Canada in a Globalized World: Maximizing the Economic Contribution of Immigration to Canada February 4, 2014 Preface This document is a summary of a conference on the economics of migration held on October 18 and 19, 2013 at the University of Ottawa. The conference was organized by the Research Group on the Economics of Immigration of the University of Ottawa in partnership with Citizenship and Immigration Canada and Employment and Social Development Canada. Serge Nadeau, Director Research Group on the Economics of Immigration University of Ottawa The views expressed in this document do not necessarily reflect those of Citizenship and Immigration Canada, Employment and Social Development Canada or the Government of Canada. The purpose of this document is to encourage broad participation in discussions and debates on important public policy issues.
Table of Contents 1. Introduction 3 2. Immigration levels.. 4 2.1 The labour market performance of immigrants. 5 2.2 The macroeconomic contribution of immigrants.. 8 2.3 Immigration levels and downward wage pressure... 9 3. Key determinanct of immigrant labour market success. 10 3.1 Language proficiency... 10 3.2 Transferability of human capital... 11 3.3 Gender... 13 3.4 Social networks. 14 3.5 Demand for skills.. 15 3.6 Discrimination... 15 4. Globalization and immigration... 16 5. Some social aspects of immigration... 18 6. Immigration programs effectiveness.. 20 6.1 The Eligible Occupations Stream of Ministerial Instructions... 20 6.2 Provincial Nominee Programs.. 21 6.3 The Temporary Foreign Worker Program 22 7. Summary and policy implications. 23 7.1 The number of immigrants 24 7.2 The composition of immigrants 25 7.3 The importance of skills 26 7.4 Foreign qualification recognition.. 26 References.. 27 Appendix I: Conference Program. 33 2
1. Introduction Canada is a country of immigrants and is expected to become even more so in the future. The proportion of Canada's population that is foreign born currently stands at around 21 percent. It is the fifth highest among all OECD countries (behind Switzerland, Australia, Israel and New Zealand) and the highest since 1931, when it stood at about 22 percent (see Employment and Social Development Canada 2011 and United Nations 2013). Furthermore, since 2000, immigration has overtaken the natural process of births and deaths as the main driver of population growth. In fact, should current trends continue, by 2031, immigration could explain almost 80 percent of population net growth, and foreign born individuals could represent 28 percent of Canada s total population (Statistics Canada 2010). While immigration can contribute to the quality of life of Canadians by fulfilling humanitarian objectives and increasing social diversity, the guiding principle of immigration policy in Canada is ostensibly economic in nature. 1 However, evidence on the economic contribution of immigrants to Canada s standard of living is rather mixed. Some studies show that immigration may have a small positive impact on Canada s standard of living (Dungan, Fang and Gunderson 2013) while others show that immigration may result in lower productivity and average wage for Canadians, and may also have a negative net fiscal impact on public resources (see, for example, Aydemir and Borjas 2007 and Grubel 2009). Within this context, the Research Group on the Economics of Immigration at the University of Ottawa partnered with Citizenship and Immigration Canada and Employment and Social Development Canada and held a conference on the economics of migration at the University of Ottawa on October 18 and 19, 2013. The objective of the conference was to identify ways to maximize the contribution of immigrants to Canada s standard of living and to assess the performance of current immigration programs and 1 For example, the 2012 Department of Finance Budget plan states Since 2006, the Government has pursued much-needed reforms to focus Canada s immigration system on fuelling economic prosperity for Canada. (Finance Canada 2012, p. 151) In the same spirit, the 2013 Department of Finance Budget plan states Through these reforms, the Government is strengthening Canada s immigration system, moving to a proactive system that helps to foster economic growth and ensure long-term prosperity for all Canadians. (Finance Canada 2013, p. 82) 3
practices in that regard (see conference program in Appendix A). This document highlights the conference s major findings. They are organized under six headings: immigration levels; key determinants of immigrant labour market success; globalization and immigration; some social aspects of immigration; immigration program effectiveness; and summary and policy implications. 2. Immigration levels The annual level of immigration is a key component of Canada s immigration policy. Since 2006, the annual intake of immigrants has been around 250,000 per year; approximately 60 percent of which falls into the economic immigrant category (see Figure 1). At the conference, a number of papers addressed directly or indirectly the issue of the economically optimal level of immigration. Figure 1: Canada Permanent Residents by Category In his paper, Ernie Stokes (Stokes 2013) estimates that to facilitate economic growth and minimize the costs of inflation and unemployment, the level of immigration should gradually increase to 360,000 per year by 2022 to offset the impact of population ageing (see Table 1). 2 Two key assumptions underpinning this result are that Canada can attract immigrants with the necessary qualifications (or who can be trained to obtain 2 Specifically, this is the level of immigration that would minimize the gap between actual and normal (cyclically-adjusted) unemployment rates. 4
them) and that that these immigrants would be employed in jobs that match their qualifications. These are strong assumptions in light of the relatively poor labour market performance of immigrants that has been observed over the last three decades. Table 1: Immigration, Canada and the Provinces (000s) 2013-2022 2.1 The labour market performance of immigrants Further evidence that immigrants on average do not perform as well in the labour market as their Canadian-born counterparts in terms of wages and employment rates was presented at the conference. For example, Bouaissa (2013) shows that while recent immigrants (that is, immigrants who have been in Canada for five years or less) have a labour participation rate that is as high as that of Canadian born individuals, their likelihood of being unemployed is twice as high (see Table 2). Pendakur and Pendakur (2013) also add to the evidence that the situation has been worsening since the 1980s: in 1990, all immigrants arriving at age 18 or less faced little economic disparity, but, by 2005, this only applied to immigrants arriving at age seven or less. This pattern was observed broadly for both men and women, for visible minority and white immigrants, and for Chinese, South Asian and African origin immigrants (see Figure 2). 5
