GLOBAL ECONOMICS
IMMIGRATION PAPERS
Patrick Grady
What the Immigration Minister should have known
December 5, 2005
Two months ago Immigration Minister Joe Volpe announced his plans to dramatically increase immigration by up to 100,000 per year to 320,000. While the target for next year has, in the interim, only been boosted to 255,000, the Liberals apparently remain committed to their 1993 Red Book promise to increase immigration to 1 per cent of the Canadian population. As another step in this direction, Citizenship and Immigration Canada has already been instructed to prepare a plan to spend $2 billion to reduce the backlog of 700,000 applicants who have applied but have not yet been accepted, which is, of course, music to the ears of the many immigrant voters eager to bring their extended families to Canada.
The wisdom on economic grounds of the Government’s proposed higher immigration strategy is not something Mr. Volpe wants to debate, especially during an election campaign. He recently curtly dismissed as “anti-immigrant” an excellent economic study by Herbert Grubel of the Fraser Institute that raised serious questions about the levels and composition of immigration.1 For Mr. Volpe, the economic benefits of ever increasing immigration levels have become a matter of faith, and not analysis.
The Immigration Minister’s claim that the incomes of new immigrants catch up to those of native Canadians after five years testifies to his deplorable ignorance of the real facts of immigration as revealed by a growing stream of studies based on the 2001 Census coming out of Statistics Canada. Their key finding is the dramatic deterioration in the economic performance of immigrants in recent years as their source countries have shifted from industrialized countries to the Third World. What exactly do these studies show?
A convenient survey of the studies is provided by Garnett Picot and Arthur Sweetman.2. It reports 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, not the five years claimed by the Minister.
An appreciation of the relative performance of new immigrants in 2001 from different areas of the world can be gleaned from the information contained in a tabulation posted on the Statistics Canada website (Chart 1). It shows that the members of most recent cohort that did worse were: those from the Caribbean and Bermuda who had only 75 per cent of the earnings of other members of the cohort; those from South-East Asia who had only 78 per cent of the earnings; and those from Central and South America who had 87 per cent. In contrast, the members of the recent cohort who did best were those from the United States with earnings 112 per cent higher and those from the United Kingdom with earnings 45 per cent greater.
Even more troubling because of the large numbers of new immigrants who are not able to work full-year, full-time is the increase in the low-income rate among new immigrants who have been in the country five years or less. (This is the proportion of a group falling below Statistics Canada’s Low-Income Cutoff, a generally used measure of poverty.) It rose to 35.8 per cent in 2000 from 24.6 per cent in 1980. This reflects the relatively high numbers of new immigrants who work part time, or are not earning money because they are unemployed or not in the labour force as well as the fact that new immigrants earn less when employed full-year, full-time. In contrast, the low-income rate among non-immigrants actually fell to 14.3 per cent from 17.2 per cent over this same period. The low-income rate for new immigrants in 2000 was thus a striking 2.5 times that of non-immigrants. The rising low-income rate among immigrants accounts for more than the total increase in low-income rate in Toronto, Vancouver and Montreal.
According to Statistics Canada’s tabulations,which are shown on Table 1, the low-income rates are highest for the new immigrants from the non-traditional source countries. For example, the income of 54.3 per cent of economic families from West Central Asia and the Middle East, 50.1 per cent from Eastern Asia, and 48.8 per cent from Africa fall below the low-income cutoff, whereas the income of only 23.2 per cent of new immigrants from the United States, 18 per cent from the United Kingdom, and 26 per cent from the rest of Northern and Western Europe were below the low-income cutoff. Growing urban poverty in Canada can thus be attributed to the large numbers of Third World immigrants being admitted who are living below the poverty line. If immigration stays at a very high level, it will tend to increase poverty and income inequality.
| Before | 1961- | 1971- | 1981- | 1991- | 1991- | 1996- | |||
| Total | 1961 | 1970 | 1980 | 1990 | 2001 | 1995 | 2001 | ||
| All Immigrants | 19.1 | 6.8 | 8.2 | 10.4 | 17.2 | 33.6 | 25.2 | 41.2 | |
| United States | 10.0 | 4.2 | 5.8 | 7.5 | 9.7 | 19.2 | 13.3 | 23.2 | |
| Central and South America | 20.6 | 6.5 | 7.6 | 11.7 | 19 | 29.2 | 23.8 | 36.1 | |
| Caribbean and Bermuda | 22.2 | 7.2 | 9.0 | 15.7 | 25.9 | 33.2 | 31.3 | 36.1 | |
| Europe | 10.9 | 6.9 | 8.4 | 8.2 | 10.5 | 24.7 | 14.5 | 33.7 | |
| United Kingdom | 5.5 | 4.2 | 5.2 | 5.0 | 5.3 | 13.6 | 9.6 | 18.0 | |
| Other Northern and Western Europe | 8.3 | 5.4 | 7 | 7.2 | 9.2 | 21.5 | 14.9 | 26.1 | |
| Eastern Europe | 15.4 | 6.1 | 7.9 | 10.7 | 12 | 25.5 | 15.1 | 34.5 | |
| Southern Europe | 13.8 | 11.1 | 10.8 | 11.1 | 13.8 | 30 | 15.6 | 43.5 | |
| Africa | 28.1 | 7.1 | 7.2 | 10 | 20.7 | 42.6 | 34.8 | 48.8 | |
| Asia | 28.1 | 8.7 | 8.3 | 11.3 | 19.4 | 36.8 | 27.8 | 44.6 | |
| West Central Asia and the Middle East | 26.9 | 8.7 | 8.3 | 11.3 | 19.4 | 36.8 | 27.8 | 44.6 | |
| Eastern Asia | 30.6 | 9.8 | 8.9 | 12.4 | 19.2 | 41.4 | 31.4 | 50.1 | |
| South-East Asia | 17.0 | 4.1 | 6.3 | 10.1 | 17.5 | 21.4 | 18 | 26.4 | |
| Southern Asia | 25.0 | 5.4 | 5.9 | 9.4 | 17.1 | 33.6 | 24.8 | 40.0 | |
| Oceania and Other | 13.4 | 5.2 | 6.5 | 11.6 | 15.4 | 18.8 | 18.1 | 19.7 | |
| Source: Statistics Canada, Cat. No. 97F0009XCB2001043. |
Picot and Sweetman attribute the decline in entry earnings and increasing low-income rates to: the changing characteristics of immigrants, including country of origin, language, and education, which appears to have accounted for about a third of the increase in the earnings gap; the decreasing returns to foreign work experience, which accounts for another third; and the decline in the labour market outcome of all new labour force entrants including immigrants. They also discuss a possible reduction in the return on education and quality differences in education.
