The Economics of Immigration and Roxham Road, Part 4: Recommendations for Canadian Immigration Policy
Governments need to both help immigrants directly and ensure Canadians in general believe in the system
Over the last month, I have been writing on Canadian immigration, both in terms of its history as well as its economic implications. It is now time to put it all together to determine what our governments have done well, and what they have done poorly — and sometimes shamefully. I also want to make recommendations regarding how Canadian governments should approach immigration policy, not only with respect to the immigrants themselves, but also the people who already live and work here, who should understand why immigration is good for everyone in Canada.
So what have our governments been doing well? First, as
and I found in the second part of this series, it put refugees at the head of the line in the immigration system, which is good since their migration can literally be a life-and-death situation.Second, the points system used to admit economic migrants was a good thing because we should admit the best and brightest of these migrants. This system is also good because it focuses on their skills and education, rather than their country of origin.
We also found Canada did a good job helping Syrian refugees in 2016, in terms of the citizenship process, education, employment, shelter, and mental health. The authors we cited also highlighted the importance of agencies working together to better fulfill the various needs of immigrants.
Still, there is a lot of room for improvement, which will be the focus of this final part of my series on immigration. But before we dive into how to help immigrants most efficiently and effectively, we need to set up the conditions necessary to do so, which includes maximizing acceptance by existing Canadians. Then, since we only have so many resources, and we cannot resort to the utopian ideal of open borders, we need to use foreign policy to help poorer countries reduce the “push” and “pull” factors that motivate migration: if people would otherwise rather stay in their own countries, then we help everyone if we enable them to do so. With all of that done, we can concentrate on who remains: refugees, followed by those coming for family unification, and finally economic migrants.
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Generating Acceptance from Existing Canadians
To summarize the theoretical predictions explained in the first and third parts of this series, the increase in labour supply caused by a boost in immigration will lead to downward pressure on wages in Canada, but wages could still rise for Canadians whose skills complement the skills of these immigrants. Furthermore, since workers are used where they are more productive, the overall welfare of Canadians will rise.
Nonetheless, even when immigrants and Canadian workers are substitutable, negative wage effects are expected to be less significant when they are imperfect substitutes, such as when the immigrants do not have comparable language and communications skills. Therefore, they can all still work together as Canadian workers gravitate toward cognitively-oriented and communications-intensive jobs.
Furthermore, even when the increase in labour supply pushes wages of Canadian workers down, these new immigrants will create more labour demand with their own purchases of goods and services, as well as starting their own businesses which require hiring their own labour.
Therefore, average Canadian wages do not need to fall with immigration, and there is indeed empirical evidence (summarized last week) showing the average effect of immigration on wages is non-negative in the long run, depending on the degree of substitution between workers — slightly positive if workers are imperfect substitutes.
Furthermore, studies show immigration is correlated with less wage inequality in Canada because immigrants tend to be highly skilled and highly educated, so high-wage workers tend to be the ones who experience negative wage effects while low-skilled workers are not harmed in this respect.
For that reason, we would expect low-skilled workers to support — or at least not oppose — immigration in Canada. On the contrary, low-skilled workers do oppose it, although Canadians are generally more accepting of immigrants who are victims of torture or who are vulnerable in other ways, as opposed to economic immigrants.
With respect to why these people might oppose immigration, recall from last week they might feel they are not getting what they deserve in life, and immigrants will take more away from them — as opposed to more educated workers who tend to place a higher value on cultural diversity and believe in the overall benefits of immigration. Again, the evidence indicates low-skilled workers have little to make them worry about immigration, but simply saying “you are wrong” will likely not help — perception is reality.
All of this suggests while people immigrate to Canada in search of a better life, many who already live and work here do not feel they have this better life. Thus, Canadian governments need to help improve the way society works for Canadians, in addition to assisting the assimilation of immigrants. Examples of areas for improvement include healthcare, inflation, and the abuses of market power by oligopolists in the airline and telecommunications industries. Furthermore, these improvements need to be recognized by everyone, rather than just telling them they exist.
