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

Herbert Grubel
August 9, 2020
It seems as if a new taboo is foisted upon Canadians by the week. Immigration is already among our established taboos – while the limits on its remaining areas of policy discussion grow ever-tighter. Canadians as a whole want less of it, while our elites are convinced that only good can come from more of it – and that increasing our diversity of origin is so important that it shall require uniformity of thought. Academic economist and former Parliamentarian Herbert Grubel says nuts to that, offering his take on key elements of immigration policy, plus the facts to support it. Part I of a two-part analysis.

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

Herbert Grubel
August 9, 2020
It seems as if a new taboo is foisted upon Canadians by the week. Immigration is already among our established taboos – while the limits on its remaining areas of policy discussion grow ever-tighter. Canadians as a whole want less of it, while our elites are convinced that only good can come from more of it – and that increasing our diversity of origin is so important that it shall require uniformity of thought. Academic economist and former Parliamentarian Herbert Grubel says nuts to that, offering his take on key elements of immigration policy, plus the facts to support it. Part I of a two-part analysis.
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On March 12, 2020 − what now might be considered “Pandemic Eve” − Marco Mendicino, Canada’s Minister of Immigration, Refugees and Citizenship, unveiled the federal government’s latest Immigration Levels Plan. A framework for immigration policy over the next three years, it proposes that Canada admit 341,000 immigrants this year, 351,000 in 2021 and 361,000 the year following – at which point the annual flow of new immigrants into this country will constitute approximately 1 percent of Canada’s total population. While the global coronavirus outbreak may alter these numbers in the short term, the long-term trend is unmistakeable. As recently as 2003, for example, Canada accepted a mere 199,170 immigrants.

In these unprecedented times, the most remarkable thing about Mendicino’s announcement is the lack of attention it received. Amidst a global health emergency, no-one in Canada seemed interested in questioning the proposed numbers or the immigration plan’s overall logic. Then again, even without the worry of a pandemic, Canadian politicians from all mainstream parties have spent decades studiously avoiding serious debate about immigration – unless it is to outbid each other in support of ever-higher numbers.

Is there any room for debate on the immigration levels sought by Minister Mendicino?
It’s all good: Liberal immigration minister Marco Mendicino wants to double intake by 2023.

When I was a Member of Parliament for the Reform Party from 1993 to 1997, all parties engaged in vigorous debates on core issues of government spending, taxation, the environment, public health, defence and foreign affairs. Yet immigration policies never seemed to come up. The same thing continues today. Rather than informed argumentation, Canadians are served meaningless bromides about the ostensibly unambiguous benefits of constantly expanding immigration. 

The Elite vs. Popular Chasm

“Our immigration system benefits all Canadians by strengthening the middle class, keeping families together and building strong and inclusive communities,” Mendicino said in announcing the new figures. “This increase in immigration levels supports a system that will help Canadian business create good middle class jobs and grow the economy.” It would be reasonable to expect the exact same statement from every politician currently sitting in the House of Commons. The official view is that there are no downsides to immigration. Ever.

A new taboo: an open debate about immigration levels.

Anyone who attempts to take a critical or questioning perspective – anyone, that is, who wants to have an actual debate – is instantly targeted as racist, bigoted or simply ignorant of the facts. I have an ample supply of rejection letters from editors further testifying that this lack of interest in questioning the received wisdom of Canada’s immigration policies (or plain fear, perhaps) is shared by the mainstream media as well.

Curiously enough, the public doesn’t appear to feel likewise. In a Leger poll last year, “Sixty-three per cent of respondents…said the government should prioritize limiting immigration levels because the country might be reaching a limit in its ability to integrate them.” Given the size of support, clearly this is a view shared by supporters of all major federal parties. Of course, the poll result was immediately labelled as “concerning” by former federal Immigration Minister Ahmed Hussen. The implication being that Canadians are wrong to hold such views, and it is the federal government’s job to convince them otherwise. The only debate allowed is that which urges people to accept that more immigration is always better. 

The pandemic has thrown the future job market into question.