Table 2: Labour Market Indicators for Canadian Born and Recent Immigrants Figure 2: Log-Earnings Gaps Immigrants vs. Natives 6
On the other hand, Akbari and Aydede (2013) show that the labour market performance of immigrants relative to that of natives is not as bleak in all regions of the country. In fact, they show that unlike in the rest of the country, over the 1996-2006 period, the wage earnings gap between immigrants and Canadian-born individuals was in favour of immigrants in Atlantic Canada: in 2006 (1996), natives earned on average 25 percent (30 percent) less than immigrants in Atlantic Canada, while, in the rest of Canada, natives earned on average approximately 20 percent (15 percent) more than immigrants (see Figure 3). According to Akbari and Aydede (2013), the major reason why immigrants perform relatively better in Atlantic Canada than in the rest of the country is that immigrants who settle in Atlantic Canada tend to have better demographic, human capital and labour market characteristics that those settling in the rest of the country. Further, returns to productivity characteristics were discounted less heavily in Atlantic Canada than in larger provinces. The authors conclude that this differential evaluation is necessary for smaller areas to attract immigrants as a compensation for the lack of noneconomic factors such as cultural centres and ethnic goods. Figure 3: Average wage earned by natives relative to immigrants 7
2.2 The macroeconomic contribution of immigrants An overarching issue in deciding whether or not to increase the intake of immigrants is if, in the end, it would increase the economic welfare of natives. But here lies the difficulty. The fact is that even if the labour market performance of immigrants (in terms of employment rate and productivity) could be increased to a level similar to that of Canadian natives, it is not clear that increasing the immigration target to reduce pressure on the labour market would end up increasing the standard of living of Canadian natives (businesses might benefit but not necessarily the population as a whole). In fact, most empirical studies show that immigration even under the most favourable scenarios has only a modest impact on the standard of living of Canadian natives. The study presented by Bouaissa at the conference provides further evidence to that effect. Using a general equilibrium model of a closed economy with overlapping generations to simulate the impact of eliminating the employment and productivity gaps between immigrants and the Canadian born, he finds that the steady state level of Canada s GDP per capita would be 3.5 percent higher, but the welfare of natives would increase by only 0.44 percent per year (see Table 3). Raising the employment and productivity levels of immigrants would in fact mostly benefit the immigrants themselves who would see their welfare increase by more than 16 percent per year. Table 3: Impacts of Improving Labour Market Outcome of Recent Immigrants 8
Another study presented at the conference also finds that immigration has a significantly positive impact on GDP per capita, albeit for the United Kingdom. Using the same type of general equilibrium model as Bouaissa (2013), Lisenkova, Merette and Sanchez-Martinez (2003) show that the United Kingdom s planned reduction in net migration (by approximately a factor of 2) would in steady state reduce real GDP per capita by 2.5 percent and lower after-tax wages by 3 percent. Unfortunately, no information is provided on the possible impact of this policy on the welfare of United Kingdom s natives. 2.3 Immigration levels and downward wage pressure One reason why immigration does not have more of a positive impact on welfare is that it increases the supply of workers and therefore puts downward pressure on wages. There are many studies in the literature that examine the effects of immigration on the labour market outcomes of the native-born. However there is no consensus. For example, Aydemir and Borjas (2007) estimate that a 10 percent increase in immigration-induced labour supply in a skill group reduces the wages of Canadian-born workers by 3 percent. On the other hand, Tu (2010) finds that the effects of immigration on the wages of Canadian-born workers are either not significant or slightly positive. The paper presented by Hou and Picot at the conference complements these findings as it examines the impact of immigration levels on immigrant entry earnings. 3 After controlling for changes in immigrant characteristics and macroeconomic conditions, they find that a 10 percent increase in the size of a cohort of entering immigrants is associated with a 0.8 percent decline in real entry earnings among immigrant men and a 0.3 percent decline among immigrant women in that cohort (see Hou and Picot 2013). They also show that the effect of cohort size on entry earnings does not vary with general macroeconomic conditions, which suggests that the downward wage pressure of increasing immigration levels may be more than offset by increased earnings associated with improving economic conditions. Similarly, during a recession, 3 As explained in Hou and Picot (2013), immigrants labour market performance may be related to the level of immigration because of changes in labour supply. An increase in labour supply that is, a larger immigrant entering cohort could increase competition for the types of jobs sought by entering immigrants and place downward pressure on wages for immigrants arriving in that cohort. 9
