New Faces in the Crowd: Economic and Social Impacts of Immigration-Summary

1. Who commissioned this study? Federal Government of Canada (Copywright: Minister of Supply and Services Canada 1991)

2. When? 1990-1991

3. Who did the study? Economic Council of Canada (19 Business People, 1 Academic, 1 Labour Representative, 1 Chair, 2 Deputy Chairs) and 8 University Professor-Consultants

4. Length: Short Report–41 pages ISBN 0-660-13766-6 (VPL Call #: SOC 305.80971 E19n)

Long Report–160 pages

5. What was the study supposed to do? Examine this topic and make recommendations

Foreword and Overview of Report (EDITOR’S NOTE: THIS IS LIKE A SUMMARY):

(1) Canadian immigration in the distant past was designed to fill up spaces. Canadians have to decide whether, because of low fertility and aging, new immigration should be used to shore up population growth in Canada

(2) Two attitudes towards newcomers: (A) Welcoming and generous; (B) Fearful

(3) Unlike Australia, Canada has never done a systematic study of immigration. ECC first did an economic analysis. Conclusion: the net economic benefits of immigration to Canadians are very small (around 1%). (EDITORIAL NOTE: Environmental factors were not considered. If they had been, immigration might have been discovered to be a significant cost to Canadians.)

(4) Council then turned its attention to the social effects, particularly the political and humanitarian implications.

(5) Council examined how well immigrants do in Canada.

(6) Council became optimistic about more immigration because it found a greater tolerance of visible minorities and general support for more immigration.

(7) Council then made 11 recommendations regarding the level of immigration over the next 25 years, integration of immigrants, and the desireable distribution of immigrants.

6. Why did the ECC examine immigration? (1) Border pressures from refugee seekers. (2) Burdensome costs of health and other services for aging and declining population. (3) The prospect of using immigration to maintain the country’s population growth.

7. What were some of the positive and negative views the ECC heard about immigration?(1) Positive: View that Canada is built on immigration; economic benefits; the view that immigration is a good substitute for natural increase; humanitarian values; multicultural enrichment; building of a more diverse, powerful nation

(2) Negative: Taking jobs; lowering wages and working conditions;costs; erosion of cherished traditions; immigrant’s lack of familiarity with Canadian values; overwhelming of schools; out of control processing system;

8. What were four immigration lessons learned by the ECC? (1) Immigration is not a substitute for population growth. (2) The origin of immigrants is an issue. (3) Population growth through immigration is geographically unbalanced.(4) A balanced evaluation of immigration must go beyond its economic effects.

9. Historical Background: (1) Immigration has not been necessary for the country’s population growth nor for its prosperity. For much of Canada’s history, natural increase, not immigration, has driven the growth of population. There is no sustained correlation between immigration and economic growth.(2) From the 1880’s to the 1950’s and 1960’s, Canada, like Australia and partially, the USA, had a racist immigration policy.Asians and blacks were not welcome. (P.2) (EDITORIAL COMMENT: Please note these remarks.) (3) In 1957, the Diefenbaker government began using immigration to fill labour market gaps. In 1967, the Pearson government began using the point system which had 2 characteristics: admission for the labour market and universal application.(Immigrants were divided into 3 classes: independent, family and refugee.) The proportion of immigrants from the Caribbean, Asia and Africa rose from less than 5% in 1946-1955 to 70% in 1977-90. (4 ) A new Immigration Act was passed in the late 1970’s and further changes were made in the 1980’s: formal adoption of three immigrant categories (family class, refugees, and independents); an attempt to link immigration levels to demographic and labour market conditions; an improvement in the point system; an attempt to match planned with expected arrivals; introduction of a business class (investors, entrepreneurs and self-employed–investors had to have a net worth of $500,000 and committ $250,000 or more for a minimum of three years to an investment for business development and job creation). (5) Two new management issues arose: provincial interest in immigration policy (Under the BNA, immigration is a joint federal-provincial responsibility. Some provinces, Quebec, in 1978, saw this power as a potential policy lever); determination of the immigrant status of people who reach Canada without landed-immigrant status ( Ottawa created the IAB in 1967 and plugged a loophole in it in 1973 because of an ummanageable backlog. Problems with refugee claimants escalated greatly in the 1980’s.

10. What are the economic consequences of immigration on the three generally agreed yardsticks of the economic impact of immigration?

A. Efficiency

(a) Economies of Scale (Popular belief is that the greater the domestic market is, the better off producers will be. Classic theory of population says there is an optimum population for each country: too small a population makes a country unable to exploit efficiency gains associated with size; too large a population may reduce the country to subsistence levels.) How do we know if this is true? Two tests:

(i) International Comparisons: Population size does seem to affect economic efficiency but gains are questionable. If Canada had a population of 100 million, the gross average income of Canadians would
be 7% higher than 1990 levels ($71 annually per resident; $1894 per immigrant; $76,000 per immigrant family). Beyond 100 million, the benefits diminish.

