOMICS
Patrick Grady
June 11, 2012
Toward Improving Canada’s Skilled Immigration Policy: An Evaluation Approach
By Charles M. Beach, Alan G. Green and Christopher Worswick
Toronto, Ontario, C.D. Howe Institute Policy Study 45
Pp. xii, 152, $21.95.
Prepared by very three distinguished Canadian economists – Charles M. Beach (Queen’s University), Alan G. Green (also of Queen’s but sadly recently deceased) and Christopher Worswick (Carleton University), and published by the C.D. Howe Institute, this study has received much critical acclaim. After being shortlisted for the Donner Prize, it went on to win the prestigious Purvis Prize. The Purvis Prize Committee observed that "While there is rarely a direct relationship between policy research and political decisions, it seems clear that the Beach, Green and Worswick research has had an influence on the government decision to recast immigration rules and processes."
Yet from the point of view of an economist concerned about the poor performance of recent immigrants and the need for immigration policy reform, the study is problematic.
Granted, it certainly does provide a very useful overview of immigration policy and history. And indeed it offers many very sensible suggestions for reforming immigration policy. These include: increasing the share of economic class immigrants; increasing weights on language proficiency; establishing ex ante evaluation of immigrants’ credentials; adopting an asymmetric weight system for age (with declining weights after a certain age to give preference to younger applicants); reallocating points away from work experience and towards younger age; putting more weight on blue-collar skills (skilled trades); giving priority to arranged employment; reviewing the skills of applicants under Provincial Nominee Programs to make sure that too many low skilled applicants are not being allowed in (as the authors suspect); and reducing substantially the number of temporary foreign workers, especially low-skilled, which “inhibit… the domestic labour market form giving Canadian workers incentives to fill shortages.” The Government’s adoption of some of these suggestions provides the basis for the Purvis Committee’s observation quoted above.
On the other hand, much of the content of the study is based on controversial and far from settled arguments. It is based on the premise that Canada faces labour and skills shortages because of the aging of the baby boomers and increased demand for resources that will have to be met through increased immigration. They thus argue that the problems with the Federal Skilled Worker Program should be met by modifying the program rather than scaling it back.
Most of the study is devoted to presenting and using an analytical tool that is cobbled together from estimates in a variety of studies to estimate the effects of immigration policy levers on the skills characteristics and earnings of new arrivals. An inevitable problem with such a tool is that it turns out to be something of a hodge-podge that is really not very appropriate for the task at hand. And it is not just that it does not incorporate general equilibrium feedbacks and provide estimates of net economic benefits to the economy as noted by the authors. It is more basic than that and stems from problems with the way the methodology was applied.
The main earnings variable examined by the authors is entry earnings in the first full calendar year after landing. This sheds very little information on the earnings pattern of immigrants over time as they are gradually integrated to a greater or lesser extent in the Canadian labour market. It is this longer term performance which indicates whether immigrants are successful or not and that is most relevant for immigration policy. Moreover, the underlying regression analysis performed by the authors, on which the parameter estimates are based, relies on Canadian landings data for the years 1980 to 2001. The problem with this is that it includes a substantial proportion of immigrants from the 1980s before the recent deterioration in immigrant performance and excludes a large number of immigrants in the 2000s whose performance was even worse (at least judging from the 2006 census data). Finally, the authors used a linear specification in their equations. It is hard to believe that the performance of immigrants would not improve substantially as numbers declined to low levels and that a doubling would not come at a high cost in terms of poorer performance.
For these reasons, it is not surprising that the empirical estimates in the study are not very plausible. For instance, they suggest that increasing the number of immigrants admitted by 100, 000 would only cause a $1,576 decrease in entry earnings of men and $1,098 for women (p.98). More strikingly, they estimate that the 25-percentage-point increase in the share of the economic class that occurred between the mid-1980s and 2000 raised the entry earnings of men by $8,624 and women by $5,898 and that the mid-1990s revisions to policy on skilled immigration increased the earnings of men by $7,589 and women by $5,191 (p.99). Yet over this same period in spite of the large estimated positive impact of these two immigration policy measures, median earnings of recent immigrants actually decreased substantially over a period when there was no equivalent decline in the earnings of the native born(Table 1). How much confidence should this give us in the ability of the analytical tool used by the authors to predict the impact of the major changes in immigration policy and increases in immigration that they propose?
As noted by the Purvis Committee, many of the specific policy recommendations made in this study have been reflected in the recent immigration policy changes made by the Government which have put more emphasis on occupational demand, language skills, and arranged employment. An important exception is the authors’ recommendation that the Government should clear up the immigration backlog and processing delays by adding more resources to reduce the massive backlog of such applicants (p.104). Instead, the Government has quite sensibly decided to ignore this recommendation and to eliminate the backlog by legislation and to give itself more authority in processing applications. To do otherwise would have been to precipitate a further decline in immigrant performance by bringing in applicants who were accepted under previous selection procedures that were found inadequate and who had been allowed to grow older and less suitable in the queue.
While the authors claim that this study “contributes to moving skilled immigration policy to a more objective evidence-based approach…(p.95), there is a real danger that it will persuade many to accept its unfounded conclusions about the need for more immigrants and to use its dubious empirical estimates to justify increasing the number of immigrants. It will thus give an veneer of academic respectability to those such as the Globe and Mail that are calling for doubling economic class immigration and raising overall levels to 400,000 by 2016. And it flies in the face of mounting empirical evidence that that the more immigrants Canada admits the worse they do and the higher the fiscal cost to Canadians. That is the real evidence base that should guide immigration policy.
| Recent immigrant earners | ||||
| With a University Degree |
With no University Degree |
|||
| males | females | males | females | |
| 1980 | 48,541 | 24,317 | 36,467 | 18,548 |
| 1990 | 38,351 | 25,959 | 27,301 | 17,931 |
| 2000 | 35,816 | 22,511 | 25,951 | 16,794 |
| 2005 | 30,332 | 18,969 | 24,470 | 14,233 |
Note:'Recent immigrants' are those who arrived during the five-year period ending one year before the census year. They do not include those who arrived in the census year because many of these would not have had the opportunity to work for a full year. | ||||
Source:Statistics Canada (2008). Earnings and Incomes of Canadians over the Past Quarter Century, 2006 Census. Catalogue no 97-563-x, p.22. | ||||