the negative wage effect of deteriorating economic conditions on entering immigrants may be partially offset by a reduction in the entering cohort size. 3. Key determinants of immigrant labour market success A concern more pressing than the current level of immigration is probably the poor economic outcomes of immigrants already living in Canada. Addressing this concern would be beneficial not only for the immigrants themselves but also for the economy as a whole. Several papers presented at the conference add to our knowledge of the factors that affect the labour market performance of immigrants; many of them providing further justification for recent policy changes aimed at improving the integration of immigrants into Canada s labour market. 4 3.1 Language proficiency There is ample evidence in the literature on the importance of knowing English and/or French for immigrants to be successful in Canada s labour market. In particular, much of the deteriorating labour market performance of immigrants since the 1960s has been ascribed to their lower proficiency in Canada s two official languages as a result of the shift in their source countries away from Europe towards Asia and to a lesser extent Africa (see, for example, Chiswick and Miller 2001). One possible reason why immigrant groups differ in their language proficiency is that there are differences in the linguistic distance between English and French and their home country languages. In other words, depending on one s mother tongue, some languages may be easier to learn than others. Thus, for example, if English and French are linguistically closer to 4 Much effort has been made by the federal and provincial governments to improve the integration of immigrants into Canada s labour market. Recent changes to the Federal Skilled Worker Program selection criteria include: Minimum official language thresholds and increased points for official language proficiency, making language the most important factor in the selection process; More emphasis on younger immigrants: Introduction of the Educational Credential Assessment (ECA), so that education points awarded reflect the foreign credential s true value in Canada; Additional adaptability points for spousal language ability and Canadian work experience. See Citizenship and Immigration Canada (2012b) for more details. 10
Western European languages (such as German and Italian) than it is to Asian languages (such as Chinese and Hindi), it would be expected that Western European immigrants in Canada would attain a higher level of proficiency in Canada s two official languages, and would attain any given level of proficiency sooner, than immigrants from Asia. 5 In their paper presented at the conference, Corak and Gunduz (2013) quantify the extent to which the languages spoken by immigrants are different from French and English using indices of linguistic distance such as the Levenshtein Distance (see Brown et al. 2008). They find that, starting with the 1986-1990 cohort, there has been a marked increase in the distance between the mother tongue of immigrants and English and French. This result suggests that one reason why recent cohorts of immigrants are less proficient in English or French (than earlier cohorts) is because it is more difficult for them to learn English or French. Another finding by Corak and Gunduz (2013) is that while the distance between the language spoken at home and English narrows over time (albeit slowly), the distance between the home language and French, for immigrants living in Quebec, does not seem to narrow over time at all. In other words, immigrants appear to integrate linguistically faster outside Québec than in Québec. More research is needed to explain this phenomenom. 3.2 Transferability of human capital The paper presented at the conference by Javier Torres (see Fortin, Lemieux and Torres 2013) adds to the already rich empirical evidence that human capital (e.g., years of schooling and work experience) acquired before an immigrant s arrival in Canada is much less valued by employers than human capital acquired in Canada. 6 The paper shows that controlling for the source countries of human capital explains 70 percent of the immigrant-native wage gap. It also provides evidence that education obtained in Asia 5 Other reasons beside linguistic distance why immigrants from some countries may adjust more easily to the language of the host country (even after controlling statistically for the immigrant s socioeconomic and demographic characteristics) include differences in incentives for investing in the host country s language, the availability of access to language training programs in the host country and access to the host country s language prior to migration (see Chiswick and Miller 2004). 6 For studies showing that the returns to years of schooling and years of work experience acquired outside Canada are lower than when acquired in Canada, see, for example, Schaafsma and Sweetman (2001), Frenette and Morissette (2005), Aydemir and Skuterud (2005) and Green and Worswick (2010). 11
tends to be less valued than education obtained in South America, Africa and East Europe, which, in turn, tends to be less valued than education acquired in Oceania, the U.S. and the rest of continental Europe. Finally, it suggests that the knowledge acquired in certain fields of study is more easily transferable between a country of origin and a host country than the knowledge acquired in other fields of study. For example, immigrants who studied in computer science, mathematics and physical sciences seem to experience much smaller wage discounts than immigrants who studied in fields requiring country specific knowledge such as education, health, social sciences and business. In his comments on Fortin, Lemieux and Torres (2013), Serge Coulombe indicated that while there are a number of possible reasons why the returns to immigrant human capital could vary across countries of origin, his research suggests that the most reasonable one is differences in quality (see Coulombe 2013). It is also worth noting that these results provides further justification for the recently introduced requirement that prospective Federal Skilled Workers (FSW) immigrants have their education credentials assessed to see whether they are equivalent to the standards set for Canadian workers. An issue closely related to the transferability of skills of immigrants is the recognition of foreign qualifications. Approximately 20 percent of the jobs in Canada are regulated (Government of British Columbia, 2012). However, according to Zietsma (2010), immigrants are much less likely to work in regulated occupations for which they trained than natives (24 percent vs. 62 percent). A common explanation for this is that even though many immigrants have the appropriate and required skills, their credentials are not recognized by Canadian employers and professional certifying bodies, due to their unfamiliarity with the education systems and job markets of the countries where immigrants come from. In that context, the British Columbia Ministry of Jobs, Tourism and Innovation commissioned a review to examine selected foreign qualification assessment processes managed in British Columbia and to make suggestions to improve these processes. The results of this review were presented at the conference (see Government of British Columbia, 2012). Suggestions to improve these processes include: Develop Pathway to Recognition process maps; 12