(ii) Importance of Domestic Market Size: Scale economies are virtually zero. With an immigration induced population increase of 1 million, national average productivity would rise 0.11%.

B. Filling Labour Market Gaps ( Popular belief is that immigration can enable employers to fill labour market gaps.) Two major flaws: (1) While employers and concumers benefit, workers already in place lose as a result of competition from immigrants; (2) There is no reliable way to detect gaps in the labour market.

C. Spillover Effects (Popular belief is that immigrants benefit the economy because they are different from
native-born residents–more energetic, productive, hard-working, smart-working.) No theoretical or analytical research examines potential spillover effects from immigrants to hosts. Indirect evidence suggests there are no significant spillover effects.

D. Unmeasured Economic Impacts

(a) Positive : Broadening of choices (Examples: world-class art gallery or particle accelerator)

(b) Negative: Greater pollution and congestion

(c) ECC speculates that a correction to scale gains would mean a small change to an already small result

11. What objections might be raised to the ECC’s treatment of the effects of immigration on economic efficiency in the host community?

A. Don’t immigrants bring human capital (their paid-for education, Canada’s brain gain)? Yes, but they retain this human capital and the earnings it brings. Canada will gain if immigrants pay more taxes than they consume in services. This is a distributional rather than an efficiency matter.

B. Isn’t the financial capital that immigrants bring with them of benefit to the hosts? Response: All immigrants retain title to their capital. The host gets no direct benefits. If investment were made in projects that, without the money provided by the immigrant, would not be feasible, then the host would benefit. It seems likely thatthe potential gains from the investor class are very small. Officials would have to check. This remains unfinished. (EDITOR’S NOTE: Later, C and I had several studies done on this subject. The conclusion: The investor programme was riddled with fraud.)

C. Doesn’t the Entrepreneurship programme bring needed jobs and entrepreneurs? The first belief was found wanting; as for the second, Canada does not have a shortage of entrepreneurs.

12. Summary: This study concludes that immigration enhances economic efficiency in a very small way (1%).The great majority of previous studies have been much less positive. (ED: WHAT STUDIES?)

13. What general conclusion did the ECC reach about using immigration to offset future dependency costs? A higher rate of immigration would cushion the demographic fiscal blow, but only slightly. Costs of social assistance and language training would offset the small future saving.

14. Will Canada see a dramatic increase in dependency ratios when the baby boomers retire? No, dependency ratios will rise, but will remain well below previously observed historical levels.

15. If immigration were at 0.8% of the previous year’s population, what difference would this make to the per capita cost of supporting dependents by the year 2015? Immigration would lower the per capita cost by $109 by 2015. This is about one third of one percentage point of a real estimate of per-capita income in 2015. When the costs of immigration are considered, the lowering of per capita cost is reduced slightly. (ED: Immigration does not lead to any significant saving.)

16. When added to economic efficiency gains, what is the total gain to the per capita disposable income of hosts by the year 2015? Total gain would be 1.4%.

17. What would be the per-capita cost be of eliminating immigration altogether? Total would be a 1.3% loss of per capita income to hosts by 2015.

18. Is the commonly-held opinion that immigration creates unemployment among existing residents true? No. The ECC did two tests to find out: (1) International Comparison: ECC findings suggest there is no link between population size and the unemployment rate. (2) The Big Models: (a) The Neo-Classical Synthesis Theory says that immigration causes unemployment. (b) The Classical Theory says that the demand for labour in an economy will adjust to immigration and therefore that immigration causes no long-term increase in unemployment. Conclusion of ECC: The Classical Theory applies in part because it appears in Canada that more firms are created as a result of immigration. These new firms absorb the extra workers. Caution: Any sudden increase in immigration might strain the market-adjustment mechanisms.

19. What would be the effect of 0.0, 0.4, and o.8% immigration intakes on the size of Canada’s population and on its economic (political) power by 2015?

A. 0.0% Immigration: By 2015, Canada’s population would have risen from 27M (1990) to 28M. Real per capita income would be one-third higher. In relation to the US and the larger European countries, Canada would remain a small economic power. Same ethnic mix as 1990.

B. 0.4% Immigration: By 2015, Canada’s population would be 32 million. Real per capita income would be 1% higher than in 0.0% scenario. Canada would still be a minor economic power. Ethnically, Canada would change from being 94.5% ethnic European to about 91% ethnic European.

C. 0.8% Immigration: By 2015, Canada would have a population of 36 million. It would have a GDP close to or above that of the UK or Italy. Per capita income not much different from A or B.

