Global logo
GLOBAL ECONOMICS LTD.

IMMIGRATION PAPERS



Patrick Grady and Herbert Grubel
The Canada West Foundation Misinterprets Immigration Data
June 1, 2011
Op Ed in Vancouver Province replying to Vineberg


Robert Vineberg, as senior fellow at the Canada West Foundation, was quick off the mark to call our recent analysis of the fiscal costs of recent immigration “flawed” (“Fraser Institute’s immigration analysis is flawed,” May 26). Yet he never provided any hard facts to challenge those we presented. Instead, his argument was mainly an assertion supported by incidental largely irrelevant observations. Let’s consider them one by one.

First, the facts. Since 1987 when the number of immigrants admitted to Canada was dramatically increased and brought in large numbers of immigrants from the Third World instead of from what had been the traditional source countries for Canadian immigration, the performance of immigrants in labour markets has steadily deteriorated as each new cohort entered the country and as shown in census after census. This is the group of immigrants for which we chose to examine their net fiscal costs in 2005, the latest year available in the census.

Mr. Vineberg does not challenge these facts. Rather he accurately quotes the results of our study, which we will do again for your readers’ benefit, namely that recent immigrants arriving during the 15 years between 1987 and 2004 earned an average of only $26,253, which is less than the $35,057 earned by all Canadians and that each immigrant is costing Canada about $6,000 per year or $16.3 billion in total counting the 2.7 million immigrants who came and stayed during the period.

Mr. Vineberg then goes on to argue that “It is important to note that the average income of immigrants who had been in Canada more than 15 years prior to the 2006 census was, in fact, higher than the average income of persons born in Canada. These immigrants would, therefore, be paying more taxes than the average Canadian-born person. This turns the Fraser Institute’s analysis on its head and suggests that immigrants are net contributors to government revenues if their entire working life is considered.”

This is, of course, true but irrelevant. Our point is not that immigration has not made a great contribution to the building of Canada in the past and that generations of immigrants have not done well economically after they arrived in Canada. Indeed, we are well aware that the traditional earnings pattern for immigrants was that initially they would earn significantly less than other Canadians, but that their incomes would increase over a ten or 20 year period bringing them eventually to a higher level of income than even native Canadians. This stylistic fact was based on the performance of immigrants largely from the United States and Europe.

The problem that we address in our study is not the past success of immigration, but its current shortcomings. There is mounting evidence that immigration is not working the same as in the past. The turning point was 1987. This was the year when the Conservative Government of Brian Mulroney started to increase the numbers of immigrants admitted, and kept increasing them through the subsequent 1990-1992 recession in sharp contrast to the previous tap-on, tap-off policy whereby the number of immigrants admitted was cut back during recessions when the economy was unable to absorb them.

Since then and even before, immigrants have been coming largely come from the Third World where language skills and education may not be up to Canadian standards. And Canadian employers have revealed an inclination to not put much weight on work experience gained in countries whose economies are not as advanced as Canada. As a result, there has been a consistent deterioration in the earnings of each new cohort of immigrants at least up to 2005, the census year, and probably beyond given the evidence from the labour force survey that the employment prospects of recent immigrants were more severely damaged by the 2008-2009 recession. In 2009 the unemployment rate of the most recent cohort of immigrants who had been in the country less than 5 years was almost double that of the Canadian-born.

This is not to say that recent immigrants have not been able to improve their positions over time in spite of the obstacles they face, however, that the gap remains very large. A continued high inflow of underperforming new immigrants will not only suffer the initial disadvantage experienced by previous cohorts, but also will compete with those immigrants already here who are already having a difficult time succeeding in the labour market.

Mr. Vineberg labels our analysis uni-dimensional. It’s true we examine recent immigration from the limited perspective of its economic contribution to Canada. But is this not the rationale always given to justify a continued high level of immigration? Now that the facts show that to be without foundation, the supporters of mass immigration such as Mr. Vineberg want to dismiss the importance of hard-nosed economic considerations.

What other “dimensions” does Mr. Vineberg propose? He specifically mentions “Often, an immigrant brings skills to a workplace allowing his or her employer to keep others employed. Immigrant entrepreneurs employ hundreds of thousands of people born in Canada. Poorly paid immigrant domestics free up Canadian-born parents to earn often extremely high salaries.”

It’s highly unlikely that the skills of a particular immigrant are so unique that his or her skills are essential to keeping others employed. But if so, such an immigrant could be expected to earn a substantial premium. Under the proposal in our study linking immigration to a job offer paying above the average, any employer requiring such a unique worker would be able to bring him or her into the country.

As to the immigrant entrepreneurs who eventually employ hundreds of thousands of people, surely they would have certain qualities that would enable them to find an employer to sponsor them.

And the poorly-paid immigrant domestics who free up Canadian-born parents to earn often extremely high salaries are being subsidized by Canadian taxpayers. Why can’t people with “extremely high salaries” pay for their own day care?

Mr. Vineberg argues that “a vast relatively under-populated country like Canada has enormous “fixed costs,” including national defence, running diplomatic missions abroad, maintaining inter city transportation infrastructure and so on” and that ‘all of this can be made less expensive for every Canadian resident if there are more taxpayers to share the burden.” One might be pardoned for wondering if Mr. Vineberg has ever visited the “under-populated’ cities of Toronto, Vancouver or Montreal where the largest number of immigrants concentrate. And it’s surprising that given the enormous “fixed costs” he mentions that per-capita costs of government have done nothing but go up as the Canadian government has expanded over the post war period. In addition, if this is so why don’t larger countries have smaller government sectors?

Another dimension that we allegedly ignored according to Mr. Vineberg is “Canada’s commitment to international humanitarianism [which] includes welcoming some 20,000 refugees each year.” If he had read our report more carefully he would have noted that we said that our proposal for immigration reform did not apply to refugee claimants whose admissibility would continue to be determined by “international treaty obligations.” (p.25)

Mr. Vineberg also notes that “These persons [refugees] who may have suffered horribly both physically and mentally, are often unable to earn a decent salary for many years and they depress the average immigrant income calculations.” Our response is that Canada has always accepted refugees, and they only account for small proportion (about 14 per cent over the 1987 to 2005 period) of total immigrants. Thus they would not likely depress our overall results very much.

Creating a straw man, Mr. Vineberg suggests that our analysis if applied to primary and secondary education would imply that due to education’s high cost we should “outlaw families of two or more children so that Canadian parents do not receive more in benefits than they pay in taxes.” Everyone knows that there are very good reasons why it is important to support education even if it means that some families gain more than others at the taxpayer’s expense. But this does not justify bringing ever-increasing numbers of under-performing immigrants into the country to benefit from the Canadian taxpayer’s largesse. Those admitted must be able to pay their own way. Otherwise, at some point, Canadian taxpayers will revolt and the carefully constructed edifice of Canada’s welfare state will begin to crumble to the detriment of all.

What does Mr. Vineberg offer? An empty call for a “multi-dimensional analysis” of the “complete picture.” These are fine generalities to throw around in an op ed. But Mr. Vineberg has come up very short on specifics.

Mr Vineberg offers to engage in a “constructive debate on how Canada chooses its immigrants and what selection criteria might be most effective to select immigrants who could rapidly contribute to Canada’s economy, culture and society.” However, he then turns around and in another forum calls for a 100,000 per year increase in Canada’s immigration intake. It doesn’t sound to us like he has any understanding whatsoever of the nature of the problem and what needs to be done to address it.

Back to Immigration Papers

Global Economics Homepage