But surely now, of all times, we need to have a frank and open discussion about Canada’s immigration policies. Should the facts of the pandemic result in major changes to Canada’s annual immigrant intake? To what extent should any change be determined by our unemployment levels and economic growth performance? How might the growth of economic nationalism around the world affect our basic long-run immigration policies? What are the calculations that produce 361,000 as the appropriate number of immigrants to accept two years hence? And perhaps most important, just what is it that makes anyone calling for annual immigration to be capped at, say, 261,000 − or even 161,000 – an automatic bigot? 

What we need, in other words, is a rational, polite and fact-based debate about Canada’s immigration policies, one that recognizes there are costs as well as benefits to welcoming more people into this great country of ours. Acknowledging this truth is not racist or anti-immigrant, and it should not be smeared as such. There is no doubt this country has benefited greatly from immigration in the past, and that immigration could provide ample benefit in our future as well. But we need to let evidence be our guide, and to seek balance in competing interests. With this in mind, here are some key issues Canadians should be discussing whenever the topic of immigration comes up.

GDP Growth 

Ottawa frequently claims immigrants are necessary to fuel economic growth, defined as an increase in the dollar value of aggregate national income, or GDP. When Mendicino says immigration helps “grow the economy,” this is what he’s talking about. The problem with this argument is that the growth in GDP is meaningless if it does not also increase GDP per capita. India has a higher GDP that Canada. But so what? It also has a lot more people. The key factor in measuring the economic well-being and general prosperity of the citizens of Canada and India is annual GDP per person. According to the World Bank, these figures are US$46,194 for Canada, and US$2,104 for India. So where would you prefer to live?

We need to have a rationale debate about immigration policy in Canada. As importing low-income earners doesn’t “grow the economy”, it lower’s Canada’s per-capita GDP.
Importing low-income earners doesn’t “grow the economy”, it lower’s Canada’s per-capita GDP.

Over recent decades, while immigrants have raised Canada’s GDP, they have at the same time lowered our per-capita income. This is because the average income of immigrants is substantially less that that of Canadians. The proper goal of a rational immigration policy should not be to simply “grow the economy”, but rather to increase the well-being of all Canadians by increasing average income on a per capita rather than gross national basis. 

Unemployment

Able-bodied, working-age immigrants arriving in Canada add to the supply of labour. In times of low unemployment, this is obviously a good thing. If, however, they arrive during a recession when jobs are scarce, the effect will be to increase unemployment for the entire country. This suggests that a logical approach towards immigration would be to have an overall policy that includes shorter-term adjustments to immigration numbers in relation to current employment conditions. 

In fact Canada’s immigration policy was highly sensitive to the unemployment rate for much of this country’s history. It would rise to new highs during periods of strong economic growth and shrink during recessions and wars. As the accompanying graph shows, this traditional pattern of peaks and valleys continued until the early 2000s, at which point it shifted to a steady growth rate regardless of economic performance. Note that even during the Great Recession of 2008-09 there was no substantial decline in immigration. Ottawa has thus delinked immigration from the labour market. Any rational discussion about immigration must acknowledge the significant effect this can have on unemployment. 

Housing and Congestion Costs

All immigrants have to live somewhere. In this way, they inevitably add to the demand for housing. The effect immigration can have on the housing market is often staggering. During a recent 12-month period, for example, 139,000 immigrants settled in Ontario, most of them in the Toronto metropolitan area. If immigrant families on average consist of three members, this addition to the region’s population thus required an additional 46,000 units that year. That amounts to nearly 1,000 new homes every week. Much the same conditions exist in the Vancouver and Montreal metropolitan areas.

Might immigration have an effect on Canada’s “housing affordability crisis”?