20. What effect do the three immigration scenarios have on the provinces by 2015?

A. Atlantic: All will decline, N.S. the least of the four.

B. Quebec: Decline

C. Ontario: Increases

D. Manitoba: Stable or declines slightly

E. Saskatchewan: Stable and decline

F. Alberta and B.C.: Rapid and substantial expansion

21. What effect will the three scenarios have on Canada’s three biggest metropolitan centres by 2015?

A. 0.0% Immigration: Montreal declines slightly; Toronto and Vancouver increase slightly

B. 0.4% Immigration: Montreal increases slightly, Toronto and Vancouver substantially. Non European group in Toronto: 21%; Non-European group in Vancouver: 19%

C. 0.8% Immigration: Montreal, Toronto and Vancouver increase substantially; Non-European groups increase in all three cities: Toronto becomes 29%; Vancouver becomes 26%; Montreal becomes 17% non-European. Canada will be 15% non-European.

22. How well have immigrants done up to the 1986 census?

A. Dependency ratio of immigrants in 1985 was 28% (100 immigrants carry 28 other immigrants?); dependency ratio of native born was 50% (100 native-born carry 50 other native-born?).

B. In early 1980’s, immigrants were better educated than native-born.

C. In 1986, the proportion of immigrant males who were working or looking for work was 76.4%. The rate for native-born was 77.7%.

D. Immigrants had an overall unemployment rate of 8.2%. (Recently-arrived immigrants had an unemployment rate of 16%.) Canadian-born had a rate of 10.8%.

E. In 1986, no workable data was available to compare income levels of immigrants and Canadian-born.

F. In 1986, 12.5% of recent immigrants and 13.8% of Canadian-born depended on welfare assistance.

G. There is no significant discrimination against immigrants.

H. The economic performance of immigrants compares favourably with that of comparably qualified Canadian-born..

23. What problems is Canada facing from refugees?

A. The system is being overburdened. Traditionally, Canada has met its international obligations by screening and accepting refugees overseas. However, in the 1980’s, a very rapid increase in the number of refugees arriving on Canadian soil and claiming refugee status occurred.

B. Because of a backlog, the federal government granted amnesty to 27,300 refugee claimants in 1986

C. A sharp increase in the number of refugee claimants occurred in 1987 and 1988. By the end of 1988, a backlog of 85,000 claimants existed.

D. The government set up the Immigration and Refugee Board on January 1, 1989. The process involved favours the claimants. Two hearings take place. In second hearing, unanimity of the two person panel is required for rejection of a claim, but not for acceptance. The claimant can appeal a rejection.

E. A new backlog built up almost immediately after the IRB was set up.

F. Since January, 1989, all claimants who have passed their initial hearing have been encouraged to apply for work permits. Despite this, substantial welfareassistance expenditures have been incurred by various governments. In 1989, more than $250 million was spent on refugees and refugee claimants.

G. The projected costs, which do not even include the cost of the refugee-determination process, are far beyond the value of any gains in scale economies or savings in tax and dependency costs that might accrue to Canadians from these claimants.

H. There are non-monetary costs as well: (1) It has become difficult for authorities to implement a coherent immigration policy. (2) Conflict between the provinces and the federal government have occurred as well. (3) Perception of queue-jumping and hoodwinking of Canada may endanger the whole programme.

I. Unlike most other countries receiving refugees, Canada guarantees refugee claimants virtually the same legal and social protection as its citizens under the Charter of Rights and Freedoms.

J. Options available: (1) Spend more money to process claims faster; number of claims is increasing. (2) Apply existing regulations to deter false claims and to fine airlines which transport claimants. (3) Do nothing. ECC points out that sound management of the flow of refugee claimants is necessary, but makes no recommendations.

24. Have changes in the ethnic composition or the rate of these changes altered the potential for ethnic conflict in Canada?

A. ECC tried to measure prejudice. ECC looked at 62 surveys taken between 1975 and 1990.B. ECC examined the interrelations among the survey questions. ECC also examined the trendsin the answers as well as the variables that determine why people vary in their responses. One important trend: Respondents from communities with higher proportions of visible-minority immigrants were likely to be more tolerant of racial or ethnic differences. Caution: Sudden rapid growth in the proportiin of visible minorities would have a negative impact on attitudes; coincidence of high unemployment and high proportions of visible minorities would probably result in unfavourable attitudes. The variable with strongest impact on degree of prejudice was education.

B. ECC also looked at actual incidents of threat or conflict against Jewish Canadians, surveyed Richmond, B.C. to explore links between immigration and crime, tested trends in job discrimination in Toronto, and checked census data on earnings for evidence of discrimination. Five types of evidence led ECC to be cautiously optimistic about the degree of tolerance of Canadians.

