Making Immigration Work

Can Canada Handle a Rational, Polite and Fact-Based Debate About Immigration? Part II

Herbert Grubel
August 17, 2020
Despite ample criticism of late, markets still work. Anyone who allows real-world evidence to inform their opinions knows that issues of supply and demand are best sorted out through the interactions of many disparate actors rather than a single bureaucratic declaration. So why not use the labour market to determine the optimal level of immigration? In the conclusion of his two-part series on immigration, Herbert Grubel lays out the economist’s case for why employers, rather than bureaucrats or politicians, should be the ones deciding on the people and skills Canada’s economy actually needs, and thus collectively shaping the flow of immigration to Canada.
Making Immigration Work

Can Canada Handle a Rational, Polite and Fact-Based Debate About Immigration? Part II

Herbert Grubel
August 17, 2020
Despite ample criticism of late, markets still work. Anyone who allows real-world evidence to inform their opinions knows that issues of supply and demand are best sorted out through the interactions of many disparate actors rather than a single bureaucratic declaration. So why not use the labour market to determine the optimal level of immigration? In the conclusion of his two-part series on immigration, Herbert Grubel lays out the economist’s case for why employers, rather than bureaucrats or politicians, should be the ones deciding on the people and skills Canada’s economy actually needs, and thus collectively shaping the flow of immigration to Canada.
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Evidence that immigrants to Canada display relatively low incomes and pay far less in taxes than they receive in benefits, as discussed in Part I, often comes as a surprise to many Canadians. This may be because public perception of the economic performance of immigrants is shaped by media coverage that relentlessly focuses on the success of a few exceptional immigrants, as well as repeated claims that immigration is crucial to Canada’s current and future growth. It may also be affected by personal experiences arising from interaction or friendship with successful immigrants.

Statistically, though, higher-income immigrants are greatly outnumbered by new Canadians in lower-income categories. And this creates a significant fiscal burden associated with immigration. The absence of meaningful discussion about both the pros and cons of immigration policy in the political sphere adds to this sense of confusion as all mainstream parties appear to eagerly accept the conventional wisdom that immigration entails only benefits for Canada and its economy. Adding further to this dissonance is the fact we are repeatedly reminded that Canada’s points-based immigration system is the envy of numerous other countries.

There is a need for a rational debate on immigration policy in Canada as many only choose to look at its benefits.
Canada’s immigration system entails costs and benefits for the country. But only the benefits are ever discussed.

As we have seen, however, many of the assumptions made about the contribution of new immigrants to Canada’s economy and society are either incorrect or misleading – including their effect on GDP per capita, the housing market and our tax and welfare systems. And this in turn reflects rather poorly on Canada’s famous process for immigration selection. If this system was actually delivering the sort of world-beating results its proponents claim it does, there ought not to be much of a gap between public perception and the reality of Canada’s immigration experience. But there is.

It is time to take a closer look at the flaws in how Canada accepts immigrants, and propose some major improvements.

Point-by-Point, Canada’s Current Immigration System

The main decision-making tool used by the federal government for issuing visas to landed immigrants is Canada’s much-praised points system, established in the 1960s, and which replaced an older method of selecting immigrants based on country-of-origin. Under Canada’s current system for economic immigrants, “principal applicants” in certain categories can earn up to 100 points based on various personal attributes, including education, language and occupational skills. A minimum score of 67 is required for admission. Other categories use different selection criteria to identify desirable principal applicants.

Such a merit-based system is sound in theory, and Canadians can be justifiably proud that their immigration policy assesses applicants without regard to ethnic, racial or religious background. It contains a major flaw, however. Only a fraction of immigrants admitted to Canada are actually measured on merit. In a typical year, principal applicants comprise fewer than 30 percent of immigrants who arrive in Canada annually. The huge remainder include principal applicants’ immediate family members plus sponsored parents, grandparents and other close relatives, as well as disparate other categories including refugees. 

Canada's point-based immigration system for Federal Skilled Workers

Systems such as Canada's point-based immigration system for Federal Skilled Workers deserve another loon in a debate on immigration policy in Canada.