Enable some of the foreign qualification recognition process to occur outside Canada; and Review Canadian work experience requirements to ensure that all requirements are necessary to support public safety. In his presentation to the conference, Jonathan Wells (see Wells 2013) also noted that while significant improvements have been made to foreign qualification recognition processes, gaps remain including: Regulators have different levels of capacity and willingness to address foreign qualification recognition across occupations and across Canada; Immigrants continue to face financial barriers as they move through the licensing process; and Prospective immigrants are often not aware of licensing/registration requirements until they arrive in Canada. 3.3 Gender Women approximately represent 52 percent of the total immigrant population in Canada. The majority of them are admitted under the Economic Class category (see Figure 4). Although most of the women in that category are admitted as spouses or dependents, the proportion of them admitted as principal applicants has been growing fast in recent years (Chui 2011). A concern though is that the labour force participation rate of immigrant women is low: for example, in 2006, it was 55.8 percent compared to 63.2 percent for Canadian-born women (Chui 2011). A popular explanation for this is that immigrant women may behave as secondary earners. That is, immigrant women may be marginally attached to the labour market in response to labour shocks and experience little career progression over time. 7 This could be the case, for instance, if immigrant males have a higher potential productivity, if their skills are more easily transferable to the host country, or if the perception of gender roles within immigrant households does 7 The secondary earner theory of female labour market participation decisions relies on traditional views of gender roles within families, with a (male) primary earner devoted to labour market activities and a (female) secondary earner devoted to household production and only occasionally entering the labour market in response to income shocks (Adserà and Ferrer 2013). 13
not support a female's active role in the labour market, regardless of the labour status of the male immigrant. Figure 4: Female Immigrants by Major Admission Category (2009) In their paper presented at the conference, Adserà and Ferrer find no evidence that immigrant women behave as secondary earners. They find, however, some evidence of lower skill mobility and of low status job-traps for the less educated among them (Adserà and Ferrer 2013). 3.4 Social networks Another factor that can have an impact on immigrant success in the labour market is the existence and the use of social networks in job searches. An immigrant network is composed of those established immigrants who are from the same source country or the same ethnic group as the newcomer. In a paper presented at the conference, Schuetze and Wood (2013) examine how immigrant networks affect the match between the skill level of an immigrant's job after arrival in Canada and the skill level of the job held in the source country. They find that although immigrant social networks seem to influence the occupational choice of new arrivals, it does not seem to affect the skill match quality of their jobs. Among the immigrants with ethnic networks, only 16.3 percent found jobs that exactly matched the jobs they had in their source countries. The study also finds that immigrants with higher language proficiencies are more likely to use formal jobsearching tools and less likely to have jobs among those dominant in their networks. 14
3.5 Demand for skills Immigrant success in the labour market does not depend only on the quality of the skills immigrants provide but also on the demand for these skills. In particular, a key determinant of immigrant labour market success in both the short run and the long run is the state of the labour market at the time of arrival. Research shows that arriving during unfavourable labour market conditions and having difficulty finding a first job may lead to a permanent disadvantage in an immigrant s assimilation into the labour market the so-called scarring effect (Aydemir 2003). Some economists (e.g., Abbott and Beach 2011 and Picot and Sweetman 2012) have argued for a return to a procyclical immigration policy, which consists in reducing the immigration level in recessions and increasing it during economic expansions. Two papers presented at the conference are supportive of linking the immigration level to labour market demand: Hou and Picot (2013) and Pescarus (2013). In their paper, Hou and Picot (2013) show that while immigrant entry earnings are negatively affected by cohort size, this effect will be smaller during economic expansions. Similarly, they argue that during a recession, the negative wage effect of deteriorating economic conditions on entering immigrants can be partially offset by reducing the entering cohort size. On a related issue, Pescarus (2013) finds that immigrants who came between 2001 and 2005 and who were trained to work in one of the MI-8 (2013) eligible occupations (these occupations are selected based on actual and expected labour market shortages) perform better in the labour market than other immigrants who arrived in Canada at the same time. Compared to these other immigrants, they have higher labour market participation and employment rates (respectively, 83.1 percent vs. 72.2 percent and 75.3 percent vs. 64.5 percent); and their field of study-occupation match rate is double that of other recent immigrants (43 percent vs. 20 percent). 3.6 Discrimination Another factor that can influence the labour market performance of immigrants is discrimination. Although a large body of literature has been devoted to that subject (see, for example, Reitz 2005, Oreopoulos 2011 and Bonikowska, Green and Riddell 2010), the conclusions remain contentious. The issue is that it is difficult to identify the source 15
