Canada Immigration and Global Warming

by Herbert Grubel and Patrick Grady

Prime Minister Justin Trudeau recently announced large increases in carbon taxes to reach a new ambitious target for the reduction of Greenhouse Gas (GHG) emissions by 2030. The critical media reaction to this announcement focused on the economic burden that the policy will impose on Canadians, the amount of global warming it will prevent, and the chances that the tax will actually be adopted by future governments.

Absent from the discussion, however, was any mention of how current immigration policies will increase the effort needed to reach this target. Based on experience, these policies will add three-quarters of a per cent to Canada’s population every year so that in 2030, all else being equal, the country’s population and total GHG emissions will be 7.5 per cent above what they would have been otherwise. This gap will be much larger by 2050, the year the government has promised to reduce emissions to net-zero as required by the Paris accord.

Supporters of current immigration policies are likely to argue that the higher emissions will not require higher taxes on non-immigrant Canadians to attain the zero targets since the immigrants will raise national income and the tax base proportionately to the added cost of emission control measures.

That would be true if immigrants on average paid the same amount of tax as the average non-immigrant. In fact, they do not. As we have shown, using data published by Statistics Canada, recent immigrants on average have lower incomes and pay less tax than other Canadians, which means the latter will have to bear a larger fiscal and economic burden than they would in the absence of the immigrants.

If the higher tax and economic burden of emission control measures were to cause voters to elect governments that reduced the intensity of these measures, that would reduce progress toward net-zero. But migration also has more direct effects on emissions. Consider a migrant from India, where according to data from the World Bank for 2016, the average emission of CO2 (which represents about 80 per cent of all GHG emissions) was 1.82 metric tons per year. In Canada, the average was 15.09 metric tons. As a result, after this migrant settled in Canada global emissions would increase by 13.27 metric tons per year.

The size of this effect created by all of Canada’s immigrants is determined by the average emissions in their country of origin as well as the numbers of immigrants from each of these countries. Using CO2 emissions data for 2016 from the World Bank, and Immigration, Refugees and Citizenship Canada data on the sources of immigrants, we estimate that in 2017 the increase in global emissions was 11.33 metric tons per immigrant and that the 286,000 immigrants admitted in that year added a total of 3.25 million metric tons to global emissions and will add 97.4 million more metric tons over the remaining 30 years of their assumed lifespan. These figures are just for the immigrants who arrived in 2017, but they also are relevant for immigrants arriving in future years in numbers that according to the latest government plans will increase substantially.

All the above calculations are based on assumptions that others may question and wish to change, including the assumption that immigrants are average carbon-producers both in the countries they leave and when they get to Canada. That almost certainly is not exactly true, though with existing data more precise assumptions and estimates are not possible. In any case, we are confident that such changes would not alter our basic conclusion that immigrants will add considerably to Canada’s contribution to the global stock of CO2 emissions. Given the low average incomes and tax payments of immigrants, elimination of these added emissions will raise taxes and cause economic dislocations that fall primarily on non-immigrant Canadians.

As mentioned, these increased burdens may well lead to future governments being elected on the promise to reduce or possibly even eliminate the carbon taxes that have been imposed recently. If that happens, Canada’s immigration policies will have resulted in a permanent addition in the stock of CO2 in the atmosphere and raised the risk of costly global warming. This problem can be avoided, however, if the government sets much lower target numbers for immigration and focuses more on admitting workers with needed skills rather than dependents and family members.

In the end, and as it should be, voters will decide whether they want the government to change immigration policies or whether they are willing to accept higher costs to gain the alleged benefits of mass immigration. But voters are entitled to be informed about the costs involved in these choices. The ministers of immigration and environment should take responsibility for providing this information to Canadians — and to Prime Minister Trudeau before he sets off on another pilgrimage to an international forum to talk about his government’s commitment to eliminate CO2 emissions or increase immigration.

Herbert Grubel, formerly MP for Capilano-Howe Sound, is an emeritus professor of economics at Simon Fraser University. Patrick Grady is with global-economics.ca.

This study has been published by the Financial Post on January 23, 2021 at https://financialpost.com/opinion/opinion-immigration-may-make-global-net-zero-harder

 

SHOULD CANADA COPY AUSTRALIA'S IMMIGRATION POLICIES?

Robert Gregory is a distinguished Australian economist, who at a recent academic conference had this to say about immigration policy issues in his country:

“Over the last decade, …net overseas migration added between 1 and 1.2 million people every 5 years to the Australian population (around 5% of the population stock) …As a result, the infrastructure in Sydney and Melbourne, our two major cities where immigrants largely settle, has become increasingly inadequate…The Australian current housing boom…is being generated by… low interest rates and the [fact] that Australia has more people than expected… Government and all segments of the population at large have become increasingly dissatisfied with [these problems]…Australian immigration authorities therefore have begun to reduce the granting of permanent immigration visas.”