What is the effect of immigration on the housing market? While it obviously contributes to overall growth in the industry, which is a good thing, a number of academic studies have found that immigrants raise the cost of housing in Toronto, Montreal and Vancouver. This contributes to the much-talked-about “housing affordability crisis” in these large cities. For example, University of British Columbia geographer Daniel Hiebert has found that the strong desire for homeownership among new immigrants “probably [has] a significant impact on the housing markets” in Montreal and Toronto. Hiebert’s colleague David Ley, author of the book Millionaire Migrants, has charted a similar phenomenon in Vancouver, as has Joanna F. Miyake, a researcher at the Fraser Institute. “There is a significant link between immigration flows into B.C. and the price of housing in greater Vancouver,” Miyake concludes in a recent study. In an interview with the Vancouver Sun, UBC’s Ley claims that the effect of Chinese in-migration is “fundamental” to understanding Vancouver housing prices. Canadian politicians, keen to stimulate B.C.’s economy, are responsible for creating the conditions that have led to Metro Vancouver’s housing affordability crisis,” he says of the immigration effect.

In discussing the role immigration plays in the housing market, the only study I am aware of proposing that immigrants have virtually no impact on the cost of housing is by Ather Akbari and Vigit Ayded of St. Mary’s University. They claim in-migration has induced new supply and encouraged the outward migration of native-born Canadians from the areas where immigrants settle, and thus leave the housing market unaffected. Even leaving aside the unstated personal hardship and resentment that is built into the bland euphemism about “encouraging outward migration”, theirs is not a particularly persuasive argument.

Immigrants’ Incomes and Taxes

In 2015 I co-authored a study looking at the average incomes and tax payments of recent immigrants and native-born Canadians. Using a 2010 Statistics Canada database with a wide range of demographic information for nearly 1 million Canadians, we calculated the average incomes and income tax payments for all Canadians in the database who had immigrated between 1985 and 2009 and for all Canadian residents, except recent immigrants, regardless of the age, gender or other demographics of these individuals.

The immigration equation: Taxes paid per person are, on average, less than the cost of government services provided.

We found that in 2010 the average annual income of the recent immigrants was $32,922 and that of native-born Canadians was $41,935. We also found that the personal income taxes paid were $4,567 and $6,885 for the two groups, respectively. Taking account of GST, property and other taxes, and added to income taxes, we found that the total average annual taxes paid by the two groups were $13,103 for recent immigrants and $18,019 for native-born Canadians, respectively. This means that immigrants paid, on average, $4,916 per person less in annual taxes than other Canadians.

In our welfare state all people, including immigrants, have equal access to government services. In 2008-09 these amounted to $17,675 per capita. After considering the fact that immigrants absorb less than the average cost of protecting property (of which they have less than Canadians), but absorb more of the cost of spending on all levels of education (they have more children), the average immigrant annually absorbs $414 more in benefits than the average long-time Canadian.

Putting together the lower tax payments of the average immigrant ($4,916) and higher use of government programs ($414) implies that the average immigrant in 2010 imposed on Canadian taxpayers a net fiscal burden of $5,330. In 2014 the total number of immigrants in Canada was about 6.6 million. Based on the 2010 calculations described above, the totl fiscal burden came to a total of about $3.5 billion in 2014.

Mohsen Javdani and Krishna Pendakur, two academic economists from Simon Fraser University, critically evaluated our study. They did not disagree with our methodology but applied some different assumptions and concluded that the fiscal burden was smaller than we had estimated. Importantly, however, they concluded that it still was substantial.

Many immigrants are highly successful and make strong contributions to the economy and society. How might we get more of them? Time for a rational debate on immigration policy in Canada.
Many immigrants are highly successful and make strong contributions to the economy and society. How might we get more of them?

The exact size of the fiscal burden is less important than the fact that it is substantial. That is because it contributes significantly to the growing fiscal problems faced by provincial and municipal governments and their ability to finance the construction of roads, public transit, and educational, recreational and cultural facilities, as well as paying for the wide range of other government programs such as the military, pensions and social benefits.

A further important consequence of the low average income of recent immigrants is that it exacerbates perceptions of income inequality in Canada. If income inequality is a major policy problem, as the Trudeau government has indicated it is, then we cannot ignore the role played by immigration. Why, indeed, is immigration policy seemingly aimed at bringing in large numbers of people whose mix of skills or demographic status tends toward the lower income categories, thereby exacerbating income inequality? This problem could be ameliorated by reducing overall immigration levels or by reforming immigration policy to favour immigrants who could be expected to earn above-average incomes. 

