‘Too much, too quickly’: economists warn of Liberal ‘pro-business’ immigration policy

Great counterpoint to the simplistic and misguided arguments of the government and immigration arguments in favour of the current high levels, with Mikal Stuterud, Chris Worswick and David Green being cited extensively:

The Liberal government’s move to admit record numbers of immigrants to fill a purported “labour shortage” has prompted warnings from economists with years of experience studying immigration to Canada.

The government is selling the policy change as a way to boost economic growth and “help businesses find workers.”

But there’s no evidence, the economists said, that the plan to eventually accept a half million new residents per year will benefit the average Canadian resident—though it might help businesses looking for low-cost labour.

The higher immigration targets—along with a growth in the use of temporary foreign workers and working international students under the Liberal government—have the potential to push down wages for the lowest-paid workers in the country, many of whom are recent immigrants or refugees, they said.

“The short answer is that the evidence just does not line up with the talking points. It’s not even in the ballpark, it’s not even close,” said Mikal Skuterud, a labour economist at the University of Waterloo who serves as a director for the Canadian Labour Economics Forum.

The Hill Times spoke to three economists with decades of experience researching immigration and labour economics in Canada. All three said they did not believe that the government’s moves to raise its immigration targets and focus on filling “labour shortages” would increase GDP per capita, a proxy for average financial well-being in the population.

“I think what the government is considering is too much, too quickly,” said Christopher Worswick, a labour economist at Carleton University in Ottawa who has published extensively on immigration and immigrant earnings.

Immigration spike could increase income inequality 

Canada’s economic immigration system is supposed to prioritize the most skilled applicants for entry. In theory, that should bring in immigrants with better workforce skills and earning potential than the average Canadian resident and is supposed to raise the workforce’s productivity and GDP per capita.

However, the reality is that immigrants to Canada earn less, on average, than workers born in Canada.

In 2016, immigrants who had been in Canada for a decade earned an average of $40,700, while the average for the entire population was $58,100, according to a 2022 study by Worswick, Skuterud, and University of Waterloo economist Matthew Doyle, who used data from Statistics Canada.

Economic immigrants in that sample actually earned a higher-than-average income of $62,500, but their spouses and dependents earned significantly less, pulling down the average.

Now, there are signs that the Liberal government may be compounding the problem by preparing to move away from the high-skill selection system to accommodate demands from employers for lower-skilled workers.

“I worry a lot about the language coming out of the federal government in terms of the skill level of immigrants,” said Worswick.

Those signs include the government’s upcoming changes to its Express Entry program; emphasis on resolving so-called “labour shortages;” increase to economic immigration targets; and a relaxed approach to growing numbers of temporary foreign workers and international student workers, the economists said.

Expanding the number of immigrants admitted will mean reaching deeper into the applicant pool, and picking candidates whose workforce skills are, on average, less valuable than those who would be admitted with a smaller target, said Worswick.

“You’re bringing in people who are going to contribute less in terms of GDP per capita at the margin. If they drop a long way below average, you’re probably worsening wage inequality from admitting them compared to not,” said Worswick.

David Green, a professor at the University of Vancouver’s School of Economics, is also critical of the government’s move to increase immigration. He made his case in an op-ed in The Globe and Mail in December and again in an interview with The Hill Times.

“This feels like, ‘We’re going to pump the numbers up for the sake of pumping the numbers up,’ but won’t create ways to integrate [the new arrivals],” said Green, who has researched labour economics, wage inequality, and immigration since the early 1990s.

“What tends to happen is that the people who suffer the most, in terms of the negative effects of immigration, are the previously-arrived, recently-arrived immigrants—the ones who are going to compete most directly with the new immigrants.”

A 2014 paper by Statistics Canada concluded that the wages of immigrants to Canada fell slightly when the number of immigrants admitted to the country increased.

‘Pro-business’ policy

Canada welcomed more than 400,000 immigrants last year. That was the largest number of newcomers in Canadian history. The government plans to continue increasing its target for admitting immigrants until at least 2025, when the target will be 500,000 people.

Immigration is often viewed through a humanitarian lens, but that’s not what’s driving the increases. Immigration Minister Sean Fraser (Central Nova, N.S.) has made clear that boosting Canada’s economy is the impetus for raising the immigration target.

“There were a million jobs available in the Canadian economy at a time when immigration already accounts for nearly all of our labour force growth,” Fraser told the Canadian Press back in November. “We cannot maximize our economic potential if we don’t embrace immigration.”

Fraser’s press release trumpeting the government’s latest immigration levels plan said that it “embraces immigration as a strategy to help businesses find workers and to attract the skills required in key sectors—including health care, skilled trades, manufacturing, and technology—to manage the social and economic challenges Canada will face in the decades ahead.”