This account of conditions in Australia pretty well describes those in Canada. Immigrants have:

·       added to Canada’s population four percent over the last five years and are scheduled to add even more in coming years.

·       settled mainly in Canada’s largest cities, Toronto, Vancouver and Montreal. More than 300 newly arrived immigrant families are settling in the Vancouver Metropolitan are EVERY WEEK.

·       caused Vancouver housing costs to be the second highest of all North American cities.

·       caused serious traffic congestion. Schools, recreation and other public facilities are overcrowded. Hospitals in Ontario routinely place patients in linen closets and hallways.

   

Public opinion surveys show that most Canadians want their government to reduce the number of immigrants.

However, the response of Canada’s government to these conditions has been much different from Australia’s. Australia has reduced immigration; Canada has increased it, to unprecedented levels of over 300,000 annually.

Canadians, including the many recent immigrants, in the country’s large cities suffer much as a result of the government’s immigration policies. Their suffering could be reduced by cutting the total annual number of immigrants to 100,000 for a limited period of time.

During this period, construction could increase the supply of housing and infrastructure facilities to eliminate the current shortages; government agents could apply their limited resources to the selection of immigrants with the greatest prospects of economic success; and information could be gathered about the number of immigrants whose demand for housing and infrastructure facilities can be met by the construction industry and financed by governments.

When politicians increase immigrants to this optimum number, they can expect to be rewarded by voters at the ballot box.

Herbert Grubel

Emeritus Professor of Economics

Simon Fraser University

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

In praise of real estate speculators

Throughout history, politicians and the public have hated speculators on the grounds that they create scarcities, raise prices and cause hardships for consumers. This view is behind the recent decision by the B.C. government to impose a tax on unoccupied housing presumed to be owned by speculators and which is expected to lower the cost of housing.

The implementation of this policy has run into a number of problems that can be solved by some tweaking of the law, but it will do nothing to reduce prices in the long-run. Speculators raise house prices when they buy and keep them empty or rent them out. The speculators realize profits only when they sell them later, at which time they lower prices. In effect, speculators do not add to the demand for and cost of housing, but only smooth it through time. The real cause of the high and rising cost of housing is a continuous excess of demand over supply.

The excess demand in Metro Vancouver is determined by the high level of immigration, which in recent years has brought 250 families to the region every week. Under the policies announced by the current government, by 2020 this number will be 375 families a week. Adding to this demand are the housing requirements of foreign students, who in 2017 numbered 130,000 and are expected to grow substantially in the future.

In principle, in a market economy the supply of housing should keep up with the growth in demand. However, as the record shows, this has not happened. The reason given by the construction industry is that it faces delays and cost-increasing obstacles due to the scarcity of building sites, zoning restrictions, regulation affecting building codes, and a shortage of skilled workers. Another reason explaining the scarcity and high cost of rents is the existence of rent controls, which lower returns from investment in rental units over their lifetime to levels at which investors are staying away in troves.

Neither demand nor supply are likely to change soon. Politicians will not reduce demand coming from immigration. Their electoral success depends too much on the votes of immigrants and on the financial support from the real estate industry, employers of cheap immigrant labour, and producers and retailers whose markets are increased by immigrants. Any politician proposing the end of rent controls faces sure electoral defeat at the hands of renters subsidized by the existing law.

Neither will there be a decrease in the number of foreign students. Public universities increase their financial resources through the tuition paid by foreign students. Many private educational institutions depend entirely on income from foreign students.

Given the prospect of future growth in the demand for and continued limits on the increase in the supply, the public will have to live with these facts unless they show their displeasure at the ballot box with the policies of Canada’s virtue-signalling elites who are lobbying for ever-larger numbers of immigrants in the future but show little concern for the blight of ordinary Canadians facing a housing affordability crisis. Asking these elites for taxes on speculators, empty housing and tougher rent controls will not do the job.

Published in the Vancouver Sun on March 25, 2018

Canada’s Housing Strategies in Perspective

The federal government’s newly announced housing strategy is a sham. It will do nothing to end the rapid rise in the cost of housing because it does not address excess demand, which according to the iron law of economics, drives up prices. The excess demand has persisted for many years because the supply of housing produced by the private sector has been insufficient to meet the demand.

This failure of the private sector is due mostly to municipal regulations that require the completion of red tape and use much costly time to issue building permits, prevent the creation of greater population density and the construction of housing on land dedicated to other uses like agriculture and parks. Municipal politicians are aware of this problem, but easing them has been prevented by the political opposition from influential voters.

 

Municipal politicians have faced less opposition to the imposition of taxes on speculating foreigners, who have no votes in elections, but this policy has no impact on supply. Speculators typically hold their purchases for only a limited time since they have to sell their investments to realize their profits. As a result, speculators merely move forward in time price increases that would otherwise have taken place later.