Even within Canada’s single-largest economic immigrant category – Federal Skilled Workers – principal applicants applying through the points system account for only about 40 percent of visas awarded. (Between 2011 and 2016, Canada admitted approximately 351,000 immigrants under the skilled worker program, of whom 144,000 were principal applicants.) It is a remarkable fact, and an indication of the gap between rhetoric and reality in Canada’s immigration system, that the vast majority of immigrants who come to Canada through the skilled worker program do not even have to take the points test. And most would score far less than 67 if they did. Many have no expectation of ever entering the labour force; unless they happen to be wealthy they are fated to be consumers of public resources provided by Canadian taxpayers from the day they arrive until the day they leave or pass away. Others can be expected to have incomes substantially below the Canadian average for very lengthy periods, if not permanently.

A further problem arises from difficulties in assessing a principal applicant’s claims regarding educational and training achievements and language competence. Realistic-looking fake documents of this sort are readily available on black markets in most developing countries, or via the Internet. They constitute a grave threat to the integrity of any merit-based system. And even if these certificates can be declared legitimate, the quality of education received by graduates from foreign schools is often not well known. Such concerns should not detract from the fact that many foreign-trained professionals arrive in Canada with exceptional education, skills and work habits. (In fact, they often prove to be harder-working than many native-born Canadians.) The point is it can be difficult for federal immigration officials to properly assess the quality of any individual’s application prior to their arrival in the country. 

Issues such as the prevalence of forged documents online deserve further consideration in a rational debate on immigration in Canada.
Fake Canada Degrees! Satisfaction Guaranteed! Assessing the validity of immigrant qualifications is a major problem for Canada's immigration bureaucracy.

And the plight of immigrants denied qualifications in Canada often engenders substantial sympathy from Canadians and in the media. Tales of medical doctors driving cabs or engineers and accountants delivering pizzas are commonplace. Such stories are often held as proof that our immigration system is unfair or discriminatory. Few would argue, however, that Canadian medical schools or other professional associations should lower their standards simply because rigorous tests are unfair to students who cannot pass them. 

If certification problems are the result of discrimination by Canadian professional associations intent on protecting the incomes of their members, then those should be eliminated. But in general, occupational standards are in place to protect all Canadians, and should apply to all applicants. The presence of numerous immigrants from the world over in all of Canada’s professions and technical disciplines furnishes ample evidence that the current system is not unfair or discriminatory other than in uniformly applying necessary standards.  

Who Really Decides?

Whatever the flaws of the points system, the biggest problem facing Canada’s immigration system is that the number of visas to be issued in any given year is an entirely separate calculation. Despite congratulating ourselves that Canada’s immigration system is wholly merit-based, the total number of visas distributed annually is unrelated to merit, skill or demonstrated need within the Canadian economy. Rather, it is a political decision. And it is driven by political considerations that favour continual increases in immigration. 

As discussed in Part I, for most of Canada’s history, the level of immigration properly tracked the ups and downs of the labour market and overall economic activity. Such a process makes intuitive sense as Canada’s need for immigrant workers rises in good times and falls in bad times. This, however, is no longer the case. Since the early 2000s, immigration levels have risen steadily regardless of economic conditions, including during the Great Recession of 2008-09. 

This year, Ottawa has announced it intends to admit 341,000 immigrants, 351,000 in 2021 and 361,000 in 2022. Such continual increases during what may prove to be the most devastating economic collapse since the Great Depression of the 1930s raises an obvious question: where did these numbers come from? Answer: the federal Liberals. According to a boosterish press release from Marco Mendicino, the federal immigration minister, this level of intake – unprecedented in over a century in Canada – is meant to “responsibly grow Canada’s population.”

Sound in theory, problematic in practice: While Canada claims to run a merit-based immigration system, annual intake levels are wholly political calculations.

Whether such a thing is desirable or not, it is clear that Canada does not have a truly merit-based immigration system. The total number of immigrants accepted to Canada is based on political calculations and objectives without regard to the absorptive capacity of the economy or society in general. That does not sound terribly “responsible”.

Putting the Private Sector in Charge

Given the flaws inherent to Canada’s immigration system, how might the politicization of intake numbers and the poor application of the merit principle be reformed to better serve the needs of all Canadians? Rather than relying on politicians to pick an annual level, I propose that immigrant selection should be shifted to employers. Let the labour market decide how many immigrants Canada needs. 

