Tuesday, November 22, 2011

Bad News from the Immigration Front

Immigration Minister Jason Kenney announced recently that Canada will allow the entry of 240,000 permanent residents to enter the country next year. This is bad news for Canada struggling with a large fiscal deficit, unemployment, income inequalities and environmental problems.

A recent study, which I co-authored with Patrick Grady, showed that recent immigrants who arrived between 1987 and 2004 cost taxpayers an average of $6,000 every year. Applying this figure to the projected number of immigrants, by the end of next year, the tax payer burden will have increased by $1.4 billion and will continue to do so for many years.

This burden does not appear in any government budgets. It arises from a fact, found in data published by Statistics Canada: Recent immigrants on average earn about 70 percent of what other Canadians earn. Because of the progressive income tax system, they pay only half of what other Canadians do. Their low incomes also cause them to pay lower amounts of other taxes.

At the same time, the immigrants are entitled to and use all of the benefits provided by Canada’s welfare state. The result is the annual net fiscal burden of $6,000 per immigrant.

This cost does not account for the other negative effect the immigrants have on unemployment, congestion, pollution and the number living in poverty. Protests about income inequality should be directed at immigration and other government policies, not the free market system.

The Minister should be praised for a shift of emphasis on the selection of immigrants in the Canadian Experience Class program, which fast tracks skilled foreign workers and graduate students who have spent time in Canada on temporary permits or student visas, but the effect on the fiscal deficit is minimal. The number in the Canadian Experience Class in the first full year of the program in 2009 was 2,545. Assuming that on average they have a spouse and one child, under the existing classification system, the program will affect 7,635 immigrants, which comes to 3.2 percent of the 240,000 total to be admitted next year. Nor will the numbers grow much in the future. Only small numbers of temporary workers and students qualify.

According to the Minister, immigrants are needed to meet labour shortages. This argument involves circular reasoning. These immigrants create demand for labour through their needs for housing, schools, hospitals, universities, roads, bridges, sewers, water supply, consumer goods and services. In fact, most of the current and projected labour shortages are the result of recent mass immigration.

The demand for housing from immigrants is especially notable. Assuming an average family size of three and the same settlement pattern as in recent years, new immigrants next year in Toronto will require 27,272 dwelling units, 2,273 every month or 568 every week of the year. The corresponding weekly figures are 235 for Vancouver and 233 for Montreal. To build these accommodations requires much labour and scarce land. It will also lead to higher housing costs and the number of homeless.

Worth noting also is the effect of these immigrants on health care. Given that the average physician in Canada has 240 patients, by the end of next year one thousand additional doctors will be needed. Canada already has a growing shortage of physicians, so waiting lists will lengthen even more, as will crowding in the emergency departments of hospitals.

If the past is guide to the future, there will not be enough doctors in next year’s cohort to meet the new demand. The granting of medical licenses to all immigrants who claim to be a doctor is not a solution either. Canadians will not stand for the deterioration in the quality of services they receive from their doctors.

Canada’s immigration policy needs to be reformed. The influence of politicians, civil servants and the immigration industry on its formulation should be minimized. The heralded points system has failed and needs to be scrapped.

In its place should be market forces used in the selection of economic immigrants (refugees raise a different set of issues and are a small proportion of the total anyway). The basic concept is that landed immigrant visas will be issued only to applicants who have a verified, pre-arranged employment contract at a pay equal to at least that of the average of Canadian. They may be accompanied by spouses and under-age children.

With this minimum income, immigrants will no longer impose a fiscal burden on taxpayers and have a positive effect on average per capita incomes of all Canadians. In addition, the annual inflows will vary according to cyclical labour market conditions, reducing unemployment when economic growth is slow.

The adoption of the proposed policy will make immigrants serve Canada, not Canada serve immigrants. Voters, including past immigrants, are bound to reward politicians who make this change.

Herbert Grubel
Professor of Economics (Emeritus), Simon Fraser University
Senior Fellow, The Fraser Institute

1 comment:

  1. Herb Grubel is an immigrant to Canada. I like his idea of a combined US / Canada dollar provided the Americans pay off their debts first. It would make travel to the US easier and cheaper.