Sergent: Who benefits from surging immigration? Hint: it’s not Canadian workers 

More on immigration and productivity. Less clarity than other commentaries:

…Key takeaways: do the negative impacts on productivity mean that immigration is negative for the Canadian economy?

It does seem likely then that the surge in immigration over the last few years, particularly amongst NPRs, has contributed to the recent decline in Canada’s productivity. Because the capital stock moves slowly, faster population growth reduces the available stock of machinery, buildings, and natural resources per worker, making them less productive. And because new immigrants and NPRs are less productive than immigrants who have been in the country for a long period of time, a surge in immigration lowers the average quality of the workforce. The other key driver of growth, innovation, is unlikely to respond significantly to immigration, given that ideas tend to flow easily over national borders.

None of this means that no one in the economy benefits from immigration. Owners of capital certainly benefit when labour is cheaper and more abundant. However, the principal beneficiaries of immigration are immigrants themselves. Given the huge wage disparities between Canada and the developing countries from which the vast majority of immigrants come from, the potential economic gain to immigrants is very large. The costs of relocating and adapting to a new country are small in comparison.

Furthermore, there are things governments can do to improve the economy’s adjustment to the higher immigration. Policies to improvethe investment climate would help increase the capital stock, and better credential recognition would reduce the wage gap for new immigrants.

However, policy action on these fronts can only go so far. Ultimately, it is always going to take some time for the capital stock to catch up with a bigger workforce, and new immigrants are likely to be less productive for a significant period (unless Canada is willing to become much more selective in its immigration policy, cutting back on family class immigrants, and making selection criteria much more stringent). This means that if immigration remains at its current level, it is likely to remain a drag on productivity and therefore our standard of living for some time to come. Whether that proves politically sustainable remains to be seen.

Tim Sargent is Director of the Domestic Policy Program at the Macdonald-Laurier Institute and a Distinguished Fellow at the Centre for International Governance Innovation.

Source: DeepDive: Who benefits from surging immigration? Hint: it’s not Canadian workers