The Socioeconomic Benefits of Immigration to Canada

Transcription

1 The Socioeconomic Benefits of Immigration to Canada Tony Fang, PhD, FRSA Jarislowsky Chair in Economic & Cultural Transformation Memorial University of Newfoundland Associate Professor, University of Toronto J. Robert Beyster Faculty Fellow, Rutgers University New Brunswick Institute for Research, Data, and Training University of New Brunswick May 18, 2017

2 Stephen A. Jarislowsky

3 Research Team

4 Research Team 1 Postdoctoral Fellow 1 Communication Consultant 3 PhD students 2 MA student 2 Undergraduate students 2 Visiting Scholars

5 Current Research Projects 1. The Migration Advantage: Lessons from Canada and around the World (University of Toronto Press). 2. Syrian Refugee Arrival, Resettlement and Integration in Newfoundland and Labrador (funded by SSHRC). 3. Retention and Integration of Refugees in Newfoundland and Labrador (funded by the Leslie Harris Centre). 4. Integration of Refugees in Smaller Communities (research proposal submitted for SSHRC Knowledge Synthesis Grant). 5. The Temporary Foreign Worker Program and Employers in Labrador (funded by the Harris Centre).

6 Current Research Projects 6. Public Service Delivery in Labrador (funded by the Harris Centre) 7. Strength in Adversity: Disasters and Emergencies, Neighbourhood Ties and Community Belonging (with Grant Schellenberg and Feng Hou, Statistics Canada). 8. Productivity, Firms and Incomes (funded by SSHRC partnership grant). 9. Warmth of Welcome: Australian, Canadian, and the US Immigration Systems Compared (funded by SSHRC partnership grant Pathways to Prosperity ). 10. Employer Perceptions to Hiring Newcomers and International Students in the Atlantic Provinces (research proposal submitted for ACOA grant).

7 Migration: A Multidisciplinary Area of Research multidisciplinary-reveals-big-storycultural.html Economics, Geography, Sociology, Demography, Heath, Public Policy.

8 Major Issues Canadian immigration policy: major objectives Points System : Number of intakes Patterns of immigration: types of immigrants Settlement and integration Long-term effects of immigration: innovation, entrepreneurship, and international trade Macroeconomic impact of immigration Drain on public treasury?

9 First message Demographics Matter

10 Second message Demographics Matter A Lot

11 Canada 1950

12 Canada 1960

13 Canada 1970

14 Canada 1980

15 Canada 1990

16 Canada 2000

17 Canada 2010

18 Canada 2020

19 Canada 2030

20 Canada 2040

21 Canada 2050

22 Median Age: Canada and Provinces (Statistics Canada, CANSIM Table ) Newfoundland & Labrador Prince Edward Island Nova Scotia New Brunswick Quebec Ontario Manitoba Saskatchewan Alberta British Columbia Canada

23 Western Canada: Population growth can be achieved through immigration While Atlantic Canada s population has declined, all three provinces in Western Canada have enjoyed population growth rates higher than the national average, driven largely by immigration. Alberta (11.6%) has benefited from an oil and gas led boom, but Manitoba, for example, faced some similar challenges to the Atlantic provinces. Population grew by 5.8% in the last five years in Manitoba, 6.3% in Saskatchewan, higher than the Canadian average, mostly driven by international migration.

24 Population Challenges and Responses NB: a population growth division NS: Immigration strategy PEI: a population secretariat NL: a population growth strategy and Immigration Action Plan

25 Busted myth 3 Atlantic Canadians don t want newcomers (Howard Ramos, 2016)

26 Busted myth 3 Atlantic Canadians don t want newcomers

27 Busted myth 3 Atlantic Canadians don t want newcomers

28 The three Facets of Canadian Immigration Selection of skilled immigrants: The Point System (for the mass migration) Multiculturalism (highly symbolic) and integration policies Provincial decentralization: inter-provincial migration Unique features: economic contributions and nationbuilding exercise Geography: geographic isolation from other countries has limited illegal immigration and has made legal immigration more attractive

29 The Point System (1967) 1967 The Points System was established, judging immigrants on qualifications such as language and skill (Human capital model), in order to Meet labour and skill shortages Create source of economic stimulation from Alberta, to BC, to Atlantic Canada Add size, new ideas, creative potentials, international awareness and critical trade linkages in a global economy Canada recently moved away from the points system (PNPs, TFWP, CEC, Express Entry)

30 Selection Criteria: Skilled Worker Education Maximum 25 points Ability in English and/or French Maximum 24 points Experience Maximum 21 points Age Maximum 10 points Arranged employment in Canada Maximum 10 points Adaptability Maximum 10 points Total Maximum 100 points Pass mark 67 points

31 The Policy Environment Two levers number of immigrants who is admitted What are the policymakers are trying to achieve?