C. Diversity can produce positive and negative results. Basic psychological research shows that both very simple and very complex environments will have relatively negative effects on skill development, compared with the effects of a moderately complex learning environment. The same is true of adapting social institutions to meet the needs of a culturally more diverse population. Caution is needed.

25. Why did the ECC choose an integrationist approach as a strategy that Canada should adopt towards its immigrants?

A. More opportunities for the positive effects of contact are possible.

B. Potential for conflict arising from the frustration of members of minority groups who suffer from discrimination is reduced.

C. Accomodations made by immigrants to the host society are more visible and more voluntary.

26. ECC sees Canada’s multiculturalism policy to be an integrationist strategy. (Multiculturalism assumption=the belief that a person’s confidence in his/her own individual identity and place in the Canadian mosaic facilitates his/her acceptance of the rights of members of other groups to have their own place in Canadian society.) Multiculturalism policy aims to preserve as much of ethnic cultures as is compatible with Canadian customs. The policy was first introduced in 1971. It has evolved from maintenance of heritage cultures to the promotion of other-group acceptance and tolerance. ECC sees even Quebec’s approach to immigrants as integrationist rather than assimilationist.

27. ECC believes that immigration policy should not be based on population growth being desireable or immigration being a satisfactory substitute for natural increae as a source of population growth. Instead, it should be based on a direct assessment of whether the effects we can expect from immigration are desireable in their own right. (P. 33) (EDITOR’S COMMENT: Note this.)

28. Recommendations:

(1) Immigration should be increased gradually above the levels of 1965-1990 to reach 1% of the population on a gross basis, by 2015. Policy to be reviewed every 5 years to verify that the integration is being successfully managed.

(a) Economic and political factors were minor.

(b) Social factor is more important. Immigration will make Canada a more interesting and exciting

society. (EDITOR’s NOTE: This is a big change from the beginning of the report.)

(c) The humanitarian aspect has weighed quite heavily in ECC recommendation.

(d) ECC plan differs from CIC plan in ECC emphasis on gradualism.

(2) A moral contract outlining the responsibilities of both hosts and immigrants should be developed. It should be used to inform and counsel prospective immigrants before their arrival in Canada.

(a) ECC believes in integrationist rather than an assimilationist approach towars immigrants.

(b) Some Canadians believe that multicultural approach demands too much adjustment by them, too little by immigrants.

(3) A major strategic initiative be taken to combat racism and foster tolerance.

(a) A doubling of $55M federal contribution (1989/90) between 1990 and 2000; proportionate increases at other levels.

(b) Increased business, union, community, educational and media involvement to combat prejudice and promote integration.

(c) More immigrant obligation to learn English or French

(d) Information to defuse Canadians’ fears of unemployment and competition from immigrants

(e) Avoidance of sharp increases in immigrant inflow

(f) Training of immigrants in cultural traditions inappropriate in Canada

(g) Race relations training for police

(4) More resources should be devoted to the task of providing consistent social measurement of social friction.

(a) The fear of being branded as racist should not inhibit the collection of data essential to fight racism itself.

(b) Up-to-date information on Canadian and immigrant attitudes towards each other and towards multiculturalism must be collected.

(5) Multiculturalism and Citizenship Canada should repeat a study of Canadian attitudes towards multiculturalism. Immigrant attitudes towards native-born Canadians and about their satisfaction level with life in Canda should also be surveyed.

(6) Provincial and federal governments should increase information about degree of equivalence or otherwise of foreign credentials.

(7) Men and women immigrants should have equal access to language training.

(8) Language training should be partly charged for, but with a generous system of loans, subsidies and exemptions.

(9) The balance among immigrant classes should be kept close to the levels of the 1980-90 period.

(a) Research after 1982 does not show that independent immigrants earn more than do family class immigrants.

(b) Humanitarian reasons should be a major factor in immigration policy. (A rapid clearing of the refugee backlog may require a temporary violation of this principle.)

(10) The operation of the investor class should be carefully monitored to determine whether it induces investment to occur in worthwhile projects and whether it creates a net benefit to Canada. ECC doubts whether the special preference given to investor immigrants is justified.

(a) Tighter control should be exercised over entrepreneur and business class categories, possibly abandoning them

(b) ECC cautions about the awarding of points to immigrants of any occupational backgrounds because net economic gain from using immigration to combat labour shortages is miniscule.

(11) Re point system, greater importance should be given to obtain a balanced intake across all occupational groups.

ECC makes no recommendation to change the overall regional distribution of immigrants. (EDITOR’S NOTE: ECC was aware that in 1990, immigrants were going disproportionately to certain provinces –Ontario and B.C. especially. This is an interesting comment considering the very large population increases that have occurred in Toronto and Vancouver.)


(1) Immigration offers a rare chance for a policy change where everyone can gain

(2) Cautious expansion should be our watchword