In an employment-based system, it would be in the self-interest of employers to hire only immigrants who can be put to work immediately at wages that match their productivity. Immigration visas would thus be granted only to healthy and reliable workers who have a guaranteed job offer waiting for them Canada – provided they also met other necessary security criteria. This would produce a far simpler and more transparent system than our current points-based method.

Canada has already made some tentative steps in this regard. The long-standing Temporary Foreign Worker program is frequently used to bring in workers to do jobs Canadians are reluctant to fill at prevailing wages. Further, the Harper government made several important reforms to immigration policy to improve the employment prospects of new immigrants, including creating new categories that give enhanced preference to employability skills, such as the Canada Experience Class and Federal Skilled Trades program. And the provinces can pre-select employable immigrants via the very useful Provincial Nominee program. 

Practical evidence suggests this is a workable and desirable system. When Alberta’s oil and natural-gas fuelled economy was booming at the same time as Venezuela’s formerly world-class energy industry was disintegrating under the Marxist mismanagement of President Hugo Chavez, thousands of hard-working Venezuelans streamed north to Alberta. Many of them found well-paying technical jobs and have remained here permanently ever since. An employer-based approach, in other words, advances Canada’s national interest as well as those of the immigrants themselves.

But while some improvements have been made to how the points system operates and through the addition of new categories, the single biggest flaw remains. The overall level of immigration to Canada in any given year is still the product of a single political calculation, rather than economic or business factors. An employer-driven approach for Canada’s immigration system would eliminate this problem once and for all.  

Under an employment-first immigration system, we would expect employers to seek out more immigrant workers when the economy (or their sector, region or job category) is booming and unemployment is low. And fewer when the opposite is the case. This would ensure that our immigration system was once again sensitive to the unemployment rate. The number of visas issued would be directly linked to the number of job offers submitted by employers – doing away with the need for bureaucratic micro-management or political interference. 

Such a system should also ease the challenge of accurately assessing foreign credentials and qualifications by placing the responsibility for judging skills and abilities with employers who have a direct interest in assessing the immigrants’ competency and are directly exposed to the consequences of mistakes in this regard. This opens up the possibility of a far more efficient system.  Applicants with foreign medical degrees, for example, might be accepted as interns at authorized medical clinics where their skills could be properly evaluated and where they could become familiar with conditions in Canada’s medical system. 

Let the labour market decide: An employment-based immigration system would be more transparent and respond better to economic conditions.

In order to accommodate immediate family members, visas would automatically be granted to the spouses and under-age children of the applicants following a guaranteed job offer to the principal applicant, and relevant health and security checks. The status of extended family members – and in particular parents and grandparents – remains a complicated and highly-politicized issue that should properly be dealt with through broad-based reform of the family sponsorship category. 

Implementing the transfer of responsibility for individual immigration decisions from civil servants to the labour market should be relatively straightforward. Employers would submit completed forms regarding firm job offers and various other commitments, government officials would perform necessary health and security checks and, once everything checked out, would issue the necessary visas. 

Additional legislation would be needed to protect the broader public interest. Employers would be expected to provide credible evidence that no Canadian worker was available, able, willing and equally qualified and experienced to fill any position offered to a foreign worker. Plus, the wages and total compensation offered to immigrants would have to be close to that earned by the average Canadian. This would be necessary to prevent a flood of low-paid workers whose tax payments would inevitably fail to match the government services they consumed. 

Enforcement of rules regarding a lack of available Canadian workers and the pay of immigrants requires special consideration. One possibility would be to allow employers to advertise for positions at market wages. If those positions went unfilled, this could be considered sufficient to indicate that no Canadian worker was prepared to do the work being advertised. (This was the system in place in the academic sector in 1970s when I first came to Canada as a junior professor.) 

Venezuela’s loss = Alberta’s gain: As Venezuela’s energy sector collapsed under former President Hugo Chavez, thousands of experienced workers found employment in Canada’s oil and natural gas industries.

Additionally, the federal government would have to ensure employers do not promise to pay a certain salary, but then actually pay the immigrant less or fire them soon after their arrival. Such practices could develop if immigrants eager to settle in Canada were motivated to pay bribes to employers to secure job offers at the legally-required wage. I would expect that the cost of proper enforcement would be covered by the savings achieved through the abandonment of the current, highly-bureaucratic selection system. Less obvious but equally substantial would be the overall reduction in the fiscal burden the current system imposes on governments’ budgets. 

