GLOBAL ECONOMICS
Patrick Grady
Immigration Should Be Cut to Counter Soaring Unemployment
February 12, 2009
When Immigration Minister Jason Kenney appeared before a Common’s Committee on February 10, he mused that the government might be having some second thoughts about the wisdom of keeping the immigration doors wide open as the economy sinks. But after allowing himself to entertain this heresy, the next day he quickly reaffirmed the government’s target of admitting between 240,000 and 265,000 new permanent residents this year in an interview with CTV.
Since the Minister announced the government's immigration targets last November, the economic situation has gone from bad to worse. Some pessimists have declared that the current recession is likely to be the worst since the Great Depression. Others of more optimistic bent see it as only being on a par with the recessions of the early 1980s or 1990s.
The Government took some small comfort in its January 27th budget from reporting that the consensus of private sector forecasters was that the Canadian economy had entered a recession in the fourth quarter of 2008 that would last three quarters, but that it “would be milder than the last two Canadian recessions and significantly less pronounced than the U.S. recession, which is forecast to be one of the deepest recessions in U.S. post-war history.”
Maybe so, but in early February, Statistics Canada revealed that employment had declined by 129,000 in January, which was greater than any monthly decline during the previous economic downturns of the 1980s and 1990s. Since October when employment peaked, the decrease has been 213,000. The unemployment rate reached 7.2 per cent in January, jumping up a hefty 0.6 percentage points in a single month.
And forecasts are for unemployment to continue its climb. The private sector forecasters surveyed in the budget saw the unemployment rate rising from 6.1 per cent in 2008, to 7.5 per cent in 2009, and 7.7 per cent in 2010. But even this is probably overly rosy. A more recent February 4 forecast by the TD Bank Economics Department called for unemployment to average 8.2 per cent in 2009 and 8.8 per cent in 2010. And unless there is a very strong recovery, unemployment rates could remain stuck at that level or even creep up as unemployment tends to lag the cycle.
These unemployment forecasts provide an indication of the likely bleak state of Canada’s national labour market. The situation will be even gloomier for immigrants, particularly the most recently arrived, and in areas like Toronto, Montreal and Vancouver where they tend to concentrate.
The unemployment rate in 2007 for immigrants 25 to 54 years old who were in Canada less than 5 years was 11.4 per cent, and for immigrants in Canada for 5 to 10 years 7.3 per cent (Table 1). This was significantly higher than the 4.6 per cent unemployment rate for the same age group born in Canada and also higher than the national average rate of 6 per cent.
As a result of the contraction of the manufacturing sector and the continued high inflow of immigrants, there has been a deterioration in the relative performance of the Toronto labour market. The unemployment rate in Toronto in 2008 was 6.9 per cent, 0.4 percentage points higher than the Ontario average of 6.5 per cent. And the Ontario rate was in turn higher than the 6.1 per cent national average. This is quite a reversal of fortunes for a city and province whose strong labour market was once the envy of the country.
Based on the relationship between unemployment rates for immigrants and the national average, the unemployment rate for very recent immigrants could reach 17 per cent if the national average were to rise to 9 per cent, and the unemployment rate for recent immigrants could touch 11 per cent. But it could be much worse than this as new immigrants often find themselves at the end of the employment queue because of their lack of Canadian experience and education and their weak language skills. And initial problems in becoming integrated into the labour market can easily turn into a chronic problem of marginal labour force attachment and low earned income.
If the overall unemployment rate rises to the extent anticipated and if immigrants are hit disproportionately as expected and require substantial government support, it would be surprising if the government did not eventually revert to past practice when hit by a recession and cut back on immigration. Ironically, past experience shows that immigration levels are never reduced going into the recession, when they should be, but only in the following years after the recovery is well underway. After the 1981-82 recession, immigration was pared by more than a quarter and kept low from 1983 to 1986, and following the recession of the early 1990s, immigration was curtailed from 1994 to 2000. Even though the Minister may not want to lower immigration targets now for obvious political reasons, he will come under increasing pressure to do so as the labour market deteriorates. And if a key objective of immigration policy is to meet the needs of the labour market, he clearly should lower the target. And the sooner the better.
| 2006 | 2007 | |
| Total Immigrants | 6.5 | 6.6 |
| Very Recent Immigrants | 11.5 | 11.4 |
| Recent Immigrants | 7.3 | 7.3 |
| Established Immigrants | 5.0 | 5.3 |
| Born in Canada | 4.9 | 4.6 |
| National Average (Age 15+) | 6.3 | 6.0 |
Source: Statistics Canada, Catalogue no. 71-606-X2008003, May 2008. |