According to Hou Feng and Garnett Picot in an article published in Statistics Canada’s Canadian Social Trends (spring 2004),3. immigrants have been increasingly settling in enclaves in major cities like Toronto and Vancouver. The number of census regions where immigrants from certain ethnic backgrounds make up more than 30 per cent of the population has gone up from 6 in 1981 to 254 in 2001. While the authors conclude in a subsequent paper that this has no “significant labour market effects,”4 in my mind, it raises two important questions. Will this growing ghettoization continue? And if so, will it impede assimilation and contribute to a further deterioration in the relative economic performance of immigrants and their growing poverty rates?
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 44.5. 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 this deterioration have been if the economy had slid into a recession?
Immigration can not prevent the aging of the population or solve the related issues because of the simple fact that immigrants on average are not that much younger than those already living in Canada. A study done for Citizenship and Immigration Canada in 1998 by Roderic Beaujot demonstrated that immigration has only a small impact on age structure of the population.6 It presented population projections over a 50-year period that showed that the median age of the population was only reduced by less than 2 years assuming 200,000 per year immigration compared to an assumption of no immigration at all. Another more recent study by Beaujot concluded that immigration from 1951 to 1981 had only slowed down the aging of the population by a meager half a year, which was an insignificant amount in relation to the increase in the average age of Canadians over the same period.7 In spite of the existence of solid evidence such as this, why do so many people including the Minister stubbornly persist in justifying immigration in terms of countering the declining birth rate and the aging population?
Also, and even more fundamentally, if new immigrants perform so poorly relative to native Canadians, how are they going to be able to raise Canadian productivity and help to support an aging population? In a welfare state such as Canada with progressive taxation and generous social programs, it is inevitable that immigrants earning substantially less than average become net claimants on government fiscal resources rather than net contributors. Unfortunately, no detailed studies have yet been published to estimate the fiscal costs of recent cohorts of immigrants using the 2001 Census data and contemporaneous administrative and tax files. However, in the same study that Minister Volpe so categorically rejected, Herbert Grubel estimated crudely, but conservatively, that the cohort of immigrants who entered the country in 1990 received net fiscal transfers of $6,294 each or $1.36 billion in total. And applying this to the 2.9 million immigrants that entered the country between 1990 and 2003, he estimated the total net fiscal transfers to recent immigrants would be $18.3 billion per year.8
While politicians of all stripes will no doubt cringe at the thought of a discussion of the politically charged issue of the pros and cons of higher immigration during the election, could there be a better time? Immigration has very substantial implications for the living standards of Canadians that need to be addressed and the sooner, the better. For starters, the Liberals need to answer one very important question. Why they are so sure that the economic performance of new immigrants will not remain poor or even deteriorate further and transform the expected benefits of immigration into unwanted costs? And the other parties also need to make their positions on immigration clear to help voters to decide if Canada really needs more immigration on economic grounds. Oh, one final thing, it would be nice to have an Immigration Minister who keeps abreast of the research so that immigration policy can be guided by analysis and not ideology.
1. Herbert Grubel, "Immigration and the Welfare State in Canada: Growing Conflicts, Constructive Solutions," Fraser Institute Public Policy Sources, Number 84, September 2005.
2. Garnett Picot and Arthur Sweetman, “The Deteriorating Economic Welfare of Immigrants and Possible Causes: Update 2005,” Statistics Canada, Catalogue no. 11F0019MIE2005262.
3. Published in Charles M. Beach, Alan G. Green and Jeffrey G. Reitz (eds.) Canadian Immigration Policy for the 21st Century(McGill-Queen’s University Press, 2003).
4. Feng Hou and Garnett Picot, "Visible Minority Neighbourhoods in Toronto, Montréal and Vancouver," Canadian Social Trends, No. 72, spring 2004, pp.8-13.
5. Statistics Canada, "2001 Census: analysis Series: The changing profile of Canada's labour force,"Statistics Canada, Catalogue no. 96F0030XIE2001009.
6. Roderic Beaujot, Immigration and Canadian Demographics: State of the Research, May 26, 1998. May 26, 1998
7. Also published in Canadian Immigration Policy for the 21st Century.
8. Herbert Grubel, op. cit., p.19.