GLOBAL ECONOMICS
The most important fact we all need to recognize is that Canada’s immigration policy is badly broken and needs to be fixed. The main stream of the economic class is supposed to be designed to bring in the highly skilled workers that are needed to fill occupational gaps and meet labour market needs that we are focusing on today. But instead it is bringing in a lots of people who are performing very poorly in the labour market – so poorly in fact that they are adding to the growing ranks of our urban poor. And sure some very highly skilled immigrants are being allowed in too, but only after they have managed to work their way through enormous piles of red tape and been forced to wait for inordinate amounts of time. That’s why employers who really need key skilled employees such as those interviewed in Vancouver’s biotechnology sector by Katherine Richardson (2006) take advantage of the quicker and more flexible Temporary Worker Program or NAFTA TN visa.
We can talk all day here about Canada’s immigration policy using buzz words like “skills requirements, and the global skills competition in order to support a more innovative knowledge-based economy.” But this is to ignore the fundamental fact that immigration fits to a T the phenomenon described by Mancur Olson in his classic The Logic of Collective Action (Olson, 1971). Immigration policy has been captured by a distributional coalition made of politicians and immigrant groups who are able to gain large economic benefits for themselves at the expense of the more diffuse losses of the general public. Needless to say, this undermines Canadian economic performance and per capita growth even if noone is yet willing to say it.
Anyone who doubts that immigration policy has been captured by immigrants who want to be able to bring in more of their extended families to share in Canada’s prosperity and social programs need only get involved in party politics at the constituency level. It’s only the immigrant groups who can mobilize busloads of instant members to vote at candidate selection meetings and can turn out the volunteers needed to win a campaign. Is it any wonder that MPs, particularly from urban areas, spend most of their time dealing with their constituents’ immigration issues rather than weighty affairs of state? And why do you think that no one including even our present Prime Minister is willing to consider that Canada might be bringing in too many of the wrong sorts of immigrants? For this reason even some of the modest changes we’ve been talking about today to encourage the immigration of more skilled workers are likely to encounter substantial political resistance that make them impossible to implement.
Let me remind you of some of the key facts about the performance of high skilled immigrants.
Focusing more broadly on all classes of immigrants, Garnett Picot and Arthur Sweetman (2005) summarize growing stream of studies based on the 2001 Census coming out of Statistics Canada. They report that the cohort that came to Canada in the early 1990s and that were aged 16 to 64 and worked full-time and full-year only earned roughly 70 per cent of comparable Canadians after 6 to 10 years in Canada . And the cohort that came to Canada in the late 1990s only earned around 60 per cent of comparable Canadians in 2001. The last immigrant cohort to eliminate the earnings gap with other Canadians is the one that entered in the late 1970s and then it was only after 16 to 20 years.
And additional studies from Statistics Canada, one of which was previewed at the CEA meetings earlier this month giving us a preview of what to expect from the 2006 census, will no doubt soon be forthcoming confirming the continued deterioration in the labour market performance of recent cohorts of immigrants after 2000.
Analysis series released by Statistics Canada for the 2001 Census show the underlying deterioration in the labour market performance of recent immigrants aged 25 to 44.Their employment rate has fallen to 65.8 per cent in 2001 from 75.7 per cent in 1981, while that of non-immigrants has risen to 81.8 per cent from 74.6 per cent, driven by the burgeoning labour force participation of women. Correspondingly, the unemployment rate for new immigrants has doubled to 12.1 per cent, while that of non-immigrants has remained roughly stable around 6.4 per cent.
A worrisome question that can’t be ignored is: how much worse would the performance of new immigrants have been if the economy had slid into a recession as it inevitably will?
Some reasonable sounding explanations have been advanced for the poor performance of Canada’s most highly educated immigrant cohort. Summarized the results of other Census studies, Picot and Sweetman (2005) blamed:
They also discussed a possible reduction in the return on education and quality differences in education.
More evidence has been provided by Ferrer, Green and Ridell (2004) who attribute much of earnings gap to low literacy. Further innovative work by Bonikowska, Green and Riddell (2006) using the International Adult Literacy Survey, which was presented this year at the CEA meetings, identifies a 45-percentage point differences in average skill level test scores between immigrants with no Canadian education and the native born. The differences in test scores explain half of the earnings gap for university educated immigrants. Using the same survey, Coulombe and Tremblay (2005) report skills learning gap of 3 years for immigrants and 2.1 even for those whose first was language English or French. That’s enough to make a university graduate with a pass degree equivalent to a high school graduate.
The disconnect between education and skills for many immigrants from Third World countries seems to be a definite factor explaining the poorer earnings performance. An obvious source of this discrepancy identified by Schaafsma, 2004 is the lower quality of the education in these countries. That this might be the case had earlier been suggested in studies such as that by Schaafsma and Sweetman (2001) that showed that immigrants with Canadian education perform as well as Canadian born.