Refugee Policy

One of the most problematic aspects of Canada’s immigration policies is the admission of refugees. In 2020, Canada plans to accept 61,000 refugees, or nearly 18 percent of the total immigration allotment of 341,000. This is up substantially from 37,000 accepted refugees in 2008.

Only 30 percent of Canada’s immigrants are accepted based on criteria beneficial to Canada, such as occupational and language skills. (Source: Reuters)

Most refugees to Canada are selected by government agents and representatives of approved voluntary private organizations who visit camps abroad that house refugees from regions plagued by internal and external conflicts. These claimants are deemed to have good economic prospects in Canada and to pose no threat to our national security. In theory, then, the refugees selected will be good for, or at least not harmful to, Canada. A substantial share of refugees, however, enter Canada on their own time and with their own interests foremost. These individuals are known as asylum-seekers, and typically cross the Canada-U.S. border on foot at rural locations away from regular official border-crossing points. Others have been known to arrive by plane from Mexico.

After their arrival in Canada, all irregular claimants are required to appear before the Immigration and Refugee Board, (IRB) a quasi-judicial organization staffed by politically appointed individuals. However, they are immediately eligible to receive free federal benefits described as follows on a government website: “The Resettlement Assistance Program (RAP) gives government-assisted refugees immediate and essential supports for their most basic needs…which can include a one-time household start-up allowance, and monthly income support payment…for up to one year or until they can support themselves.”

In 2019, a typical year, the IRB evaluated refugee claims from 25,034 individuals and accepted 13,718 (55 percent). It is interesting to note that at the end of 2019, 87,287 claims were pending, often waiting for appeal hearings after their initial claims had been rejected. Successful claimants become permanent residents and are entitled to continued financial assistance to meet their basic needs. The just under half whose claims are refused are entitled to launch appeals, the cost of which is covered by our government. While they wait for their appeals to be heard, they are apparently also eligible for financial support. This process can take years and if during this time the claimants get married and have children, they can be granted landed immigrant status on humanitarian and compassionate grounds. 

Asylum seekers looking to illegally cross from Champlain, N.Y., to Saint-Bernard-de-Lacolle, Quebec, using Roxham Road. We need to evaluate this through an open, rational debate on immigration policy in Canada.
Asylum seekers looking to illegally cross from Champlain, N.Y., to Saint-Bernard-de-Lacolle, Quebec, using Roxham Road.

Even among the relative few who ultimately fail this process, not all end up leaving Canada. Disturbingly, the federal Auditor-General reported in early 2020 that 34,000 refugees whose claims had been denied and were ordered deported could not be found.

James Bissett, a former ambassador to several eastern European countries and executive director of Canada’s Immigration Service from 1985 to 1990, has noted that the administrative costs of our refugee policy ranges from $13,000 to $20,000 per claimant. The cost per failed claimant is $50,000, or approximately $1.1 billion per year in total. Not included in this estimate are the costs of providing claimants with funds to cover their basic needs while they wait for their hearings initially or on appeal. These costs are likely to be very large and continue to rise because the IRB is habitually unable to keep up with the demand for its services.

Bissett argues that the asylum process could be greatly improved by staffing the IRB with professional refugee officers and judges instead of political appointees. Hiring adjudicators who have the background and expertise to make well-informed decisions quickly and who would be located in different parts of the country would dramatically improve the asylum process, reduce the backlog and thus reduce the large cost of funding the claimants’ basic needs. Also important is that rationalizing the refugee process would greatly improve public confidence in our overall immigration system. 

Foreign Students and Temporary Foreign Workers

Canada’s federal Minister of Immigration deals not only with immigrants and refugees but also with two important groups of temporary visitors to Canada who affect our well-being in ways that require a thorough public airing as well.

First, there are foreign students, who in 2019 numbered 642,000 and mostly attended post-secondary institutions. These individuals pay a fee and their presence enhances our national economic strength to the extent it allows educators and their institutions to, in effect, “export” their services at a profit, just as bankers and insurance companies sell their products to foreigners at profitable prices. This practice is good economics, helping Canada’s balance of payments and allowing us to pay for imports at more favourable currency exchange rates.

