Asian Skilled Immigration Flows to Canada in the early 21 st Century: A Supply Side Analysis

Transcription

1 04/03/03 1 Asian Skilled Immigration Flows to Canada in the early 21 st Century: A Supply Side Analysis By Don J. DeVoretz Co-Director RIIM Professor of Economics Simon Fraser University Prepared for Asia Pacific Foundation of Canada Foreign Policy Review Second Draft (03/18/03) Not for Quotation Comments by Yuan Pau Woo and the participants at the SFU Dialogue Institute Seminar on March 10 th 2003 Wosk Centre Vancouver, B.C. are noted with appreciation. 1

2 04/03/03 2 I. Introduction Both the recent popular and long-standing scholarly literature on Canadian immigration has emphasized the post arrival experience of immigrants in Canada and their affect on the Canadian economy and social institutions. i This paper breaks new ground when it eschews this traditional view and instead focuses on the supply conditions of Canada's future highly skilled Asian immigration flows. More specifically I question one central assumption of Canada's post war immigration policy; namely, that there exists an infinite supply of highly skilled immigrants (i.e. the independent class) willing to wait in a queue to enter Canada. In short, will the Canada s supply of Asian highly skilled immigrants become more limited in the near future? In order to answer this crucial question I review the Asian demographic trends over the his next 25 years to forecast the gross supply of highly skilled Asian immigrants to Canada. Next, I review the impact of Canada s 2002 Immigration Act on the future supply and composition of Asian highly skilled independent immigrants. Finally, in order to forecast the net supply of Asian immigrants I address the question on the size and composition of recent Canadian emigration to Hong-Kong (SAR). This reported evidence raises further questions about the return phenonmenon. In short, are theses return migrants to be considered Canadian overseas assets or contingent liabilities? Further what do they say about Canada s immigrant selection policy? In the following sections I argue that each of these forces: demographic, return migration and a more restrictive Canadian immigration policy will reduce the supply of available Asian skilled immigrants in the next three decades. II. Recent History If we look to recent history with the aid of figure 1, post-1968 to the present, this view of an infinite supply appears to be valid in the aggregate for all types of immigrants. ii In fact, in the aggregate it seems as if Canada simply opened or closed the entry gate according to economic conditions and could admit any number it wished over a wide range. For example, during the boom period of 1973 over 230,000 entered while in the 1984 recession only 84,000 were admitted. By Canada's immigration levels had again grown to 254,000 arrivals. Thus, it appears that a 'tap on-tap off ' immigration policy was feasible 2

3 04/03/03 3 in the aggregate. iii Hence, on the surface it appears as if the Canadian demand for immigrants-not the supply-ultimately dictated the yearly intake of immigrants. Figure 1: Total Yearly Immigration Flows, , , , , ,000 50, Source: Citizenship and Immigration Canada, Facts and Figures 2001: Immigration Overview However, these aggregate immigration totals do not reflect the dramatic changes in the source country composition for immigrants over this period. In fact, I argue that these total numbers reported in figure 1 could only be maintained by a deliberate restructuring of Canada s immigration policy in the 1970 s, which allowed the admission of skilled third world immigrants under a colour blind points system. 3

4 04/03/ Figure 2: Total Yearly Immigration Flows by Selected Regions of Origin, Asia and Pacific United States Europe and the UK Source: Citizenship and Immigration Canada, Facts and Figures, various years, at 2.html#statistics Figure 2 documents the claim that Canada altered its source country mix for immigrants to maintain its aggregate goals. In fact, in 1973 the majority of Canada's immigrants came from Europe and the United States, with the remaining emanating from Asia. By 1993 this distribution had been reversed, with the majority of the total immigrant flow now originating from non-european sources. Figure 2 also indicates that Asian immigration levels have fluctuated in the 1990's, while European and American inflows were modest and constant. iv In other words, fluctuating aggregate totals after 1990 have come as a result of the exclusive change in Asian immigration flows to Canada. Two major conclusions on the supply side can be inferred from figures 1 and 2. First, in the last third of the 20 th century, Canada was able to rapidly change its demand for immigrants with no aggregate supply constraints. However, the supply of immigrants from any one country or area could not be assumed to be infinite. Canada had to extend its reach for immigrants to areas with strong demographic forces, stagnating economies or unstable governments, all of which subsequently increased Canada's supply of skilled immigrants. 4