The relatively higher skills level of those with some Canadian education is also important. This tells us something about the quality of education in many of the countries where immigrants receive their education. The ranking compiled by the Institute of Higher Education at the Shanghai Jiao Tong University sheds some light on this as was also noted earlier today by Serge Coulombe. Only one university from outside the industrialized world is on the list of the top-100 universities. The State University of Moscow. In contrast, Canada has 4. And there are only 16 universities from the Third World among the top-500, whereas Canada has 23. And 7 of the 16 are from China where the ranking was done.
We need to know how many Third World immigrants actually attended any of these elite institutions in their countries or abroad for that matter since that’s where real highly skilled knowledge workers would have to come from. We already know that most Canadian students graduate from the elite Canadian universities since in effect almost all the larger Canadian universities are classified as elite. And the same applies to immigrants who get their university education after landing in Canada, which, by the way, might explain whey they tend to do as well as native born Canadians.
While the CIC acknowledged the general decline in the economic performance of recent immigrants in its 2005 annual report to Parliament, it countered that “changes made to the skilled worker selection grid will have an impact on the overall economic performance of skilled worker immigrants once larger numbers of immigrants selected under these criteria begin to arrive and establish themselves in Canada.” About this I’m very skeptical.
If you look at the statistics on the recent numbers of immigrants by country, you’ll see that CIC routinely approves around the same number of immigrants more or less from each country each year. This shouldn’t be surprising. CIC offices have been set up in Embassies and Consulates around the world, and as long as their budgets are there, they’ll continue to crank through the same number of immigrants each year. There may be some difference in the split between economic and family class, but the applications processed and approved will be relatively stable.
Moreover, there’s not yet any evidence that the new points grid is working any miracles yet.
And if you take a look at the new points grid, which operationalizes the six factors in human capital approach to assessing immigrants, you can see why it’s unlikely to solve the problem.
Reflecting a downgrading of occupational demand and an upgrading of education, the points for education have been increased to 25 and the points for specific vocational preparation and occupational demand dropped. However, even though the points for education have been increased, the difference between a Bachelor’s and a Master’s or Ph.D. is only 3 points and most importantly no adjustments are made for the quality of the institution. Obscure Third World university degrees are worth as much as Harvard, Oxford, or leading Canadian universities. Unlike in Australia, no extra points are given for a domestic degree. It’s not clear to what extent educational credentials are verified. If Canadian universities can do a good job evaluating the educational credentials of their overseas applicants, it’s hard to understand why CIC can’t do the same. Also there are no distinctions in points awarded on the basis of field of study, which is necessary to meet the skill needs of the Canadian labour market.
This system reportedly produces some real anomalies where what immigrants who might be deemed desirable would be turned away. For instance, a new Ph.D. from a Canadian university wouldn’t have the required points without work experience, and neither would a German journeyman machinist who had just completed what is probably the world’s most rigorous apprentice program.
In order for CIC to do a proper job of assessing economic class immigrants applications and selecting those most likely to succeed in the Canadian labour market, the total number of economic class immigrants needs to be reduced. Australia is able to do a better job of selecting immigrants as judged by their economic performance at least in part because of their relatively lower number of immigrants accepted. Permanent settlers arriving in Australia, excluding those from New Zealand, were only about a quarter of the level in Canada in relation to the labour force (Richardson and Lester, 2004, p.11).
It is also strange how in this era of gender neutrality that the system only assesses the skills of the Principal Applicant who in most cases is the man. It would be more appropriate to assess both partners, particularly since CIC insists on counting the whole family unit as economic class immigrants in all their statistical reports. Nowadays the expectation is that both partners will work and, of course, as everyone knows, marriages don’t necessarily last forever anymore. In contrast, many woman from more traditional societies are less likely to participate in the labour force and don’t have the language and educational skills to succeed.
Foreign students are a promising source of skilled immigrants that we should take better advantage for the reasons stated today by Don DeVoretz (2006) and John McHale (2006). The higher education meets Canadian quality standards and has been fully recognized in Canadian labour markets as has been confirmed in a number of studies. The students have also had an opportunity to develop their language skills and to adapt to Canada. There is also a reasonably large stock of foreign students enrolled in Canadian universities on which to draw. In 2001/02 they numbered 52,600, of whom 24,000 were graduate students. The recent initiatives to make it easier for students to work off-campus while pursuing their education and to remain in Canada to work for a limited period of time under agreements with some provinces are steps in the right direction.
The Temporary Worker Program has its problems, even if it does seem to be working well for some industries like biotechnology (Richardson, 2006). In addition to the exotic dancer scandal that brought down an Immigration Minister and some questions about the nanny program, there have been complaints from B.C. reported in the media that in the red-hot construction industry Service Canada has been putting barriers in the way of recruiting temporary foreign workers because of resistance from unions to competition from foreign labour (O’Neill, 2006).
The arrest last week of the alleged terrorists in Toronto, not to speak of any possible future terrorist attacks, may have implications for immigration that are not yet apparent. Indeed, for the past week Canadian have been preoccupied with the news coverage and even the Americans have taken note.
The shocking allegations concerning the Toronto 17 combined with the admission by CSIS’s Deputy Director of Operations that CSIS was only able to conduct a security screening on a small proportion of immigrants could very well cause the Canadian public to question the prudence of the Government’s policy of continued high immigration.