of causation: are poor labour market outcomes the result of discrimination or are they caused by unobservable differences in human capital quality? In the paper they presented at the conference, Lewis, Sweetman and Warman (2013) explore whether changes in attitudes following the attacks of September 11, 2001 had adverse consequences for the labour market outcomes of recent cohorts of Muslim immigrants to Canada. They find that male Muslim immigrants experienced a large (but temporary) reduction in employment of around 10 to 12 percentage points and a decrease in weekly earnings of between 19 and 30 percent. They however do not find evidence that the labour market performance of female Muslim immigrants was significantly affected. They note in their paper that they could not eliminate the possibility that the changes in labour market outcome for male Muslim immigrants were due to changes on the supply side (e.g., different types of individuals immigrating) or the possibility that male Muslim immigrants acted/reacted differently in the labour market following 9/11. In another paper presented at the conference, based on a survey of 459 new immigrants living in Toronto East, Akter, Topkara-Sarsu and Dyson (2013) find that among those working, 55.5 percent reported discrimination and 38 percent had experienced bullying or harassment on the job within the previous six months. 4. Globalization and immigration Globalization (free trade, free capital mobility) can be seen as a facilitator of immigration (and vice-versa). Because of advances in communications technology and declines in travel costs, globalization has made it easier for immigrants to keep in contact with their country of origin and for businesses to offshore production (International Organization for Migration 2001). Three presentations made at the conference discuss these points. The first one, Giovani Peri s luncheon address, discusses two channels through which immigration affect trade and offshoring (Peri 2013): The network effect of immigration. According to the Gravity approach (see, for example, Anderson and Van Wincoop 2001), immigration creates ethnic networks, which help reduce information, enforcement and credibility problems and therefore trade costs. Estimates of elasticity of the amount of exports to the 16
number of immigrants are typically around 0.1 to 0.15 (0.09 for Canada according to Wagner, Head and Rees 2002) The substitution/productivity effect of immigration. Immigration and offshoring are substitutable ways of performing production tasks that can compete for tasks performed by natives, especially in the service sector. For the United States, Ottaviano, Peri and Wright (2013) find that immigrants substitute more closely for offshoring tasks than for native tasks; immigrants have a positive productivity impact via the effect on the employment level of natives; offshoring generally pushes natives towards more complex tasks; but immigration does not affect the task complexity of natives in tradable industries. For the U.K., increasing the proportion of immigrants in the total population from 9 percent (the current overall proportion) to 24 percent (the proportion in London) would increase the productivity in service firms by 10 percent and increase service exports by 50 percent. Another major aspect of globalization that was discussed at the conference is that of the brain drain (or high-skill) migration. The recent empirical literature shows that high-skill emigration need not deplete a country's human capital stock and can generate positive network externalities (see, for example, Docquier and Rapoport 2012). Stories abounded in the literature in the late 1990s about the loss of Canada s best and brightest to the U.S. 8 However, as discussion of the brain drain disappeared in the press, so did academic interest in the topic. In their paper presented at the conference, Davies, Mueller and Winer (2013) revisit the issue of the Canada-U.S. brain drain and focus on the post-2000 period. Their results suggest that the brain drain may be a non-issue at this point in time. At the extensive margin, as a proportion of the Canadian population living in Canada, the number of Canadian-born individuals living in the U.S. has declined. At the intensive margin, while there has been an increase in the proportion of Canadian-born individual with university education living in the U.S., this growth rate has been smaller 8 For example, according to Schwanen (2000), a disproportionate number of Canadian migrants to the U.S. were knowledge workers who were needed in Canada to spur productivity in the new information economy. On the other hand, other researchers (e.g., Globerrman 1999), were saying that temporary migration could benefit Canada since it fosters trade with the U.S. and individuals who may eventually return would have acquired the knowledge and experience that would increase productivity in the future. 17
than that of the proportion of individuals with university education living in Canada. It is also interesting to note that the labour force participation rate of Canadian-born individuals living in the U.S. is generally lower than that of both the American-born in the US and those living in Canada, which suggests that a large number of Canadians are not resident in the U.S. for employment purposes. The third paper linking globalization and immigration that was presented at the conference is Beine, Bourgeon and Bricongne (2013). Although many other factors are relevant for migration decisions, the authors focus on the role of business cycle fluctuations and employment prospects. Their results suggest that business cycles fluctuations and employment prospects both at origin and at destination affect the level of bilateral migrant flows in addition to long-run factors such as wage differentials. They also provide evidence that the Schengen agreements in Europe and the introduction of the euro significantly raised international labour mobility between the countries 