5 04/03/03 5 Figure 3: Immigrants to Canada by Entry Classes: Family Skill Worker Refugee In addition to switching source countries, a second policy lever was available to Canada after 1980 to maintain its yearly immigrant target levels. In 1978 Canada passed an immigration act, which formally introduced three entry gates: an independent or skilled class stream, a family reunification gate and a refugee portal. In addition this legislation required that the Minister announce a yearly aggregate immigration target to parliament. In order to meet this yearly-announced target the minister had two policy levers to achieve the stated yearly immigrant target levels and confirm that an infinite supply of immigrants was truly available. As noted above, Canada could attempt to meet its yearly global immigration target by shifting source countries to recruit the desired independent immigrants. If this strategy failed to recruit sufficient independent immigrants, then Canada s policy makers simply opened the family or refugee entry gates to compensate for a shortfall in the crucial independent skill class. v DeVoretz (1995) notes that in several years Citizenship and Immigration Canada first processed the available independent class immigrants and then at the end of the year filled the yearly quota by switching to the processing of the more available family class. This latter policy adjustment led to continuing criticism that Canada was only able to meet its numerical yearly targets by emphasizing the family reunification entry gate at the expense of economic benefits generated by a strong independent immigrant class. 5

6 04/03/03 6 Figure 3 illustrates this entry class substitution clearly. After 1988 the Minister announced progressively higher yearly immigrant target levels, which were met by continually expanding the family class as the independent class, declined between After 1993 though, the independent class grew rapidly and the family class declined. In sum, figures 1 to 3 indicate that Canada has been able to meet is yearly targets for the last twenty years, but only in the aggregate. Throughout the 1980's and until the mid- 1990's the independent or skilled class of immigrants declined as a proportion of the total inflow and dramatic shifts in immigrant source countries, and entry gates were needed to sustain Canada's fluctuating yearly demand for immigrants. However, by the late 1990's Canada no longer had to rely on the family class to fill its yearlyannounced quotas as a new source country appeared. China liberalized its emigration policy and permitted the emigration of the highly skilled, and this allowed Canada to increase its total admissions to 250,000 while simultaneously expanding its skilled inflow. This post-1995 flow of Chinese skilled immigrants meant that Canada could finally achieve its "cinquante-cinquante" target. This rule implied that 50 percent of any total yearly admission must be in the independent class to insure that immigrants in total would make a net economic contribution to Canada. vi This dramatic increase in Chinese skilled immigrants also allowed Prime Minister Chretien to argue that any 'brain drain' from Canada to the United States in the 1990's was more than offset by the inflows of highly skilled Asians to Canada. vii Again critics questioned this facile accounting especially when it was noted that post 1990, highly skilled Asian immigrants were unable to find jobs in their professions and were unable to "catch-up" to their Canadian-born cohorts' earnings. Thus, at the turn of the 21st century Canada's immigration policy, which relied on the assumption that an infinite supply of highly skilled immigrants was available, was again being questioned. In fact, without the arrival circa of highly skilled Chinese from the PRC, Canada s goal of a balanced entry gate, i.e. fifty percent or more in the skilled class, would not have been met. III. Canada's Immigration Regime: 21 st century Ultimately Canada's future supply of highly skilled immigrants critically depends upon the screening device Canada uses when a prospective immigrant arrives at the independent entry gate to be 6