The proposed system could also be adjusted to deal with unexpected developments such as surges in immigration that cause housing markets to overheat or other problematic phenomenon. In these situations, government would be authorized to interfere with the normal operation by curtailing the number of visas to be approved in a particular year. Doing so would properly require a vote in the House of Commons.  

It should be noted that this shift of responsibility from politicians to the employment sector for visa selection would not involve the refugee system. It, of necessity, involves overt political, moral and ethical considerations, as well as UN agreements to which Canada is a signatory. Please see Part I for a brief discussion on reform of the refugee system. 

Policies regarding foreign students are already driven by the non-political, business-case decisions of universities and other educational institutions which stand to benefit from the increase in attendance. Foreign students are, to put it bluntly, highly lucrative. In light of the Covid-19 pandemic, however, those institutions have now been reminded of the risk involved in sudden changes in the number of foreign students. It thus seems prudent that institutions financed mostly by government funds should be required to set the fees they charge foreign students at levels that cover not only current expenses but also the schools’ sizeable capital costs. 

What Other Countries are Doing

While transferring responsibility for immigration to employers may sound controversial, it is not novel. Several other Western democracies have adopted at least a partial version of this plan by making a job offer a sufficient condition for immigration. 

For example, during the postwar years when West Germany was short of workers, employers were authorized to hire “guest workers” from Turkey to assist with the reconstruction of the war-torn economy. These workers were allowed to live in Germany on temporary visas, but many were eventually fully integrated into the German labour market. This was enabled by a certificate known as “Aufenthaltsberechtigung (“right to reside”), which entitled them to become citizens after 15 years. In effect, citizenship was granted to foreigners who had earned a permanent job with a German employer.

One point of view in a rational debate on immigration in Canada, Linking immigration levels to the labour market makes sense; Many of the Turkish guest workers who arrived in Germany during the post-war period eventually received German citizenship.
Linking immigration levels to the labour market makes sense; Many of the Turkish guest workers who arrived in Germany during the post-war period eventually received German citizenship.

More recently, Australia has created an explicit “work-stream permanent residence visa” for “workers who have an Australian employer sponsoring them to work in Australia.” This includes skilled or highly specialised work on either a temporary or permanent basis. In this way, a job offer is directly linked to a visa for Australian immigrants. 

The United States is even more explicit in linking immigration visas to its job market. Each fiscal year, approximately 140,000 immigrant visas are made available for foreigners based on their employability. This includes categories EB-2 and EB-3, which require “a job offer from a U.S. employer.” In these cases, the employer is considered to be the sponsor for immigration purposes. To become a sponsor, an employer must provide evidence that there are insufficient available, qualified, and willing U.S. workers to fill the position being offered at the prevailing wage and that hiring a foreign worker will not adversely affect the wages and working conditions of similarly employed U.S. workers. 

As mentioned previously, the Harper government created several specialty immigration programs that allow high-skill foreign applicants attractive to employers to improve their chances at becoming landed immigrants. And under the points system used for the Federal Skilled Worker category – the single-largest category for economic immigrants − a firm job offer adds a maximum 10 points towards the minimum requirement of 67. In this case, however, a job offer by itself is not enough to achieve visa status. Moving to an employment-driven immigration system (conditional, of course, on health and security checks by the federal government) would properly link available jobs with visas in a more predictable and transparent way by making a job offer the central condition for long-term and possibly permanent entry to Canada. 

Putting the labour market in charge of immigration in this way would offer concrete benefits to Canadians by reducing the fiscal burden of immigration, ensuring newly-arrived immigrants are quickly and successfully integrated into the labour market and, by reducing the role of partisan politics and loaded rhetoric, likely enhancing overall public support for immigration as well.  

Prospects for Immigration Reform

The pandemic of 2020 has preoccupied politicians, the media and much of the general public to such an extent that there appears little chance Canada’s existing immigration policies – much less proposals for serious reform – will receive close attention in the short term. Even after this situation eases, however, recent history suggests any proposal to link immigration directly to the jobs market will encounter strong opposition from groups with an interest in maintaining and enlarging the flow of immigrants to Canada regardless of economic conditions. 