And any resulting cutback in immigration would most likely affect the economic class of immigrants most severely as the family class is most politically sensitive and has already been reduced substantially from the levels of the early 1990s and the refugee class is relatively small. This would it more difficult to use immigration as a source of skilled workers unless the economic class immigration program were to be made much more selective.
There are also potential implications of the arrest for flows of skilled labour to the United States, which have not yet become clear. Anyone who has heard U.S. Congressman King, the Chairman of the House Homeland Security Committee blame liberal Canadian immigration policies or watched the news report yesterday on the hearings on the Western Hemisphere Travel Initiative of the House Judiciary Subcommittee on Immigration, Border Security, and Claims knows that important Americans lawmakers are worried about terrorist threats coming from Canada. Such concerns could easily lead to heightened security screening and red tape for skilled Canadians desiring to emigrate to the U.S. and could even ultimately end up reducing the numbers able to obtain green cards, H1-B and TN visas. At a minimum, I'm sorry to say that the environment certainly doesn’t look very hospitable for Michel Hart’s (2004) proposals to enhance labour mobility between Canada and the United States.
More generally, any tightening of scrutiny at the border and the scheduled phased introduction of passport requirements for Canada-U.S. travel, which looks much more likely after last week, could make Canada a less advantageous location for investment and could significantly reduce the demand and need for skilled labour in Canada.
In conclusion, it must be recognized that immigration can not be the main source of increased demand for skilled workers in Canada as John Helliwell argued in emphasizing the primacy of the “Build” option for increasing the supply of skilled labour in Canada (Helliwell, 2005). In 2004, 16,539 were admitted with a Bachelor’s degree, 3,022 with a Master’s, and 669 with a Doctorate. This compares to a Canada-wide total of 144,000 students receiving a Bachelor’s degree, 29,000 a Master’s degree, and 3,900 Doctorates. Thus, immigrants only add 10 to 17 per cent to the supply of highly educated workers. And, of course, judging on past experience, the increment to supply would not be of comparable quality.
Consequently, Canadian governments needs to spend more money on educating and training Canadians for highly skilled jobs and should not rely on attracting skilled immigrants to meet Canada’s incremental labour needs. And remember that the skilled immigrants don’t necessarily come cheap. While it’s not necessary to pay for their education, there is the resulting subsequent family class immigration of their parents and grandparents that could eventually turn out to be very costly in terms of social and welfare program costs.
Finally, take heed that the Canadian public is eventually going to catch on that they have been sold a bill of goods about the great economic benefits of a high level of immigration if economic performance continues to deteriorate. They will figure out that immigration at such a high level really has nothing to do with providing economic benefits to Canadians and offsetting the effect of an ageing population. And once they do, it’s a short leap to recognizing that immigration is really intended to benefit the economic and political interests of certain Canadian elites and immigrant communities, and, of course, the immigrants themselves who in spite of living below the poverty line in Canada are usually much better off e conomically than they were in their home countries. This could lead to a real backlash. It would be much better to fix immigration now in a way that maximizes our economic benefits. Canadians need an immigration policy that is based on their economic interests and not that mainly furthers humanitarian and multicultural objectives.
* These are the notes for my presentation on the panel. Because of the 15-minute time limit, I was unable to coverall the material, but managaged to get through most of it at least in passing. In any event, it was what I would have said if I had had enough time.
Bonikowska, Aneta, David A. Green and W. Craig Riddell (2006) “Cognitive Skills and Immigrant Earnings,” paper presented at Canadian Economics Association Annual Meeting in Montreal, May 26, 2006.
Hart, Michael (2004) “Is there Scope for Enhancing the Mobility of Labour Between Canada and the United States?” Working Paper 2004 D-04.
Helliwell, John (2005) “Highly Skilled Workers: Build, Share, or Buy?” Working Paper 2005 D-13.
Olson, Mancur (1971) The Logic of Collective Action, (Cambridge, Mass.: Revised edition, Harvard University Press).
O’Neill, Terry (2006) “Working the Right Channels,” The Western Standard, June 5, pp.24-25.
Picot, Garnett and Arthur Sweetman (2005) “The Deteriorating Economic Welfare of Immigrants and Possible Causes: Update 2005,” Statistics Canada, Catalogue no. 11F0019MIE2005262.
Richardson, Kathrine (2006) “The International Mobility of the Highly Skilled: A Case Study of the Biotechnology Sector in Vancouver, B.C.,” Working Paper 2006 D-15.
Richardson, Sue and Laurence Lester (2004) “A Comparison of Australian and Canadian Immigration Policies and Labour Market Outcomes,” A report prepared for the Department of Immigration and Multicultural and Aboriginal Affairs.
Schaafsma, Joseph and Arthur Sweetman (2001) “Immigrant Earnings: Age at Immigration Matters,” Canadian Journal of Economics, 34(4), pp.1066-99.
Sweetman, Arthur (2004) “Immigrant Source Country Quality and Labour Market Outcomes,” Statistics Canada, Catalogue no. 11F0019MIE2004234.