7 04/03/03 7 assessed. Table 1 outlines the changing weights applied to human capital and employment attributes as well as the rise in overall standards. In 2002 Canada altered its admission criteria for independent immigrants in two dimensions. First the total number of points required to enter Canada rose from 70 to 75 out of 100. Next, the new selection criteria now emphasized language, formal education and prior labour market experience. Table 1: Historical Selection Criteria Year Education Experience Specific Vocational Preparation Occupational Demand Labour Market Balance 10 Age Arranged Employment or Designated Occ. Language Personal Suitability Levels Demographic 8 Relative 0/3/5+ 0/3/5 5 5 Destination 5 5 Total Pass Mark * 70# 75 Source: This switch in selection criteria was made in response to the declining economic performance of Canada's highly skilled independent immigrants in the 1990's. By raising the total points required and shifting the allocation of points to emphasize previous job experience, education and language proficiencies it was hoped that this heretofore declining performance could be improved. viii Central to this essay is the answer to the question of how these new regulations will change the presumed view that Canada's highly skilled immigrants are in infinite supply, especially those from China. ix Figure 4 represents the outcome of a unique "counterfactual' experiment conducted by Shi (2003). In short, Shi asks: " What percentage of the successful principal applicants who arrived in the independent class between could have arrived if the new 2002 assessment criteria were in place?" For 7

8 04/03/03 8 purposes of this essay we divide the applicant world into Chinese (PRC) and the rest of the world (ROW) Figure 4 Acceptance Rates % Chinese I Chinese II ROW I ROW II 10 5 ROW II 0 ROW I Chinese II Chinese I to see if different acceptance patterns would emerge to question the continued presumption of an infinite supply of future highly skilled applicants from any source region. x The simulated results depicted in figure 4 from re-testing the "successful" applicants is dramatic and reveals how fragile the assumption is that Canada faces an infinite supply of independent class applicants. In 1995, one of three successful principle independent applicants from the PRC (Chinese I) could have entered if the 2002 entry criteria were in force. When Shi relaxes her assump tions and allows more points for language skills and assumes all receive bonus points for the presence of a spouse, new acceptance rates emerge. Under these more generous conditions the acceptance rates for Chinese (Chinese II) or ROW (ROW II) increase slightly but never exceed 50% for the Chinese and 26% for the ROW. xi 8

9 04/03/03 9 I draw several conclusions from these simulation results. First, changes to Canada's entry criteria for independent immigrants circa 2002 will dramatically reduce the number of successful applicants ceteris paribus from the entire world. Next, it appears as if China's ability to send highly qualified independent immigrants fell throughout the late 1990's. In other words, while 35% of actual 1995 Chinese successful applicants would have entered through the independent category, under the new criteria only 19 % of the actual successful 2000 Chinese arrivals would have been successful under the new system. Thus, the new entry criteria will reduce the supply of acceptable applicants worldwide, and in particular from China. However it remains to be seen if the new, more stringent entry criteria will enhance the economic performance of those few who now qualify. Of course, potential immigrants will respond to this new system by seeking alternative Canadian entry gates or new destination countries. We explore these additional supply side implications in our concluding section. IV. Emigration of Canada's Immigrants in the 21 st century Canada's ultimate net yearly inflow of immigrants depends of course on the difference between the immigrant inflow into Canada versus the emigrant outflow from Canada to the rest of the world. In fact, Canada's historical emigrant outflow has averaged approximately 30 percent of its annual gross inflow. Thus, in some years Canada's net inflows are quite small. In fact, when gross immigrant inflows fell below 100,000 in the mid-1980's the net inflow was less than 20,000 (DeVoretz, 1995) given that 80,000 immigrants left. There are two important dimensions to Canada's emigrant outflows, which will affect the ultimate size of the Asian immigrant stock in Canada in the early 21 st century. First, who leaves and who stays in terms of the highly skilled must be determined. If the best of the highly skilled leave then Canada will absorb a great deal of churning costs owing to the need to replace these emigrating immigrants xii Next, we would like to know where these erstwhile Canadian immigrants go to back home or to the rest of the world? The welfare implications of Asian immigrants moving on to the United States or Europe is of course different from a movement back home. In either case it is important to ask if this onward movement represents a loss to Canada or if it creates the potential for network building in both the political and economic sense between the stayers and leavers. Insert Table 2 9

