Weekly Bulletin – 2004, April 28

Urban Poverty and Immigration

Dear Prime Minister Martin and Fellow MP's:

Attached is a Globe and Mail article on immigration and the business cycle by Arthur Sweetman, Associate Professor in the School of Policy Studies at Queen's University, and a Globe and Mail letter by retired Canadian ambassador, Martin Collacott, commenting on the article.

We invite you to visit our web site: www.immigrationwatchcanada.org

Best wishes,
Dan Murray
Immigration Watch Canada

Let's tie immigration to the economy


Friday, Apr. 16, 2004

The latest news from Statistics Canada has startled Canadians out of their complacent sense that this is a land of welcome and opportunity. Statscan says and several prominent think tanks agree that the economic progress of recent immigrants is failing to keep pace with expectations, theirs and ours. In fact, newcomers are doing worse in this land of opportunity than immigrants of previous decades.

The public, too, is becoming increasingly aware that poverty rates among recent immigrants is deplorably high. The 2001 census shows that, nationally, 35 per cent of immigrants who arrived in the 1990s live below Statistics Canada's low-income cut-off, which is commonly interpreted as a type of poverty line. In some places the rate is much higher. In Montreal, more than 47 per cent of recent immigrants live below the cut-off; in Vancouver, the rate is more than 40 per cent. These are overall numbers for each city. They would be far more dramatic in selected neighbourhoods.

Why? And what is to be done?

For most of the 20th century, Canada's immigration policy was attuned to the country's business cycle, and fluctuated with it. But in 1990, the federal government under Brian Mulroney moved away from a cyclical immigration-rate policy; instead it increased the immigration rate – in the midst of the early 1990s recession.

This appears to have been a very poor decision, especially when we look more closely at Canada's three major cities. In each one, the poverty rate among the Canadian-born declined in the 1990s, but it increased among the immigrant population. Furthermore, the rise in poverty among each city's immigrant population has been sufficiently large that it has raised the overall poverty rate for each city.

Census data show that Vancouver, for example, experienced about a 3-percentage-point increase in its poverty rate over the decade (this change can be broken down into a 1.7-per-cent decrease attributable to non-immigrants, and a 4.7-per-cent increase attributable to increased immigrant poverty).

Research clearly shows that the main source of the problem for newcomers has been jobs declining labour markets rather that holes in the social safety net, as some claim. Recent immigrants' labour-market earnings have declined substantially relative to those of both earlier cohorts of immigrants, and non-immigrants.

There doesn't seem to be one single cause for this decline, nor a single policy fix. However, one policy response that's had little public discussion is that Canada should return to the pro-cyclical immigration policy we had before 1990.

There is mounting evidence that immigrants who arrive in Canada during a recession experience economic scarring. That is, the troubles they have entering the labour market affect everything from their employment records to their attitudes toward work – effects that persist well beyond the end of the recession in which they arrive.

From Mackenzie King's postwar reopening of Canada as an immigrant-receiving country in 1947, right up until 1990, Canada followed a pro-cyclical immigration policy. Immigration rates increased, sometimes to very high levels, when the business cycle was at its peak and unemployment was low. However, when the economy tanked during recessions and the unemployment rate was high, immigration rates were allowed to slump. Of course, the immigration rate lagged the business cycle slightly, because it takes policy-makers time to realize a recession has begun and adjust immigration rates. But the two series of data line up nicely.

The recession of the early 1990s was the first in which the immigration rate was not decreased; instead – in a policy experiment that was never openly debated – levels actually rose. We see some of the effects today.

Two factors appear to have motivated that 1990 policy change. The first was administrative: It is more difficult for the bureaucracy to operate a system with fluctuating, as opposed to stable, targets. However, I'd argue that the human and economic costs associated with declining labour-market outcomes outweigh the administrative costs involved.

Second, and probably more influential, was a change in the federal government's priorities. Canadian immigration policy-makers (and their critics) have for some time debated concern for long-run demographic and economic growth, compared to shorter-run labour-market issues. In the late 1980s, this debate was complicated by issues such as how to maintain Canada Pension Plan funding as the baby-boom generation began to retire from the work force. Finding immigrants to take the boomers' place as pension-fund-contributing workers seemed to be the answer; the then-dominant short-run view gave way to a longer perspective.

A few years later, the Department of Employment and Immigration was broken up, and Citizenship and Immigration was established on its own (in fact, this was a return to the situation prior to 1966, when Citizenship and Immigration was merged with the Department of Labour).

In considering this debate, let's differentiate between the long-run immigration rate, and the short-run one. The issue at hand is not the appropriate immigration rate over a decade or more, but how the rate fluctuates with the business cycle from year to year. This differentiation points to a conceptual problem with the debate between the long-.and short-run schools of thought. Long-run economic population-growth is determined by the average immigration rate over long periods, and it is no better served by a constant than by a fluctuating rate.

The existence of economic scarring shows how short-run labour-market difficulties convert into long-run problems, and it ties the two sides of the debate together. More importantly, the notion of economic scarring implies that ignoring short-run economic issues has a long-run cost.

What causes economic scarring? Individuals' technical skills tend to depreciate with lack of use, and long spells of unemployment are particularly common among recent immigrants during recessions. Also, local labour-market and social-service information that newcomers obtain on arrival during a recession may not be particularly beneficial in the long run. It can even establish individuals in poor situations that hinder wage and employment growth when the business cycle turns upward again.

So there are good reasons why a return to the pre-1990s policy of pro-cyclical immigration should be seriously studied by Citizenship and Immigration Canada. It won't fix everything, but it will help. Desperate decisions newcomers make to adjust to short-run circumstances may limit their lives for years to come. In immigration, as in so much else, timing is everything.

Arthur Sweetman is an associate professor in the School of Policy Studies at Queen's University. He recently co-edited a special issue of the Canadian Journal of Urban Research addressing economic issues of immigration.

Review immigration

former Canadian ambassador in Asia and the Middle East

Wednesday, Apr. 28, 2004

Globe and Mail

Vancouver — Re Let's Tie Immigration To The Economy (on-line edition — April 16): Arthur Sweetman points out that recent immigrants are faring badly in comparison with those who came earlier, and that the deplorable increase in their poverty levels has been a significant factor in the overall spread of poverty in large cities.

He attributes this in large measure to the fact that Canada has abandoned its pre-1990s policy of adjusting immigration levels to the country's business cycle. Neither the Tories — who began the practice of maintaining high immigration levels regardless of how the country's economy was faring — nor the Liberals have ever produced sound evidence to justify maintaining high levels of immigration (the highest per capita in the world).

Research shows that immigration does not provide a practical way of keeping the population from getting older and providing support for an increasing proportion of older people. Nor are there, any longer, significant economic advantages to having a larger population. Consistently bringing in large numbers of immigrants regardless of whether they can find suitable jobs has been driven, rather, by the expectation that most will vote for the party that made it possible for them to come here.

Prof. Sweetman has made an eminently sensible suggestion as to how to improve the situation. This should be pursued in the best interests of newcomers and Canadians in general.