32 Immigration Policy Assume policy makers are attempting to maximize national welfare admitting immigrants to alleviate specific skill shortages or contributing to economic growth family reunification sanctuary from political persecution, regioal conflicts

33 W Effects of Immigration on Wages and Employment Impact on Supply Only S 0 S 1 W Impact on Supply and Demand S 0 S 1 W 0 W 0, W 1 W 1 D 0 D 0 D 1 N 0 N 1 N N 0 N 1 N

34 Why Do We Need More Immigrants to Canada Need immigrants to sustain population and economic growth; Need immigrants to fill labour and skill shortages; Need investment and consumption to create jobs in public and private sectors; Need young people to start new businesses; Need population base to sustain business operations, esp. in the remote and rural communities;

35 Why Do We Need More Immigrants to Canada? Need more tax payers to support the health care and social security systems; Need population size to keep schools open; Need diverse population to grow creative sectors and make Canada an interesting place to live; Need immigration to stimulate international trade

36 Recent Trends in Immigration Policy First, economic considerations have become dominant, with a decreased emphasis on family class immigration and humanitarian concerns, until Second, economic criteria have shifted from broad human capital measures to more targeted selection based on specific labour market needs: TFW, PNP Greater efforts to recruit and retain international students.

37 Empirical Evidence from Macroeconomic Model If we increased immigration intakes in NB by 2,178 per year for 10 years Real GDP increases by 2.3% by 2021 Aggregate demand will be increased, mainly from housing Population increases by 2.6% by 2021 There is no adverse effect on unemployment NB government revenue will be increased from 83M to 157M, depending on the integration of the immigrants and refugees

38 Canadian Immigration: The Success Story Immigration has produced major benefits to Canada, and also for all three traditional immigration countries, not only economic, but also social and cultural These benefits are an important reason why Canada, Australia, and the US are successful nations Skilled immigration programs in Canada and Australia can partially explain why the countries narrowly missed the impact of the global financial crisis The most important success indicator may be the one in political terms: widespread support (Gallup) except for 1982 and (EKOS)

39 Immigration and innovation: US Evidence Immigrants have had a disproportionate role in innovation and technology founding such companies as Yahoo, ebay and Google. Half of Silicon Valley start-ups were founded by immigrants, up from 25% a decade ago. A recent study by the Kauffman Foundation found that immigrants are 50% likelier to start businesses than natives. Immigrant-founded technology firms employ 450,000 workers in the U.S. And according to the National Venture Capital Association, immigrants have started one quarter of all U.S. venture-backed firms. In 2016, all 6 Nobel Prize winners were immigrants to the US.

40 Immigration and innovation: Canadian Evidence At least 35 per cent of Canada Research Chairs are foreign-born, even though immigrants are just one-fifth of the Canadian population; Immigrants to Canada win proportionally more prestigious literary and performing arts awards (immigrants comprise 23 per cent of Culler Prize finalists and 29 per cent of winners; 23 per cent of Governor Generals Performing Arts Award recipients are immigrants); Foreign direct investment into Canada is greater from countries that are well represented in Canada through immigration, based on data from the census and from Foreign Affairs and International Trade Canada: 10% increase in immigration will lead to 2% increase in trade

41 Motivation Of interest in its own right given that Canada is one of the highest immigrant intake countries in the world. Also if immigration has a negative impact on the Canadian economy this could foster a backlash against immigration that would fuel the concerns that already exist on the part of immigrants because of - their increasingly slow rate of economic assimilation into the Canadian economy - and their associated increase in poverty. This project reviews the literature on the economic impact of immigration and uses the FOCUS model for the Canadian economy to simulate the impact of additional immigration.

42 Macroeconomic Impact of Canadian Immigration Existing literature identified a gap in our knowledge because the micro-analysis studies often do not account of such factors as responses from employers, housing and other markets, public expenditure, taxes, prices and longer run dynamic adjustments not only in the labour market but in other markets. This project follows the spirit of those suggestions by providing illustrative evidence of the impact of immigration on the Canadian economy through simulations based on the FOCUS model for the Canadian economy, developed by the Policy and Economic Analysis Program at the University of Toronto.

43 Macroeconomic Impact of Canadian Immigration The main outcomes of interest include: real GDP and GDP per capita; unemployment; aggregate demand and especially for housing; investment and productivity; and government expenditures, taxes and net government balances.

44 Central Case: Census 2006 Immigrant Wage Ratio Real GDP (%) Real GDP per capita (%) Total Population ( 000) Source Population ( 000) Employment ( 000) Unemploy t Rate (pc pts) Labour Productivity (%) Federal Balance ($Bill) Provincial Balance ($Bill)

45 Results (1): GDP and Unemployment Real GDP increases by 2.3% by 2021, the end of the 10- year simulation period Population increases by 2.6% because of the additional 1 million immigrants over the period, so that real GDP per capita falls slightly. This occurs largely because of assumptions we have incorporated (that are relaxed in a variant simulation) reflecting the fact that immigrants are initially paid below their marginal productivity and recent cohorts only slowly assimilate into the labour market (based on evidence from the literature). Unemployment is not affected, reflecting the fact that immigrants increase aggregated demand for goods and services (especially housing) and this roughly offsets any increase in unemployment as they enter the labour market and search for employment.