10 04/03/03 10 We have some preliminary evidence on one case which sheds light on several of the above posed questions. DeVoretz, Zhang and Ma (2002), with the aid of the 2000 Chinese census, portray the socioeconomic characteristics of Canadian immigrants who returned to Hong Kong. They then compare these return Chinese émigrés to Chinese immigrants who stayed in Canada. In several important dimensions ( income earned, educational attainment and occupation distribution) the leavers outperformed the Hong Kong immigrant stayers in Canada. Moreover, the returnees were heavily concentrated in the year old age group who accompanied the head of household who had also returned to Hong Kong. In other words, there is some evidence that the heretofore-assumed permanent Hong-Kong immigrants to Canada have returned after accumulating human capital and attaining Canadian citizenship. This triangular movement again puts the lie to a Canadian immigration policy predicated on permanent settlement with only possibly the occasional return of disappointed or retired previous immigrants. In fact, DeVoretz and Zhang (2003) explore the political institutions and instruments, which have given, rise to strategic onward movement of heretofore highly skilled immigrants to Canada. Canada's generous immigrant settlement policies, coupled with the prospect of the immigrant s rapid ascension to Canadian citizenship are argued by DeVoretz and Zhang (2003) to hasten onward migration of the highly skilled. In particular, Canadian citizenship confers a Canadian passport on the erstwhile Chinese immigrant, and now it is possible for this highly skilled Chinese (or any other Canadian citizen) to enter the United States under a TN NAFTA visa. Regardless of all the possible permutations for onward mobility that can arise in a world with dual citizenships and multiple passports, the main point here is that those who come to Canada in the future will not necessarily stay. They may either return home, or go on to the rest of the world with or without their families leaving Canada. Again, other than noting that this phenomenon questions the infinite supply assumption of Canadian immigration, I discuss in the final section whether this triangular movement is ultimately beneficial to Canada or not. V. The supply of highly skilled Asian immigrants in the early 21st century To this point I have brought into question the actual existence on an infinite supply of highly skilled immigrants ready to enter Canada, given recent emigration and a more stringent set of entry criteria circa Now I turn to supply conditions in the Asian sending region to see if my less than sanguine view of future supply is still warranted. 10

11 04/03/03 11 Since initial immigration from any source region is first driven by the supply of independent immigrants, and then, 5-10 years later, by sponsorship of family members, predicting immigration trends from any source country to Canada should concentrate on the projected supply of independent immigrants. Under Canada's current independent assessment system, age, language ability and education levels are the key conditioners for entry. Thus, this essay will look first at the flow of recent Asian higher education graduates and next at the demographic forces in selected Asian countries, which could help dictate the number of future Asian applicants in the Canadian independent category. Table 2: Higher Education in Asia: 2001 No. of Institutions Enrollment (millions) Graduates (10,000) China Philippine S. Korea n.a. Sources: S. Table 2 places the flow of Asian highly skilled immigrants to Canada into perspective. China and the Philippines, two of Canada s major source countries for immigrants had a combined higher educational enrollment of 7.4 million students in The Philippines, which has less than 10 percent of China s population, had 35 percent of this enrollment figure. In addition the stock of higher education graduates in the two countries is 2 million and 380,000 respectively in China and the Philippines circa In short, Canada s total annual inflow of highly skilled in the late 1990 s from the entire world was less than 40,000. Hence, even recognizing large quality variations across these aggregate numbers there appears to be an ample supply of potential applicants from the pool of Asian highly skilled. Of course, as we have already noted education alone only yields 25 of the required 75 points for admission. Hence, this gross supply of Asian highly skilled could be greatly diminished as we have already noted by the inability of these graduates to earn the extra 50 required entry points. I now turn to an analysis of selected age-specific pyramids which will allow me to forecast the supply of the key age group aged for each of the key Asian source countries, and project possible immigrant applications in Canada well into this century. The Asian countries of interest include: China, Malaysia, Korea, and the Philippines. Although Canada has received independent immigrants from other East and 11