5. Some social aspects of immigration The paper by Akter, Topkara-Sarsu and Dyson presented at the conference is one of the few papers in the literature dealing with the participation Canadian immigrants in the informal economy. The authors use a survey of 459 Chinese, Bangladeshi and Somali immigrants living in Toronto East to investigate the nature and scale of immigrants participation in the informal economy. They find that participation in the informal economy is relatively common among immigrants: 68 percent of the respondents reported at least some involvement with the informal economy including 46 percent earning income this way; 9 42 percent of those engaged in informal economic activities earned less than $10,000 while 18 percent earned more than $30,000 from these activities; and women were more likely to be active in the informal economy than men. The most often cited reason for engaging in informal economic activities is lack of employment opportunities they want to supplement their formal income to better support their families. Akter, Topkara-Sarsu and Dyson (2013) also found that among those working, more than half (55.5 percent) reported discrimination; 38 percent had experienced 9 It is not clear how these figures compare with those of Canadian-born individuals. However, Reimer (2006) finds that overall, the participation of Canadians in the non-household informal economy ranges between 12 percent (CMA) and 16 percent (non-cma). 18
bullying or harassment on the job within the previous six months; and 70 percent of the jobs held did not meet provincial labour standards. It is however unfortunate that their study does not allow to test whether there is a relationship between the category under which an immigrant was accepted and his/her participation in the informal economy. In her keynote speech, Marta Tienda documents three unintended, society-altering consequences of the U.S. having lost control of its immigration policy: Demographic: The size of the yearly flow of immigrants has quintupled since the 1950s; Latin-American immigrants have become dominant but the share of immigrants coming from Asia has grown the fastest; and, mostly because of family reunification, the relative share of older (that is, 50+) immigrants has increased by more than 50 percent since the early 1980s. Unauthorized immigration: The number of unauthorized immigrants in the labour force has increased by almost 50 percent since 2000. Political landscape: It is estimated that Hispanics will be the largest single ethnic group in Texas in 2020 and will be the majority group in 2030. Latinos and millenials made 2012 a demographic election. Table 4: U.S. Family Immigration Multipliers for 5-Yr. Initiating Cohorts 19
While Canada has a better control of its immigration policy than the U.S. does (thanks to the point system among other things), it is important to keep it that way. And the lessons that Tienda draws from the U.S. experience can be useful in that regard, including: Families multiply (see Table 4). Should family reunification be limited to nuclear family or extended family? Exceptions are consequential. Inconsistent enforcement leads to unauthorized immigration. 6. Immigration programs effectiveness Results on the effectiveness of three programs were presented at the conference: the Eligible Occupations Stream of Ministerial Instructions under the FSW program (FSWP), Provincial Nominee Programs (PNPs) and the Temporary Foreign Worker Program (TFWP). 6.1 The Eligible Occupations Stream of Ministerial Instructions The FSWP selects prospective immigrants to Canada each year on the basis of their ability to contribute to the Canadian economy. Selection criteria include language skills, age and education. In addition, since 2008, to be considered, applicants must show that they have work experience in an eligible occupation. An eligible occupation is an occupation that is deemed by the Minister of Citizenship and Immigration to have a strong labour market demand (see Citizenship and Immigration Canada 2013a). The most recent list of eligible occupations was issued by the Minister in 2013. To get a sense of how effective this policy will be in the future, in her paper presented at the conference, Pescarus (2013) examines how immigrants who came between 2001 and 2005 and who were trained to work in one of the eligible occupations on the 2013 list performed in the labour market in 2005 compared to other immigrants who arrived in Canada at the same time. She finds that they actually performed better: they had higher labour market participation and employment rates (respectively, 83.1 percent vs. 72.2 percent and 75.3 percent vs. 64.5 percent); and their field of study-occupation match rate was double that of other recent immigrants (43 percent vs. 20 percent). There are, however, two caveats to this study if it is to be used as a reliable predictor of the 20
effectiveness of the 2013 Ministerial eligible occupations list. One is the assumption that the labour market demand for workers in the occupations on the 2013 list will be similar in the future to what it was in 2005. The other one is that the analysis covers all immigrants despite the fact that the eligible occupation criteria applies only to the principal FSW applicant. 6.2 Provincial Nominees Programs PNPs are becoming a key component of immigration policy. While in 2000 immigrants through the PNPs accounted for about 1 percent of all economic immigrants, preliminary data indicates that in 2012 they accounted for about 25.4 percent (Pandey and Townsend 2013). PNPs and the FSWP have different selection criteria. For example, PNPs draws more heavily on semi-skilled workers and, depending on the province, may require a job offer to qualify. A recent evaluation of the labour market performance of provincial nominees (PNs) who arrived between 2000 and 2008 found that while PNs had higher average initial earnings than FSWs, they had lower earnings within five years (Citizenship and Immigration 2011). The evaluation also found that the retention rate of PNs varied widely across provinces. In a paper presented at the conference, Pandey and Townsend (2013) examine how much the differences in selection criteria explain the difference in earnings and retention between PNs and FSWs. Here are some of the key findings: Differences in characteristics and time of arrival play at most a small role in explaining differences in entry earnings between PNs and FSWs. The largest observed differences are in Alberta and British Columbia, where most PNs had pre-arranged employment. Slower earning growth for PNs is partly explained by educational differences. Except for Manitoba, the higher retention rates of PNs are explained by a combination of arrival in more favourable years and the lower average educational attainment of PNs. In another paper presented at the conference, Seidle (2013) looks at governance aspects of the PNPs. He observes that while one of the PNPs strengths is that provincial governments have had considerable leeway to shape their programs to respond to their 21