Among these blocs are communities of immigrants already settled in Canada who are keen to increase their political and social influence. The news media and most cultural institutions are also uniformly pro-immigration (if not outright in favour of erasing borders altogether). And many politicians and intellectuals support a maximal approach to immigration because it increases Canada’s total population and, therefore, the country’s self-perceived standing globally. Such sentiment is often expressed in meaningless slogans such as, “The world needs more Canada.” From this perspective, immigration is only ever about benefits, and never about costs. Recent demands that the Trudeau government waive its current citizenship fee of $530 (plus a ‘right of citizenship’ fee of $100) because of the financial hardship it imposes for applicants is a further example of this curious notion. Doing so is estimated to cost taxpayers $400 million over four years. Yet attaining Canadian citizenship entails substantial advantages for the successful applicant, why should existing citizens pay for that?

But how much more world does Canada need? If we can't have a rational, objective debate on the benefits and weaknesses of our immigration policy, should our immigration system be supported?
But how much more world does Canada need? Support for ever-increasing levels of immigration is often loud and vociferous despite being based on political opportunism and/or simplistic slogans.

Employers interested in maintaining a steady stream of cheap labour and businesses that benefit from increased demand associated with immigration, particular in the housing sector, may be expected to support continually increasing immigration levels as well. That said, the prospect of playing a more direct role in the selection of immigrants could prove attractive to many employers. As should the prospect of reducing the overall tax burden on businesses and individuals by reforming an inefficient and non-labour-market-focused immigration system. 

The body of politically-correct doctrines, particularly in the “anti-racism” sphere, also play a powerful role in promoting more immigration. They suppress open discussion and debate by labelling anyone seeking to discuss immigration policy as ignorant, bigoted, racist or a “white supremacist”, however absurd these charges may be in most instances. In sum, there are numerous, powerful and quite vocal segments of Canadian society that favour the status quo on immigration policy (and in this instance, “status quo” means continually escalating annual immigration levels) and wish to shut down any arguments to the contrary. 

And yet this should not be taken as evidence that public opinion is equally favour of ever-increasing immigration levels. As discussed in Part I, recent polling results suggest a clear majority of Canadians feel uneasy about current immigration figures and the prospects for future growth. Sixty-three percent of respondents last year agreed that the federal government “should prioritize limiting immigration levels because the country might be reaching a limit in its ability to integrate them.” Similarly, a 2018 Angus Reid poll found half of Canadians considered that year’s target of 310,000 immigrants to be “too high.” Further, such sentiment was widely distributed across the political spectrum, with at least 40 percent of supporters from all three major parties saying immigration levels should be reduced. And this was, of course, before Covid-19 came into our lives.

The need for a rational, fact-based on immigration in Canada is needed as Canadians chronically under-estimate the actual number of immigrants who arrive annually in Canada, and frequently express concern about their country’s ability to properly integrate them.
A majority of Canadians chronically under-estimate the actual number of immigrants who arrive annually in Canada, and frequently express concern about their country’s ability to properly integrate them. (Source: Wikimedia Commons, iDuke.)

There also appears to be a sizeable gap between actual and perceived levels of immigration. In 2016, federal government polling found that while a majority of Canadians expressed support for immigration as an overall benefit to the country, they believed current immigration levels to be no more than 150,000 per year. That year, Canada accepted approximately 260,000 immigrants. And the number has grown substantially since then. 

Further, respondents were strongly in favour of merit-based economic immigrants. But as we have seen, the vast majority of visas issued by Canada are not awarded to principal applicants based on their own merit or the overall points system. These disconnects suggest further “public education” would not strengthen popular support for current immigration practices. It also hints at substantial problems for the political status quo, as well as the opportunity for innovation among politicians prepared to talk about reforming or remaking the current system. 

The growth of immigration-reform-minded populist parties across Europe and elsewhere demonstrates that concerns about large-scale immigration have become a worldwide political phenomenon. With the pandemic greatly adding to Canada’s fiscal burdens, it will be up to Canadian voters themselves to decide whether they can afford an immigration system that entails more costs than benefits for their country and their economy. Or if they want to replace it with something much more pragmatic, transparent and affordable. 

Herbert Grubel is Professor Emeritus of Economics at Simon Fraser University in Vancouver, and was a Reform Party MP from 1993 to 1997.

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