http://webcache.googleusercontent.com/search?q=cache:aN8TXPH-2gAJ:www.sfu.ca/~grubel/_private/The%2520Fiscal%2520Burden%2520of%2520Recent%2520Canadian%2520Immigrants.Quote:
This immigrant selection program is renowned internationally5 for its alleged success in bringing into Canada only persons that have a high probability of finding gainful employment.
However, a close examination of the actual performance of Canada’s immigrant selection process shows a different picture. Heads of households meeting the economic selection criteria tend to be accompanied by their spouses and under-age children. After settling in Canada, many of the economic immigrants arrange for their parents and grandparents to join them under the so-called family reunification program.
As a result, in 2006 only 17.6 percent of immigrants had been selected under the economic success criteria, the rest were family members or refugees that did not pass the test.6
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Important for the analysis below is the fact that these family members of the economic immigrants tend to have only limited labour force attachment. Most spouses and all under-age children have none. Parents and grandparents have low language proficiency, education and relevant work experience and often are over age for normal employment, which means that only few of them end up working and paying taxes.
A second aspect of Canadian immigration missed by the basic economic model is that the present selection process places heavy emphasis on the immigrants’ educational attainment, giving maximum weight to those who have completed four years of university study. This emphasis on education was introduced in the expectation that it would allow the immigrants to adapt readily to labour market demands that in recent decades have involved rapidly changing skill requirements.
Unfortunately, the emphasis on educational attainment has had some detrimental effects on the incomes of highly educated Canadians, as Ayedmir-Borjas (2006) have shown. According to this study, the real level of wages earned by resident Canadians with post-graduate degrees has fallen by seven percent over the period 1990-2006 when the real incomes of persons with less schooling rose significantly.
Third, of particular importance for the analysis below, recent immigrants have had a poor earnings record on average. According to 2001 census data compiled by Statistics Canada, immigrants who arrived in 1990 had average earnings lower than those of resident Canadians of the same age, gender and level of educational attainment: 65 percent during the first year, 77 percent five years and 80 percent ten years after their arrival. Compilations based on later data suggest that there is no further improvement in this relationship after 10 years.
These data were supplemented recently by a report issued by Statistics Canada (2008), which compares median earnings of all recent immigrant earners in the core working age (age group 25 to 54) to those of their Canadian-born counterparts, using information gathered from censuses over the period 1980 - 2006. The main findings relevant to this study are:
“During the past quarter century, the earnings gap…widened significantly. In 1980, recent immigrant men who had some employment income earned 85 cents for each dollar received by Canadian-born men. By 2005, the ratio had dropped to 63 cents. The corresponding numbers for recent immigrant women were 85 cents and 56 cents, respectively. The gap widened even though the educational attainment of recent immigrant earners rose much faster than that of their Canadian-born counterparts, during this 25-year period.” (page 21) .7
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In 1990, 216,396 immigrants arrived in Canada. The cost of transfers to this cohort in 2000 was $1.36 billion in that year.
Assuming that this cohort lives for 45 years, the total cost to Canadians for that cohort comes to $62.1 billion.
In the year 2002 there were 2.9 immigrants who had arrived in the preceding 12 years. The transfers to that group of immigrants in 2002 were $18.3 billion.
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It is important to note that these costs do not constitute a social investment for Canada that eventually will be repaid by the immigrants and their offspring, even if in later years on average they earn as much as other Canadians.
At that point in time, their impact will be as suggested by basic economic theory of wages: Their pay will equal the value of their contribution to the nation’s output and when they spend their pay, they simply claim what they have produced, leaving unchanged the income of other Canadians.
In addition, they will pay taxes on average equal to the value of the social benefits they consume, again leaving the average other Canadian without net gains.
In conclusion of this section, it should be noted that the calculations presented are based on a substantial number of assumptions, spelled out and sometimes implicit. Only further work can establish the extent to which the results were influenced by unrealistic assumptions.10
In assessing the merit of these results it is also useful to know that calculations of the costs of immigration in the United States have yielded results that are quite similar, in spite of a number of important differences in social programs and the characteristics of the immigrants studied.11
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During times of economic prosperity like the one experienced in Canada in the early part of the 21st century, there were many signs in stores and restaurants advertising that they want to hire help. These signs were up for long periods of time because they were for “jobs that no one wants”. More important, firms in the booming energy and mining industries have unfilled vacancies for skilled crafts – jobs for which Canadians are not trained in sufficient numbers.
It is a simple and widely accepted proposition in economics that free markets tend to eliminate excess demand for milk, steel or cars by creating higher prices for these goods. At the higher prices, demand shrinks and supply increases until the problem is eliminated.
In the absence of immigration, excess demand for labour of different skills in free markets similarly can be eliminated by higher wages paid to workers. Supply is increased through migration of workers within Canada. When such internal migration is inadequate and shortages persist, through time the higher wages induce more Canadians to train for the relevant occupations. Employers develop and deploy labour saving technology. Firms use their own training programs to fill jobs by equipping the workers with just the right skills needed. Such training and new technology take time to become effective, but so usually does the development of shortages.
Demand for labour at the persistent high wage is reduced by employers’ investments in labour saving capital and technology. The producers of such capital in turn are encouraged to develop such technology.
Of course, profit-maximizing employers prefer not to pay higher wages and train workers but hire skilled immigrants and pay lower wages. But such behaviour and the resultant higher profits for employers do not mean that solving labour shortages through immigration necessarily is in the public interest.
As noted above, immigration lowers the income of labour and in the case of immigrants with low skills and wages, it leads to higher rates of poverty among competing Canadian workers. The reduced incentives for employers to substitute capital for labour in the longer run reduce the growth in labour productivity and overall national income. Finally, in Canada’s welfare state, for reasons discussed above, taxpayers’ burdens are increased.
I could go on, but read it for yourself.