economic and labour market needs, which has led to very positive results, 10 major program integrity issues have emerged in a number of provinces, particularly in regards to business investor programs. There have also been significant tensions over the caps on the number of nominees each province may accept. Although processes of multilateral governance (i.e., involving the federal, provincial and territorial governments) are being more extensively used in the immigration field, PNPs have since the outset been subject to a strong bilateral dynamic: the federal government interacts with each province on its own. As a result, some decisions may not be sufficiently informed by broad policy objectives and lessons learned in other provinces. The paper concludes by proposing that the federal, provincial and territorial governments jointly develop a policy framework based on shared objectives for the future development of these important programs. 6.3 The Temporary Foreign Worker Program The objective of the TFWP is to provide short-term solutions to shortages of regional or occupational labour. In a paper presented at the conference, Gravel et al. (2013) look at the motives and the relative costs of hiring temporary foreign workers (TFWs) in seasonal industries in Québec. Based on surveys of employers and TFWs, they find that employing TFWs is expensive: the costs can vary between $2.50 and $10.00 per hour more than for employing local workers. The issue though is that there is not much choice: local workers are not interested in these jobs (among other things, job placement services steer recipients of employment insurance and income security to non-seasonal jobs) and these jobs cannot be automated. In other words, at this juncture, for many seasonal businesses, employing TFWs is a matter of survival. 10 For example, PNP applications have been processed considerably faster than under the FSWP (Young 2011). The PNP has also led a greater proportion of new arrivals to settle outside the three largest provinces, contributing to population growth in some of the smaller provinces (Seidle 2013). 22
Key Conference Findings Thanks to the point system among other things, Canada has a better control of its immigration policy than the U.S. does, and it is important to keep it that way (Tienda 2013). Globalization is a facilitator of immigration, and vice-versa (Beine 2013, Mueller 2013 and Peri 2013). There is a negative relationship between the size of a cohort of entering immigrants and their earnings (Hou and Picot 2013). Human capital (e.g., schooling and work experience) acquired outside Canada is often not comparable to that acquired in Canada (Fortin, Lemieux and Torres 2013). Because of the changes in the tops countries of origin, it is increasingly difficult for immigrants to become proficient in English or French (Corak and Gunduz 2013). Immigrant social networks seem to influence the occupational choice of new arrivals, but they do not seem to affect the skill match quality of their jobs (Schuetze and Wood 2013). There is no evidence that women immigrants behave as secondary workers (Adserà and Ferrer 2013). Much progress has been done in regards to the recognition of foreign qualifications but more needs to be done (Government of British Columbia 2012 and Wells 2013). Raising the employment and productivity levels of immigrants would significantly increase their economic welfare, but it would have little impact on that of natives (Bouaissa 2013). Immigration has a significantly positive impact on GDP per capita for the United Kingdom (Lisenkova, Merette and Sanchez-Martinez 2003). From a purely labour supply point of view, the level of immigration should gradually increase to 360,000 per year by 2022 to offset the impact of population ageing (Stokes 2013). Provincial Nominee Programs are generally successful programs: Compared to economic immigrants, provincial nominees experience higher entry earnings (although they experience slower subsequent earnings growth) and are more likely to stay in the province to which they were initially destined (Pandey and Townsend 2013 and Seidle 2013). The Temporary Foreign Worker Program fills a need: at this juncture, for many seasonal businesses, employing temporary foreign workers is a matter of survival (Gravel et al. 2013). The labour market performance of immigrants is much better in Atlantic Canada than in the rest of Canada (Akbari and Aydede 2013). The economic situation of immigrants who arrived as children has been worsening since the 1980s (Pendakur and Pendakur 2013). Participation in the informal economy is relatively common among immigrants; principally because of a lack in employment opportunities (Akter, Topkara-Sarsu and Dyson 2013). After September 11, 2001, male Muslim immigrants experienced a large (but temporary) reduction in employment. But there is no evidence that female immigrants were affected (Lewis, Sweetman and Warman 2013). 23