At the same time municipal politicians maintain rent controls, which protect them from the loss of votes by renters but which reduce the supply of housing

Municipal politicians unwilling to deregulate the housing sector or eliminate rent controls have pressured the federal government to end the housing crisis by adopting policies that increase supply. The response by Ottawa has been the adoption of a “housing strategy”, which was announced with great fanfare. It promises to lead to the construction of up to 60,000 new homes over the next 10 years, the repair of up to 240,000 existing community homes and the payment of rental subsidies of up to $2,500 annually to 300,000 needy families.

The policy adds only 600 new houses a year to the supply in all of Canada, which is shown below to be trivial given the annual additions to demand. The renovation of existing stock will not increase supply and subsidies to renters will, if anything, increase the demand for housing.

The federal housing strategy is silent on the demand for housing, which is determined mostly by the growth in population through natural increases (birth minus deaths) and immigration from abroad. In recent years the growth in population has been dominated by immigration, which during the years 2006-2016 (net of emigration) has increased Canada’s population by 240,000 annually, which is equal to 65 percent of the total increase of 3.8 million (http://www5.statcan.gc.ca/cansim/a47).

Assuming that on average three immigrants make up a family requiring housing, immigration policies have added an average 81,126 housing units a year to the country’s demand. This figure will rise to 120,000 a year by 2020, when immigration will reach the government target of a maximum 360,000. That year the federal housing strategy will provide 6,000 housing units above those created by the private sector, which clearly is a sham.

However, this is not the end of the story. Immigrants tend to settle predominantly in the metropolitan areas of Vancouver, Toronto and Montreal, which in 2011 have received 14, 37 and 15 percent of all immigrants, respectively (http://www.metrovancouver.org/). For the Vancouver area this means that during the 2006-2016 period an average 11,357 immigrant families have settled there, which means that they have demanded 947 housing units per month or about 237 per week. The analogous figures are 625 for Toronto and 257 for Montreal. By 2020 these numbers will rise by 50 percent as a result of the announced higher level of immigrants.

The implication of the foregoing analysis is that to prevent the development of an ever increasing housing crisis, municipal governments will have to relax existing regulations to increase the supply of housing. Increased federal subsidies would help, but to be effective they would have to so high as to add intolerable amounts to the fiscal deficit.

Therefore, the only federal policy with any chance of dealing successfully with the housing crisis is to reduce immigration levels to perhaps 50,000 or 100,000 a year for a limited time. Once the private supply of housing has eliminated the backlog and prices have stabilized, immigrant numbers can be raised again to levels reflecting the economy’s absorptive capacity and their contribution to the well-being of Canadians.

LOWER IMMIGRATION TO CATCH UP

This article has been published in the Vancouver Sun on October 2nd, 2017. It is found at http://vancouversun.com/opinion/op-ed/opinion-curb-immigration-to-let-housing-catch-up-to-demand

Joffre Lakes Provincial Park is one of the most scenic recreation areas in Canada, if not the world. A 500 meter walk from the road reaches a small turquoise lake, an exhilarating five kilometer hike after two hours and an altitude gain of 400 meters reaches a second, a further 30 minutes a third lake. The path goes through an ancient forest, across avalanche chutes covered with slide alders and is bathed in the sound of rushing waters from a nearby creek and waterfalls.

The views from the lakes are spectacular. Evergreens line the shores and the waters reflect the sight of the large glacier descending from the 2,700 meters high Joffre Mountain. The highest lake is so close to this glacier that one can see serrated columns of ice and occasionally thundering falls of ice and rocks.

On this year’s Labour Day Sunday my wife’s and I drove to the park, where we encountered a traffic jam near the entrance and a long search for the last spot in one of three parking lots. The wait for the use of the single toilet at the start of the trail was 20 minutes. An RCMP officer at the scene told me that these conditions prevailed also during weekdays in the summer.

On the hiking path, we stopped every few minutes to let lines of younger and more vigorous hikers pass us. As we found out later, these hikers had parked on the side of the road, obviously willing to pay the tickets that a large sign had announced. It simply made more sense for them to pay this fine than to drive 3-hours back to Vancouver without stopping at the Park. Most unpleasant were the large crowds at the prominent viewpoints at the lakes, which offered standing room only and were bathed in loud chatter spoiling the normal silence of the environment.

Such unpleasant overcrowding of the Joffre Lakes Park is typical of all recreational facilities in the Lower Mainland. It also afflicts the region’s roads, bridges, public transit, hospitals, schools, universities and water supply and most importantly, Vancouver’s housing market.
  

What causes these problems? The simple answer is that for these facilities demand exceeds supply, but for the design of remedial policies, the fundamental but also more difficult question is why is there this excess demand?