12 04/03/03 12 Southeast Asian sources, these selected countries have been Canada's primary source areas over the last three decades, and thus will be the focus of our demographic analysis. xiii Insert figs. 5-6 China Age Pyramid China currently dominates Canada's supply of highly skilled immigrants and could continue to do so over the next twenty years. A comparison of the year old age group circa 2000 to the projected key year old group in 2025 is the essence of the supply story. The prime immigrant applicants to Canada from China in 2025 will be those who were aged in 2002 or in Two trends emerge from an inspection of China's age pyramid. First, the critical age group (35-40) circa 2025 will actually be larger than the year old group was in xiv However, the slightly younger age group, which consists of year olds, will decline substantially from 120 million in 2000 to 90 million in Thus, if we combine these two age groups, they will continue to potentially supply the same number of candidates for Canadian immigration provided that both groups increase their English skill level and gain more job experience than their past age cohorts to gain entry under the more stringent rules for the independent class. Insert Figs. 7-8 Malaysian Age Pyramid I now turn to the secondary tier of origin countries and review their supply conditions. First, I note that Malaysia has a small but growing prime age group for immigration (25-39) which will slightly rise in total from approximately 3 million circa 2000 to 4 million in Insert Figs Philippine Age Pyramid Moreover, within this secondary group it is important to note that the Philippines is one source country whose prime age immigration group of 9.5 million in 2000 will rise substantially to over 14 million. Insert Figs S. Korean Age Pyramid Finally, South Korea's age group measured 6.6 million in 2000 and will decrease to 5 million in In sum, with the important exception of the Philippines, these secondary source countries will yield modest numbers of potential immigrants in the prime age group for moving. 12

13 04/03/03 13 VI. Summary and Conclusions This essay outlined forces, which will ultimately determine the number of highly skilled immigrant arrivals to Canada over the next two decades. It was demonstrated that over the last 30 years Canada has been able to meet its yearly immigration targets through a series of policies, which constitute a "tap on-tap off" policy. This policy allowed the yearly target to fluctuate widely while Canada imaginatively sought out new source countries. Finally, when Canada was unable to meet its yearly target for skilled economic immigrants, it widened the entry gate in the family class. However, do all these imaginative management efforts lead us to the conclusion that the supply of skilled immigrants to Canada is infinitely elastic? If I focus only on the independent or points based class, the answer is no. The increased stringency of the entry requirements for independent immigrants after 2002 and the apparent drop in the ability of immigrants to enter under this new system means that this class will shrink by 50 percent. Hence, either the family class will increase by 50 per cent to compensate for this drop or the total yearly immigrant target will shrink as it did in the 1980's. Moreover, demographic forces in the form of a declining year old age co-hort in China will exacerbate Canada's inability to meet its independent targets levels for the 21 st century. Moreover, China is the only Asian country able to meet Canada's needs in this class although continued Chinese economic development will keep potential highly skilled Chinese immigrants at home and induce erstwhile Chinese immigrants to return from Canada. In short, Canada is in a highly competitive environment for Asian and all skilled immigrants. Unless Canada raises the rate of return on their skills or restructure its now draconian points system its much-vaunted claim to an infinite supply of skilled immigrants is in doubt. References Collacott, M. (2002), Canada s Immigration Policy: The Need for Major Reform (Vancouver: The Fraser Institute) DeVoretz, D. (1995) Diminishing Returns: Canadian Immigration Policies in the 1990's (Toronto:C.D. Howe). 13

