Immigration adds little to economy

Sep 22, 1992

IMMIGRATION doesn’t make you richer.

It makes immigrants richer if they came here from a poor country. It makes a few Canadians, such as immigration lawyers, richer. It makes other Canadians, especially those who compete for unskilled jobs, poorer. But for the majority, it makes little or no difference.

That is the opinion of most economists who have studied immigration. Whether the studies are done in Canada or elsewhere, they come to the same conclusion: neither immigration, nor population growth in general, has any impact on the income of the average native-born person.

In Canada, this old news has been kept as secret as if it were a formula for building a nuclear bomb. The federal government does not like to hear it because it justifies the world’s largest per capita intake of immigrants by saying it makes us all better off.

Meanwhile, politicians representing ethnic ridings and other advocates of wide-open immigration cling to the nonsensical idea that “immigration creates jobs.” (Of course immigration creates jobs because it makes the population larger, thereby increasing demand for products and services. But that doesn’t mean unemployment is reduced by immigration. The new jobs are offset by the newly arrived immigrants who join the work force.)

In recent years, two federal research bodies have pointed out that economics is a feeble foundation on which to construct an immigration policy. The Demographic Review in 1989 and the Economic Council in 1991 both concluded that the economic impact of immigration is minimal.

Their conclusions were the same as that of a U.S. commission on population, containing some of that country’s top economists. Twenty years ago, it declared: “We have looked for, and have not found, any convincing economic argument for continued national population growth. The health of our economy does not depend on it. The vitality of business does not depend on it. The welfare of the average person certainly does not depend on it.”

It’s perhaps not surprising that this message hasn’t seeped into the conventional wisdom because, especially if you live in a city like Toronto or Vancouver, it seems to fly in the face of common sense.

Much of Toronto’s recent population growth has been a result of immigration and it sometimes seems that if you took all the immigrants away, the city would come to a screeching halt.

Who would keep the factories going or drive the cabs or make the beds in the hotels or look after the children of families in which both members work? Without immigration, many of our best scientists and nurses and chefs would not be here. Nor would some of our most successful entrepreneurs, people such as Thomas Bata and James Ting and Frank Stronach.

How can it be that the productive activities of all these hard- working people don’t have any positive impact on the incomes of native-born Canadians? That’s simple, says Neil Swann, who was research director of the Economic Council. The immigrants contribute a lot to the economy but they also get rewarded. The effort and reward balance out and there is no “spillover” benefit to the rest of us. That may be hard for some ministers of immigration to believe “but it is the consensus of people who have investigated the question very carefully.”

Swann, who was born in Britain and lived in Australia before coming to Canada, is a scholarly man who speaks in clipped, precise sentences and whose eyes twinkle with enjoyment as he pricks the balloons of popular wisdom. Why do so many people think immigration is an economic boon? “I don’t know,” he says. “That’s like asking why so many people think Elvis Presley is still alive.”

But what about someone like Bata, who came to Canada from Europe and built a shoe manufacturing and retailing empire that spans the globe? Would we not be worse off without him?

“Say Mr. Bata employs 100,000 people,” sighs Swann. “If he had never come, that does not mean there would now be 100,000 people on the street because there is no shoe factory. They would be doing something. And all of the evidence suggests that they would be earning pretty much the same sort of income as they are now. There are lots and lots of substitutes in the system over the long haul for people like Mr. Bata.”

As for the cab drivers and security guards, “No job ever went unfilled because there were no people to do it,” Swann says. “If people still want those functions performed and there are fewer people around to do them, the relative wage would rise until there are enough people.”

Of course, the buyers of such services would object to the higher prices they had to pay. “But there would be no complaints from Canadians already in those jobs and competing with the immigrants.”

Parking lots are a good example of the impact of immigration on an industry. In many European cities, large multilevel parking lots do not employ parking lot attendants. All the work of calculating fees, receiving payment, and letting cars in and out is done by computerized machines that take bills, coins and credit cards.

In Toronto, on the other hand, a parking lot is run just as it would be in a Third World country, manned by unskilled labor. If you own a parking lot, immigration is good because it provides a large supply of affordable workers and relieves you of the need to buy expensive equipment. If, on the other hand, you would like to get into the business of making, selling, and servicing the kind of high- tech equipment used in European parking lots, immigration is a barrier.

Australia now accepts that immigration is not an engine of growth. According to Irena Omelaniuk, counsellor at Australia’s embassy in Washington, that country’s Bureau of Immigration Research has found that the long-term impact of immigration on most economic indicators is neutral.