Currently, the most popular answer is a shortage of investment in housing and infrastructure. Governments for some time have adopted policies to remedy this situation. The very existence and growth of the excess demand is clear evidence that these policies are inadequate and are likely to remain so. The relief from recently announced increases in publicly subsidized housing will quickly be overwhelmed by the torrent of additional demand for it.

Popular are also policies designed to reduce demand. They are focused on the housing market and involve taxes on foreign buyers, raising the cost of mortgages and reducing regulation. These policies at best have had only transitory effects on demand for housing. More investment in infrastructure has been promised by all parties at every election but obviously has failed to eliminate the problems.

However, there is one simple way to reduce demand. Lower immigration from the present rate, which sees about 250 new immigrant families settle EVERY WEEK of the year in Greater Vancouver. This rate of increase has brought the total population of British Columbia from 2.2 million in 1972 to 4.8 million in 2017. The projection that it will reach 6.0 million in 2037 strongly suggests future worsening of excess demand.

Parliament could easily reduce the number of immigrants temporarily from the present national 300,000 per year to 50,000. While in place for perhaps five years, the construction of housing and investment in infrastructure can catch up with demand. Thereafter, the number can be raised again but only to a level equal to the economy’s absorptive capacity marked by the sustainably matched demand and supply in housing and of infrastructure services.

Canadians really face no costs resulting from such a temporary reduction in the number of immigrants. Politicians proposing this policy run the risk of electoral losses from some powerful interest groups, but these could easily be exceeded by the gain in votes from suffering Canadians who benefit from it and let the politicians know about their preferences.

100 MILLION IN 2100 AND CANADA’S INFLUENCE ON THE WORLD

Recently Terry Corcoran, Dominic Barton and Andrew Coyne have advocated that Canada raise the number of immigrants to 450,000 a year and a population of 100 million in 2100 on the grounds, in Coyne’s words, “it would add to our clout in the world...our ability to project our interests and values on the world stage.”

     The advocates of the higher immigration levels called the Century Initiative believe that Canada is the shining model of a tolerant, caring, egalitarian, democratic, open and economically successful society, the projection of which to the world will be leveraged by the country’s increased size. Canadians will be proud to be citizens of a country able by its example to create a better world. The public intellectuals behind the idea already bask in the praise of their ideological peers everywhere.

     The ability to gain enough clout to engage in such a projection requires a reality check. According to the latest UN Projections, in 2100 the world’s most populous nations will be (in millions): India (1,660), China (1,004), Nigeria (752), USA (450), Republic of Congo (389), Pakistan (364) and Indonesia (314). If the proposed immigration policy will be enacted, Canada’s population in 2100 will be to .97 percent of the world’s total population, double the present .48 and what it would be without the larger annual number of immigrants. 

     Will such a projection take place and be successful? If history is a guide to the future, the outlook is not promising.  In 2100 all countries will continue to have serious problems of their own. The need to combat income inequalities, religious, racial, regional and international tensions will continue to exist. These political realities plaguing countries like India, China and Nigeria are too well known to need elaboration.  They also afflict all the middle sized countries of Europe, Asia and South America as well as the small countries in all parts of the world. For politicians in these countries studies of Canada’s shining success are likely to be very low on their list of priorities.

     It is also possible that by 2100 Canada itself will cease to be the model for the world. The 100 million citizens will have required housing and economic and social infrastructure, the provision of which will be costly and divisive and will be in conflict with policies to combat global warming, preserve the environment and finance the governments of the First Nations. It remains to be seen whether dealing with these problems will be possible without changes in Canada’s ability to be the tolerant, caring, democratic, open and economically successful society it now is.

     These problems will be aggravated if Canada changes from a first-past-the post to a proportional system for the election of its politicians.  Under this system groups Canadians united by common national origins and cultures will form political parties dedicated to fight for their interests. Elected politicians in Ottawa will no longer spend most of their time on the design of the best policies for increasing national output but will instead engage in fights over the distribution of national output among the groups of Canadians represented by their parochial political parties.

     Even in the absence of the proportional system for elections, the very size of Canada’s population resulting from the proposed 450,000 immigrants is likely to create ethnic enclaves where alien languages and cultural institutions dominate life and where, like in Richmond, BC, it is virtually possible to be born, educated, entertained, work, retire and die without knowing a word of English. These enclaves will gain increasing influence on government policies that advance their interests at the expense of the broader public interest. Perhaps public policies can prevent the development of enclaves and their exercise of political power, but it is by no means certain that they can.

    All of the above observations are made before even considering that most of the economic gains expected from the 100 million in 2100 are unlikely to be realized. The discussion of these issues will have to wait for another article.

This article was published in the Vancouver Sun on Saturday, November 12, 2016, page E5 under the title "Canada a beacon at 100 million? That's doubtful. History doesn't paint a rosy picture"