7. Summary and policy implications In Canada, as in many other developed countries, immigration policy ranks as one of the most debated economic and social policies. The importance attached to the topic reflects in part, the demographic challenges aging populations and slowly growing labour forces that most high-income countries face, challenges that immigration may help address. While immigration may not be the panacea to Canada s demographic challenges that it is sometimes played up to be, the fact is that it has been and will probably remain an important pillar of Canada s governments labour market strategy for the foreseeable future. In that context, all other things the same, it is important that immigrants be as economically successful as possible. Much effort has been recently made by the federal and provincial governments to help ensure the economic success of newcomers (see Citizenship and Immigration Canada 2012b). Nevertheless, more will probably have to be done in the future. The objective of this conference was to identify ways to maximize the contribution of immigrants to Canada s standard of living and to assess the performance of current immigration programs and practices in that regard. This section summarizes the conference key findings along with their policy implications. They are arranged under four headings: the number of immigrants, the composition of immigrants, the importance of skills and foreign qualification recognition. 7.1 The number of immigrants While from a narrow labour force growth point of view, one could argue that the number of immigrants should be raised (Stokes 2013), several papers presented at the conference reinforce the notion that immigrants do not perform as well in the labour market as their Canadian-born counterparts and do not significantly improve the welfare of Canadian natives (see Bouaissa 2013, Hou and Picot 2013, and Pendakur and Pendakur 2013). Further, because of their lack of success in the labour market, immigrants are more likely to participate in the informal economy (Akter, Topkary-Sarsu and Dyson 2013). Several recent government announcements are aimed at selecting/attracting immigrants that will have better chances of succeeding in the labour market. These changes include the introduction of minimum language thresholds for FSWs; an increased emphasis on 24
younger immigrants; a method of pre-assessing credentials before the immigrant arrives; and the relatively new Canadian Experience Class which aims to attract immigrants with work/study experience in Canada (Citizenship and Immigration Canada 2008). Until these reforms bear fruit, it is probably counterproductive to raise the current 250,000 intake. In fact, in the current context, one could even argue for a lower near-term immigration target until the relative labour market performance of immigrants has improved. Be that as it may, the conference provided further evidence that immigrant intake should be pro-cyclical and depend on labour market demand (see Hou and Picot 2013 and Pescarus 2013). 7.2 The composition of immigrants All presentations made at the conference that touched on the PNPs were unanimous that these are generally very successful programs (see Akbari and Ayede 2013, Pandey and Townsend 2013 and Seidle 2013). The only suggestion may be that there could be more coordination between the federal, provincial and territorial governments so that all players are sufficiently informed on broad policy objectives and lessons learned in other provinces (Seidle 2013). The TFWP was also found to fill a need (Gravel et al. 2013): at this juncture, for many seasonal businesses, employing TFWs is a matter of survival. However, two groups that should probably require closer attention in devising immigrant selection processes are spouses and families. Recent changes to the FSWP immigration criteria have added adaptability points for spousal language ability and Canadian work experience. However, one could argue that it should go further as economic success is usually measured at the household level, not at the individual level. The issue is that when a FSW immigrant with a spouse is accepted, it is really two immigrants who are accepted. And, one can expect that immigrant spouses will want to participate in the labour market (just as most spouses of Canadian natives do). This is supported by research presented at the conference that rejects the notion that immigrant women are secondary earners (see Adserà and Ferrer 2013). Another immigrant category that may deserve more attention is the Family Class. Canada has one of the most generous family reunification programs in the world. The U.S., U.K., Australia and New Zealand do not allow grandparents to be sponsored at all or only in very limited circumstances, and they have very restrictive criteria for the 25
sponsorship of parents (see Citizenship and Immigration Canada 2013b). Recent reforms have been introduced to reduce the backlog of applicants in that class. However, given the possibly negative long term economic and social consequences of overly generous family reunification criteria (see Tienda 2013), one might consider further tightening the rules in the future (possibly along the lines of the rules followed by Australia). 7.3 The importance of skills Several papers presented at the conference add to our knowledge of the importance of choosing immigrants with the right skills and provide further justification for recent policy changes aimed at improving the integration of immigrants into Canada s labour market. For example, Fortin, Lemieux and Torres (2013) provide additional evidence that human capital (e.g., schooling and work experience) acquired outside Canada is often not comparable to that acquired in Canada, which justifies the recent introduction of the Educational Credential Assessment and the increased emphasis on younger immigrants in the context of the FSWP selection criteria. Another finding that has important policy implications is that of Corak and Gunduz (2013) which shows that the mother tongues of prospective immigrants are becoming increasingly different from English and French. This means that it is increasingly difficult for immigrants to become proficient in English and French and therefore increasingly difficult for them to successfully integrate the labour market success. This finding provides not only further support for recent policy changes requiring minimum language standards for principal applicants to the FSWP and increasing language requirements for applicants to the PNPs, but also for continuing government support for basic language training (as more than two-thirds of all immigrants landing in Canada are admitted under the family unification or the refugee programs and are therefore not subject to the new language requirements). 7.4 Foreign qualification recognition One more area where progress could be made to help ensure the success of immigrants in the labour market is the recognition of foreign qualifications. As pointed out by Government of British Columbia (2012) and Wells (2013), much progress has been made in that area, but more needs to be done. In particular, as noted in Wells (2013), ongoing 26