In addition, the Committee for Economic Development of Australia spent three years studying the impact of immigration on the economy. It concluded that immigration has no impact on any important measure of individual economic well-being.

A year ago, Immigration Canada commissioned a study by Infometrica, a Canadian research group, on the same subject and it came to the same conclusion as the Australian and previous Canadian studies: immigration doesn’t increase the incomes of Canadians.

WHAT IT ALL boils down to is that Canadian-born people are not lazy fools who would descend into backwardness without immigrants to smarten them up. Without immigration we would be a different sort of country, and a less interesting one, but our standard of living would be the same. “The system is extraordinarily adaptable,” says Swann.

Final evidence of the neutrality of immigration as an economic factor is simply that countries welcoming a lot of immigrants don’t do any better than ones that don’t. Because they live next door to a rich nation that is also the third most populous in the world, Canadians have an exaggerated idea of the importance of population to economic well-being. In fact, there are only two wealthy countries with populations higher than 100 million, the U.S. and Japan. Many of the world’s handful of rich countries have populations much smaller than Canada’s.

A study for the Demographic Review by Canadian economist Pierre Fortin relating economic growth to population growth in the 22 member countries of the Organization for Economic Co-operation and Development (OECD) found no correlation at all.

Bill Marr, an economic historian and immigration specialist at Wilfrid Laurier University, says that in the past Canada has not relied on population growth to raise the incomes of its people. “Canada has always had a small population and it has substantially increased its standard of living by trying to trade rather than by opening its doors to anybody who wants to come,” he says.

A historical perspective, the Economic Council agrees, gives “little or no support to the view that immigration is needed for economic prosperity.” In fact, in the 19th and early 20th centuries, the fastest growth in real incomes happened during periods of minimal immigration, periods in which immigration to Canada was equalled or even exceeded by emigration out of Canada.

There is, however, a school of economic thought that puts the emphasis on the importance of immigration rather than playing it down. These economists take as self-evident the idea that, if we are going to have immigrants, it is better to have ones who do well economically than ones who don’t. But their message is no more welcome in Ottawa than Swann’s because it says recent policy has been a disaster.

Don DeVoretz, an expert on immigration economics at Simon Fraser University in Vancouver, is the main Canadian spokesperson for this point of view. He says that when our immigration program emphasized a person’s qualifications rather than his relations, immigrants made more money than native-born Canadians. Consequently, they paid more taxes on average than the native-born and used fewer social services. The result was a net contribution to the rest of us of $30,000 per immigrant family, in current dollars, over that family’s lifetime.

But that has changed since the Immigration Act was revised in 1978. Since then, the selection of skilled immigrants has been based more on job availability than formal education. The result has been fewer highly skilled immigrants than before.

This trend has been intensified by the growing emphasis on family class immigration, with results that DeVoretz calls “disturbing” because the immigrants we are getting now aren’t doing very well. This isn’t because they are from the Third Word – previous Third World immigrants outperformed native-born Canadians because we picked ones who could do that.

BUT THAT current group hasn’t caught up to the income of the native-born and may never catch up. In fact, DeVoretz told a parliamentary committee in 1990, “these less-trained immigrants are falling further behind similarly trained Canadians with each year of residence.”

Exacerbating the trend is the disappearance of unskilled and low- skilled jobs. In Toronto, for example, the apparel industry, the city’s largest manufacturing employer, lost 6,000 jobs from 1988 to 1992. Manufacturing jobs like these were traditionally the stepping stone that allowed new Canadians to work hard, save money, and get ahead. The low-paying service jobs that are left for the unskilled may not offer the same chance at advancement.

David Foot, a University of Toronto economist and demographer as well as a longtime observer of Canadian immigration policy, is worried about the future. The coming years will be a period of rapid change, with people having to switch, not only jobs, but careers during their working lives. Specific skills will be less important than what Foot calls “generic skills” such as flexibility, computer- literacy, and being able to communicate well.

Fundamental to these generic skills is language competence. But, because family class immigrants and refugees have swamped our immigration system, a staggering 50 per cent of current immigrants speak neither official language. This, says Foot, is intolerable.

“We are luckier than Australia which has only one language. We give immigrants two to choose from and I don’t think it’s too much to ask that they show a basic proficiency in one of them before coming here.

“As a taxpayer I am delighted to pay for immigrants getting established in the labor market but you’ve got to have something to build on. Without a language, you have nothing to build on and very little chance in the labor market of the future. This is a terrible way to manage our immigrant flow and it’s going to cause us big trouble.”