It also referenced “critical labour market shortages causing uncertainty for Canadian businesses and workers” in its opening paragraph.

Prime Minister Justin Trudeau (Papineau, Que.) said in a March 14 press conference the government’s higher immigration targets and the growing population were a “huge selling point for us” for business investors looking to troubleshoot labour shortages.

The underlying premise seems to be that bringing in more workers in “key sectors,” and those with high job vacancy rates will change the economy in a way that benefits most Canadians financially.

The economists who spoke to The Hill Times poured cold water on that suggestion.

Bringing in more workers will expand the economy and population in absolute terms, but there is, according to Skuterud, “just no evidence that we could expect this to raise GDP per capita”—the measure of per-person prosperity.

Skuterud is an immigrant, having moved to Canada with his family when he was young. He said he worries that his objections to increasing Canada’s immigrant intake could be seized upon by those who oppose immigration on racial grounds.

Still, he and other economists who spoke with The Hill Times said they believed the government had shifted to pursuing economic immigration policies that won’t improve the productivity of Canada’s economy and might even do the opposite.

“The immigration policy I’m seeing is very pro-business,” said Skuterud.

Consultation underway, Express Entry changes coming

The government is now moving to rework its “Express Entry” program via legislative amendments passed in last year’s budget implementation bill.

Express Entry is supposed to be a “cream-skimming” program that invites especially skilled prospective immigrants to jump the application queue, lest other countries scoop them up. However, the government is preparing to create new, more flexible criteria for judging who gets to jump that queue. It has given the immigration minister more control over those criteria.

The new criteria will be implemented in the spring. The government says it will provide “flexibility to respond to evolving economic needs and government priorities, selecting those with the skills and talent needed to support long-term growth and prosperity.”

The criteria will change over time, partly in response to demands from provinces and territories and “stakeholders from across Canada.”

Skuterud said he is concerned these changes will mean prioritizing applicants who help employers fill job vacancies but wouldn’t necessarily have higher-than-average workforce skills.

The wage that a worker can command is one of the most useful ways of evaluating workforce skill, he said.

Skuterud also pointed out that the government has dropped work restrictions on the growing number of international students in Canada, adding competition for entry-level jobs.

Then there is the steady increase in temporary foreign workers under the Trudeau government. More than 400,000 were in the country in 2021 under two different programs: the Temporary Foreign Worker Program and the International Mobility Program, the latter of which does not require employers to complete a labour market impact assessment. There were a little under 300,000 such workers in Canada in 2014, and fewer than 200,000 in 2011, before the International Mobility Program was established.

The Liberal government moved last year to further loosen restrictions on temporary foreign workers coming into the country.

Fraser has now begun a public consultation on further changes to Canada’s immigration policy. It’s not clear exactly what the purpose is, given that he has set immigration targets for the next several years, and is working to change Express Entry. The press release announcing the consultation said Fraser wants an immigration system that is “strong, easy to navigate, and adaptive to change.”

Fraser’s office said he was not available for an interview for this story. Questions about the concerns raised by the economists who spoke to The Hill Times were forwarded to his department, Immigration, Refugees, and Citizenship Canad (IRCC).

The department responded with a list of media lines, not all of which were applicable to the questions that had been posed. The department’s response did note that the increases to the government’s annual immigration targets were meant to “address current labour shortages, and attract new skilled workers to build our economy.”

IRCC also said that increased immigration was necessary to help address Canada’s decreasing worker to retiree ratio, low fertility rate, and “labour shortages.”

“Economic immigration is a priority to help fill critical labour shortages throughout the country in key sectors and across all skill levels. It will help position Canada’s labour force for today’s challenges and those of the future,” read a portion of IRCC’s response.

Wages should trump ‘shortages’: economists

References to a “labour shortage” have been filling the inches of government press releases and media responses, as well as politicians’ speeches and newspaper pages.

The labour economists who spoke with The Hill Times, however, rejected the notion that a “labour shortage” is a problem for the average Canadian.

On the contrary, they said, a tight labour market benefits workers. It forces employers to compete for the best workers by raising wages and improving working conditions. They are also incentivized to innovate, by purchasing labour-saving technologies, reorganizing their use of labour, or training low-skilled employees to fill vacant higher-skilled jobs.

Bringing in a greater number of workers takes that pressure off, the economists said, helping businesses to maintain their bottom line without changing their production model or raising wages.

“There’s a lot of people in Canada who can do these jobs,” said Worswick. “We should just let the wages rise until either the new immigrants, or the Canadian citizens, or the longstanding permanent residents choose to do those jobs.”

“We should bring people in who are highly skilled and tend to pull up GDP per capita by their presence in the economy. And it’s not because their jobs are essential, it’s because their jobs are well remunerated, in terms of earnings,” he said.