46 Results (2): Aggregate Demand, Investment and Productivity The increase in aggregate demand comes mainly from housing. To a lesser extent it also comes from an increase in non-residential and machinery-andequipment investment, stimulated by various factors: - the overall growth in the economy - the generation of new capital to work with the new immigrants - the positive impact on corporate profits, which tend to expand in advance of the overall economy. Productivity is increased because of the increase in investment relative to consumption and the fact that the average workers in the investment sector (residential and nonresidential) are somewhat more productive than those in the consumer sector.

47 Results (3): Government Expenditures and Tax Receipts Govt. expenditures increase in response to new immigration (although OAS and CPP only by a small amount and come later). Taxes and CPP contributions increase sooner as the new immigrants begin work. The increase in expenditures is less than the increase in taxes paid by immigrants since: 1) The taxes are more immediate while many of the expenditures come later 2) There are economies of scale in the provision of government services 3) Immigrants tend to enter in the tax paying yrs of lifecycle Because taxes paid by immigrants exceed expenditures, immigration adds to overall govt. balances (i.e., $14 billion in total and $8 billion at the federal level by the 10th year of the simulation). This represents a significant reserve against future needs or could perhaps be redeployed into additional social programs or tax cuts.

48 Variant 1 Case: Immigrant Wage = Domestic Real GDP (%) Real GDP per capita (%) Total Population ( 000) Source Population ( 000) Employment ( 000) Unemploy t Rate (pc pts) Labour Productivity (%) Federal Balance ($Bill) Provincial Balance ($Bill)

49 Results (4): Alternative Simulation Assuming No Immigrant Wage Gap Alternative simulation assumes that new immigrants are paid their marginal product same as that of domestic workers. The purpose is to indicate what gains could be had from integrating immigrants more quickly or finding immigrants who can be more quickly integrated. In this case, after 10 years: - Real GDP growth is greater than population growth so that real GDP per capita increases - There is a greater net gain in productivity from accumulation of new capital and the reorientation of output in the economy to investment goods and to net exports - Government balances are $22 billion higher than in base case Again, there is no negative impact on the unemployment rate as the demand directly or indirectly associated with new immigrants meets their addition to the potential supply capacity of the economy.

50 Policy Implications (1) Additional immigration is likely to have a positive impact on the Canadian labour market and economy in general, including net fiscal balances. This is consistent with some earlier studies based on Canadian data and a lifecycle model (Akbari, 1991, 1995). This is generally buttressed by conclusions reached in the existing literature; however, that literature is by no means in agreement. The real concern, however, is with respect to immigrants themselves in that they appear to be having an increasingly difficult time economically assimilating into the Canadian labour market, and new immigrants are increasingly falling into poverty.

51 Policy Implications (2) Furthermore, existing immigrants are likely to be adversely affected by expanding immigration since new and existing immigrants are likely substitutes. Improving the economic integration of immigrants into the Canadian labour market is likely to be beneficial not only for the immigrants themselves but also because such integration is also likely to enhance the generally positive impact that immigrants have on the Canadian economy.

52 Policy Recommendations The Canadian immigrant selection system is premised on the human capital approach. A simple modification to the point system would be to vary the points awarded to education attainment according to factors determining the likelihood of labour market success, such as skill requirements of arranged employment, language proficiency and literacy.

53 Policy Recommendations Improve credential assessment processes as a means to facilitate the transferability of immigrant skills. Have provincial government maintain complete databases of program equivalencies or establishment of a central agency for credential assessment. Promote innovative and creative policy based on evidences rather than ideologies Open other immigration categories that the province really needs: entrepreneur class or investor class

54 Policy Recommendations Several complementary initiatives may reduce underemployment of those already in the Canadian workforce. A potential action for government policy makers is the improvement of labour market information. Immigrants would also benefit from expanding their social networks through educational systems, workplaces, and professional associations. Concerted effort from the government, NGOs, and educational institutions is needed!

55 Policy Recommendations Conduct Cross-culture training, equity and diversity training to both employers and employees, reduce intended and unintended labour market discrimination Embrace the positive values expressed, don t be passive about negative values Accept Obstacles and Challenges but take actions Don t just feel empathy about the immigrants and refugees, celebrate their success!

56 The Socioeconomic Benefits of Immigration to Newfoundland and Labrador Thank you! Contact: Tony Fang, Ph.D., FRSA Stephen Jarislowsky Chair in Economic and Cultural Transformation Memorial University of Newfoundland, Department of Economics J. Robert Beyster Fellow, Rutgers University Research Fellow, IZA Bruneau Centre for Innovation and Research (IIC), 2010B Phone: (709) Jarislowsky Chair in Cultural and Economic Transformation 56