Canada Needs Immigrants, Just Not So Many

Canada tries to manage its immigration to make it serve the national interest through policies that set the number of immigrants admitted every year and select the candidates to be admitted based on the specific characteristics of the following main groups of applicants: principal economic class immigrants and their immediate families; the extended families of Canadian residents; and refugees and asylum seekers. Several European countries are in the process of revising their immigration systems and are looking at Canadian policies with respect to the economic class immigrants for inspiration. An op ed even recently appeared in the New York Times touting the Canadian system as a model for the United States. So, has it really worked that well?

The selection process for principal economic immigrants under the Federal Skilled Worker Program, which is the largest single program for economic class immigrants, uses a points system to assess an applicant’s prospect for succeeding in Canada’s highly-developed economy by considering six selection factors, namely: English and/or French language skills; education; work experience; age; arranged employment in Canada; and adaptability. Only applicants with a point score of 67 out of 100 or above are approved and are eligible to be admitted. The Canadian Experience Class and Federal Skilled Trades Program, which are also aimed to pick labour-market-ready immigrants impose similarly rigorous criteria and allow for Express Entry.

Unfortunately, as rational and appealing as this process seems at first glance, it is only a small part of an overall system that has failed to deliver on its goal of providing Canada with a flow of immigrants who perform as well as other Canadians in the labour market. The sad fact is that Census data show that immigrants who arrived since the mid-1980s have on average earned incomes and paid taxes much lower than other Canadians, even after they have been in the country as long as 20 years.

A main reason for this surprising outcome is that the so-designated principal applicants, who have passed the points test under the Federal Skilled Worker Program or qualified for the Canadian Experience Class or Federal Skilled Trades Program and were expected to be economically successful in the competitive Canadian labour market, routinely only make up about a sixth of all immigrants.

The rest, who make up most of the immigrants admitted, have not been subjected to the points test or similarly rigorous admission criteria under other programs. They comprise: the immediate family of the principal applicants (spouse and minor children); the numerous so-called family class immigrants, who are members of the extended families of earlier immigrants and refugees; the refugees and asylum seekers; and immigrants admitted under many other smaller economic class immigration programs like Live-in Caregivers and Immigrants Investors, which are problematic in their own right. The Provincial Nominee Program, which varies from province to province and is too complicated to go into here, also is largely labour-market focussed.

The incomes of all these various classes of immigrants, who are not subject to the rigorous points system, are included in the calculation in the average incomes of all immigrants and are likely to be one of the main reasons why this average is so disappointingly low as reported in the Census. Parents and grandparents are a group of family class immigrants whose numbers are not large, but whose earnings are particularly low.

The second pillar of Canadian immigration policy involves the determination of the number admitted annually. The government now sets this number and submits it to parliament in the Annual Report to Parliament on Immigration, where it is passed routinely without debate. This number has increased steadily from an annual figure of under 100,000 in the middle 1980s to 330,800 in 2019 and is proposed to increase further to 350,000 by 2021. It goes without saying that the larger the number of immigrants selected the more difficult it is to find only those with the strongest qualifications likely to be successful.

Moreover, compounding the problem is that during this period, almost 60 per cent of immigrants have settled in Canada’s three largest cities, Toronto, Montreal and Vancouver, where they have raised the cost of housing and created traffic congestion and over-crowding of hospitals, educational institutions and recreational facilities to a much greater extent than have occurred in the rest of the country.

The private sector and government have invested heavily in housing and infrastructure facilities during this period in part to accommodate the inflow of immigrants. But as Canadians can see, they have obviously not done a very good job of relieving the existing shortages, which implies that the number of immigrants is greater than the country can absorb without reducing the well-being of the Canadians already here who have to compete for housing and the use of infrastructure.

How can these problems of Canada’s immigration policies be remedied? Most obvious is the need to curtail or stop entirely the acceptance of immigrants who qualify only because they are members of the extended families of earlier immigrants. Such a policy would make it possible to meet the target number of immigrants and replace the extended family members with principal applicants and their immediate families selected under points-based economic class immigration programs who should be economically much more successful than the extended family class immigrants they replace. This is exactly the opposite of what has been happening in recent years, largely in response to political pressures from existing immigrant groups anxious to bring their family members to Canada.

As an aside, it would also be desirable to reinstate the past practice of having an immigration officer personally interview all candidates for admission. No corporation would ever hire someone sight unseen for a lifetime job. So why should the government do any differently?

Only through a process of trial and error is it possible to determine the number of immigrants that matches the country’s absorptive capacity in the short run. Thus, it makes sense to temporarily reduce the number of immigrants to be admitted to, say, 150,000, as was recently proposed by Maxime Bernier, the leader of the Peoples’ Party of Canada. And then we must watch closely to see what happens to immigrants’ earnings and cost of housing and congestion. If they continue to be a problem, the number admitted needs to be lowered some more. If they improve, the number could be maintained or even raised.

Canadians deserve a public discussion about the merit of the current immigrant selection policies and the numbers admitted annually. The campaign for the upcoming federal election provides a good opportunity to get it underway. Bernier has started the debate, let’s hear what the other parties have to say about the problems he’s identified and the solutions he's proposed.

Herbert Grubel is professor emeritus of economics at Simon Fraser University.
Patrick Grady is with global-economics.ca