“If we just do that, I think we would have a smaller immigration program than they’re planning to have.”

All three economists who spoke to The Hill Times said they supported immigration to Canada, but not the sharp planned increase in economic immigration, in combination with the shift in policy away from accumulating human capital and toward filling short-term labour shortages.

“I’m really not convinced that many companies will go bankrupt because of this,” said Worswick, of the notion that businesses be forced to confront job vacancies without a boost to immigration or temporary foreign workers.

“I think what’s more likely is that profit margins might shrink. You might see some restructuring, but you might also see a drop in wage inequality, because usually these are low-wage jobs that governments are being pressured to fill using temporary foreign workers or immigrants.”

Immigrants still earning less on average

But who says immigrants compete for low-paying jobs?

The answer, unfortunately, is decades of research on immigration outcomes in Canada.

“The hard reality is that Canadian immigrants, on average, experience significant shortfalls [compared to those born in Canada] in their earnings throughout their careers, and these shortfalls have tended to increase over time,” concluded Worswick, Skuterud, and Doyle in their 2022 paper.

The three authors also concluded that “Canadian evidence provides little evidence that Canada has in recent history been successful in leveraging immigration to boost GDP per capita.”

That paper also found that reforms to the government’s immigration selection process over the past two decades had shown some promise of reversing the earnings shortfall of immigrants to Canada—in particular, the introduction of the Express Entry program in 2015, and improvements to it made in the following years. Those reforms, however, could now be under threat by the upcoming changes to tailor Express Entry to short-term job vacancies.

‘We need more immigration’: McCallum

The government does have cheerleaders to its current approach, however. Those include former Liberal immigration minister John McCallum, who worked as an economist before getting into politics.

“I have always felt that we need more immigration. I’m in favour of letting more people in,” he said in an interview with The Hill Times.

McCallum argued that more immigration is needed to fill in labour shortages, and offset the aging of Canada’s population and its low birth rate. He also said that bringing in more immigrants—who will work and pay taxes—would help take the pressure off Canada’s flailing health-care systems.

McCallum also underlined the social benefit that immigration brings to Canada.

“I think we are better off, culturally, having the diverse population we have today as opposed to the all-white population we have when I was growing up,” he said.

“It enhances the feel of our country. I think, when I look around Toronto today, it’s a much more interesting and exciting place than when I was growing up and everybody was white,” he said.

Skuterud, who immigrated with his family from Norway as a boy, said he thought the benefits of multiculturalism warranted more space in the immigration debate.

That’s not how the government has been selling its shift in immigration policy to the public, however, and the government’s immigration policies are not being designed specifically to increase diversity in Canada. Rather, the government has focused on the purported economic benefits of the policy changes and higher targets.

An aging population

The government has another ally in its corner in the Century Initiative, an advocacy group backed by big business that is calling for Canada to nearly triple its population to 100 million by the year 2100.

On its website and in its reports, the Century Initiative argues that striving towards that target will “mean more skilled workers, innovation, and dynamism” in the economy.” It also argues that a ramp-up in immigration is necessary to offset the aging of Canada’s population caused by the country’s low birth rate—that it would “reduce the burden on government revenues to fund health care, Old Age Security, and other services.”

“We are becoming a nation of old people,” Century Initiative CEO Lisa Lalande said in an interview with The Hill Times.

She argued that economists who are critical of the higher immigration targets are taking a “very narrow perspective,” and should be looking at measures of economic prosperity besides per capita income.

She said that the contributions second-generation Canadians make to the economy should also be factored into analysis of boosting immigration.

She also said that Canada’s governments can boost the per capita economic contribution that immigrants themselves provide by reducing barriers to their success—for example, loosening restrictions on the recognition of professional credentials acquired abroad.

“If we address the income gap for newcomers, then that could actually boost GDP per capita” she said.

Green, however, noted that credential recognition problems are nothing new.

“We’ve been trying to figure that one out for a long time. We’ve never yet figured it out. And to just sort of open the gates by an extra hundred thousand per year, and just say, ‘These people are going to do all of these wonderful things because they’re skilled,’—Well you know that [for] a bunch of them, it’s not true, and you don’t have a plan for how to make it better. To me it’s irresponsible.”

The economists who spoke to The Hill Times also pushed back against the notion that increasing immigration was a way to prop up the health-care system or other social services as Canada’s population ages.

For one thing, working-age immigrants often bring retired parents or grandparents to Canada with them.

For another, immigrants brought in today to support social services for retirees will themselves one day retire, necessitating an even bigger cohort of working-age immigrants to be brought in to support them.

“I just don’t see how you’re going to get a lot of benefit on the demographic front,” said Worswick.

Source: ‘Too much, too quickly’: economists warn of Liberal ‘pro-business’ immigration policy