Profitable: Canada’s more than 600,000 foreign students are a significant revenue source for post-secondary institutions. This should be looked at more through a rational debate on immigration policy ion Canada.
Profitable: Canada’s more than 600,000 foreign students are a significant revenue source for post-secondary institutions.

The very large total number of foreign students, however, contributes to negative effects as well. As with other immigrants, they have to live somewhere in Canada and this adds to the high cost of rental accommodations, particularly in areas near post-secondary institutions. They also compete with Canadian students for limited space at universities and colleges, eventually necessitating the expansion of facilities with requisite capital and operating costs.

Second, temporary foreign workers fill seasonal jobs in agriculture and at tourism resorts such as Whistler in B.C. and Banff in Alberta. Some stay year-round and are considered critical in certain low-wage service-sector businesses, such as fast-food chains, which in total require hundreds of thousands of such workers. Their entry increases the supply of labour and lowers the average wages of Canadians with whom they compete for jobs. While it is often claimed that foreign workers are only doing jobs Canadians refuse to do, this overlooks the fact that their low wages are discouraging the adoption of labour-saving and productivity-enhancing technology that would otherwise be necessary and that would, in turn, tend to support higher compensation for remaining employees. 

Once again, there are costs and benefits to be considered. This is not an argument against the entry of any foreign students or temporary workers. But their arrival clearly creates both advantages and disadvantages for the rest of Canada. Rather than reflexively bleating in unison, “All of this is great and we should have more of it,” as our elites would have us do, need to be able to sort out these competing effects in a rational and civilized matter to determine the appropriate number of both. 

Social Benefits

In its 2019 Annual Report to Parliament on Immigration, the federal government claims that immigrants provide “immediate and long-term social benefits” without explaining what exactly these benefits are or how they affect the well-being of the average Canadian. Of course, asking for an explanation or proof of such claims is widely discouraged by the existing code of political correctness and raises the risk of censure by politicians and the other assorted bien pensants. At the risk of such treatment, here is a short discussion of the issues.

Redundancy or oxymoron?

There is no doubt that the presence of large numbers of immigrants allows them to practise and preserve their cultural practices. In this way they contribute to our country’s overall diversity. In doing so, however, they are in conflict with the long-standing responsibility of democratically elected governments to preserve existing national cultures and identities. Many Canadians have died in wars to protect this heritage. Quebec, in particular, is noteworthy for its defence of its own homegrown culture.

Lately, however, our federal government and our country’s elites have argued that policies preserving existing cultural practices and identity are obsolete and should be abandoned to prevent future international conflicts. Weakening any collective sense of national culture is now presented as an advantage for Canada. “Diversity is Canada’s Strength” was the title of Prime Minister Justin Trudeau’s famous (and famously vague) speech delivered in London in November 2015. 

“Our commitment to diversity and inclusion…is a powerful and ambitious approach to making Canada, and the world, a better, and safer, place,” the prime minister said in London. “We know that Canada has succeeded – culturally, politically, economically – because of our diversity.” For anyone who wanted proof of his assertions, Trudeau had this to say: “Because it’s 2015, people around the world are noticing the diversity of our Cabinet, and our Parliament.” Too much of Canada’s immigration policy is cloaked in this sort of bafflegab. 

Canadians deserve better than facile arguments that a calendar date provides all the proof necessary to defend any particular public policy. Whether it is 2015 or 2020, we deserve a far more detailed explanation of how diversity and inclusion are supposed to make our country a better and safer place. The same goes for claims that unfettered immigration provides an unambiguous benefit to our economy as well as our labour and housing markets. Or why refugees should be able to choose Canada, rather than Canada choosing refugees. We are owed, in other words, an immigration system that is logical, coherent and fair to all Canadians

 

Coming in Part 2: Reforming Canada’s immigration policies to better serve all Canadians.

Herbert Grubel is Emeritus Professor of Economics at Simon Fraser University and a senior fellow at the Fraser Institute.

 

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