Herbert Grubel: Canada should not open its doors to the world

The contrary view to Corcoran (Terence Corcoran: Open our doors to the world). The Grady/Grubel study he refers to have been effectively countered by Pendakur (Fiscal Effects of Immigrants in Canada, Fiscal Effects of Immigrants in Canada):

Fifth, the most important difference between modern Canada and when previous waves of immigrants entered this country is the existence of the welfare state. In the absence of its universal social benefits in the past, only healthy immigrants with strong work ethics, drive and skills came to Canada. Under present conditions, potentially many immigrants would not possess these qualities and impose heavy fiscal burdens on our welfare programs and ultimately bankrupt them. It is for this reason that Milton Friedman, one of the world’s most ardent advocates for human and economic freedom concluded that, “The welfare state and free immigration are incompatible.”

The problem identified by Friedman has been quantified in a study by myself and Patrick Grady, in which we found that the average incomes and tax payments of recent immigrants (documented by Statistics Canada) are much lower than those of the average Canadian and that the immigrants consume roughly the same amount of government services as the average Canadian. The difference between the taxes paid and services consumed by the average recent immigrant equals about $6,000 annually. Given the total number of these immigrants, the annual fiscal burden on Canadian taxpayers comes to about $30 billion.

Sixth, immigrants in large numbers cause a substantial redistribution of income, decreasing the incomes of workers and increasing the income of employers. Drawing on the basic results of a study of the redistribution effect in the United States by Harvard University Professor of Economics George Borjas, in Canada the decrease of the annual income of labour is $40 billion and the gain of employers is $43.5 billion, resulting in a net gain of $3.5 billion for the latter. This gain is called the immigration effect and is due to increased opportunities to trade.

Advocates for free immigration make much of this gain but the data show that it is very small relative to the redistribution of income. These advocates also laud the increase in Canada’s aggregate national income resulting from the immigrants’ economic activities. However, all of this increase accrues to the immigrants in the form of wages, lowers per capita incomes and is accompanied by greater congestion and pollution in metropolitan areas. Increased demand for and cost of housing reduces the ability of young Canadians to own homes and start families, creating frictions between generations.

The economic and social costs just discussed do not make the case against all immigration but make the case for the selection of immigrants with prospects for economic success that are high enough to eliminate the fiscal burden and the admission of immigrants in numbers small enough to prevent the risk of creating the substantial redistribution of income, the establishment of ethnic enclaves, the threat of jihadist terror and the problems associated with substantial and rapid population increases.

In the context of the current debate over policies for the admission of refugees from the Middle East, it is important for all Canadians that these considerations are given proper weight in the selection of immigrants and decisions about their numbers.

Source: Herbert Grubel: Canada should not open its doors to the world