14 04/03/03 14 DeVoretz, D. (2003) "Citizenship, Passports and the Brain Exchange Triangle" Journal of Comparative Policy Analysis (forthcoming 2003). DeVoretz, D. and S. Laryea (1996), Human Capital Transfers (Toronto: C.D. Howe) DeVoretz, D. and Z. Ma "Triangular Human Capital Flows between Sending, Entrepôt, and Rest-ofthe-World Regions", Canadian Population Studies Vol. 29(1), 2002 pp DeVoretz, D. and C. Werner "Canada: An entrepot Destination for Immigrants?, in R. Rotte (ed.) Migration Policy and the Economy: International Experiences, 2002, pp DeVoretz, D., Z. Ma and K.Zhang. Triangular Human Capital Flows: Some Empirical Evidence from Hong Kong and Canada in J. Reitz (ed.) Host Societies and the Reception of Immigrants, CCIS Press (forthcoming, 2003). Francis, D. (2002), Immigration: The Economic Case, Key Porter Books, Toronto p.192. Stoffman, D. (2002), Who Gets In: What s Wrong with Canada's Immigration Program and how to fix it (Macfarlane, Walter and Ross, Toronto) Shi, Y. (2003) " The Impact of Canada's 2002 Immigration Act on flows of Chinese skilled workers" Master's Project, Simon Fraser University. 14

15 04/03/03 15 i A spate of new popular books have appeared by D. Francis (2002), D. Stoffman (2002) and M. Collacott (2002) all critically analyze the impact of the post 1990's immigration flow on Canada. The most credible of these pieces is by Stoffman who argues that Canada's immigration levels are too high, flows too concentrated in urban areas and provide only a small contribution to Canada's growing demand for skilled workers. For a comprehensive if dated scholarly review of the favorable impact of immigrants on Canada's economy see DeVoretz (1995). ii The post-1967 period is crucial to denote. In 1967 the "points system" was introduced which dropped country of origin as a selection criterion for immigrant entry to Canada. If you earned 50 or more points on a skill based assessment you gained entry into Canada. There initially existed no overall quota and Canada was free to process applications from any country in the world and thus with a world-wide series of source countries the potential supply of immigrants was indeed large. However, substantial competition for the highly skilled arose from the demand in the United States and Australia. iii A "tap on tap off" policy refers to Canada's immigration policy in the 1980's of only opening the immigration levels when employment demand appeared and shutting it down when employment declined in the economy. iv The 1998 collapse of Asian immigration is due to the halt in Hong Kong and Taiwanese immigration after a successful transfer of Hong Kong to China in v DeVoretz (1995) was the first to discover this last point and later Francis (2002) rediscovers it but applies this thesis to the wrong era. vi This rule was first identified by DeVoretz (1995) as the optimum mix and implemented under Segrio Marchi's term as Minister of Immigration circa vii Citizenship and Immigration argued that 40,000 highly skilled immigrants entered Canada yearly during the period while Canada was absorbing a brain drain of 10,000 to the United States. viii A more cynical view is that Canada hoped to reduce its backlog of applicants in the queue by discouraging independent applicants. This may be true; however, the queue primarily consists of family applicants outside of China and the new criteria will not reduce the queue since these criteria do not affect the family class. ix As a wag noted, Bill Gates would not earn enough points to enter Canada under the new regulations. x The methodology to conduct this experiment was to utilize the Immigrant Data Base, which records all the relevant information of an immigrant upon arrival for the various dimensions of the entry criteria (age, educational level, language, etc). She then simply reassessed all immigrants under the new criteria to see if they achieved the now necessary 75 points to gain entry. xi She only awarded the maximum number of language points to those Chinese immigrants who had English (French) skills and had extensive use of the skill in China with a long working experience. Under the 2002 legislation an educated and employed spouse will yield extra points for the principle applicant. However, the data set we used did not make the characteristics of the spouse known so we did not include these in the calculations but reduced the total pass mark to 65 from 75 to compensate for this omission. xii DeVoretz and Laryea (1996) define churning costs as the cost of integration of the new immigrants and the loss to the Canadian taxpayer for the use of subsidized educational and or health facilities while the immigrant was resident in Canada. xiii The Philippines sent many professionals to Canada in the 1970's and early 1980's and with the increased emphasis on English should fair well under the new point system. South Korea has many post-secondary students studying in Canada, and Malaysia has been, along with Singapore, a minor source of Canada's highly skilled in the past. China is chosen for the obvious reason of size. Japan has not sent many educated immigrants to Canada in the past and will not in the future and is thus excluded. xiv The year old group circa 2000 is approximately 100 million while in 2025 this group will grow to 120 million. 15