It is also crucial for Canadian governments to ensure all new immigrants are treated fairly and with respect, both during the immigration process and after being accepted into our country, because there is a shameful history of governments treating them terribly — treatment which is still happening to some degree. As covered in detail in the second part of this series, they include the Jewish people who were denied asylum during WWII, as well as Black people who faced discrimination after coming here to escape U.S. slavery, as well as when migrating to the Canadian Prairies in 1911, and to Africville in Nova Scotia. There was also the Chinese head tax in the 1800s, Japanese internment during WWII, and the Continuous Journey legislation designed to restrict Indian migrants by foreclosing their rights as British colonial subjects to migrate to Canada. Canadians from all of these groups remember the treatment of them and their ancestors who immigrated to Canada, so governments need to demonstrate to everyone the negative history of Canadian immigration is not being repeated.
And it is not just immigrants who were treated horribly by our governments; there are also the Indigenous peoples who suffered great indignities at the hands of Canadian governments, including the Indian Residential School System — the effects of which still exist in the form of intergenerational trauma. As written in the second part of this series, the Department of Justice (2019) reports they are also over-represented in Canada’s criminal justice system, not only as people accused or convicted of crimes, but also as victims of crime. It is therefore crucial the Canadian government follows through on its promises of reconciliation with the Indigenous peoples, while at the same time making improvements in our immigration system.
Foreign Aid
As explained in the first part of this series, people migrate due to factors that “push” them out of their home countries, and ones which “pull” them into other countries. In the case of refugees who are fleeing persecution and death, the Canadian government should do whatever it can to help these people immigrate to Canada. The government should also help people move to Canada for purposes of family unification. But what of those people who would prefer to stay in their home countries if there were simply more economic opportunities available to them there? In that case, foreign aid could be the best approach to helping them, while at the same time making it easier to focus on refugees and family unification cases.
As argued in the second part of this series, countries like Canada are partially to blame for problems existing in some developing countries, because neo-colonialism has made these countries economically dependent on us. Therefore, foreign aid is not only economically responsible for various reasons, but it can also be considered morally responsible given policies of past governments.
Economic Assimilation of Canadian Immigrants
We can now focus on helping immigrants assimilate economically in Canada. We are already seeing positive evidence in this regard: as found in the third part of this series, although immigrants do appear to suffer from a wage gap initially, it gets better as they economically assimilate and their wages rise faster than the wages of pre-existing Canadians. Furthermore, immigrants tend to have life satisfaction levels comparable to naturally-born Canadians, rather than to people from their home countries. Thus, the goal is to help reduce this wage gap more quickly.
With that in mind, evidence found in the third part of this series suggests assimilation is more successful if immigrants have access to programs targeted specifically at them, rather than offering them access to programs available to all Canadians in general, so that is how I will proceed in this section.
One way to do so is to help immigrants develop language skills. In the previous part of this series, it was found that attending a language course for six months seems to help them benefit from their other skills — not just because of improved language skills, but also due to the soft skills and information acquired during language training.
With respect to age, previous findings suggest governments should put greater focus on helping older immigrants assimilate into Canadian society, because younger ones already have an advantage in that respect. Of course, immigrants of all ages should be given what they need to be successful, but more attention could be given to older ones to overcome their disadvantages.
Similarly, there is empirical evidence people who are admitted for economic reasons have an easier time assimilating economically than refugees and those who are here for family unification, so more resources should be put into helping the latter two groups overcome their barriers to assimilation. Furthermore, it is important to ensure the refugee process does not leave asylum applicants in “limbo” for an excessive amount of time, as it can negatively affect how they assimilate into Canadian society, especially when they have low educations.
There is also the issue of “brain drain”, which we typically view in terms of Canadians moving to the U.S. in search of better opportunities. But evidence cited in the third part of this series suggests this brain drain also involves people who immigrate on the points system before quickly moving on to the U.S. for an even better life. Admittedly, this is not a good look for Canada because our government devotes resources to process their immigration applications, only to not benefit from their skills and expertise. This is all the more reason to improve the way our economy operates so they want to live and work here long term rather than using Canada as a rest stop.
Canadians Are Also Beneficiaries of Immigration
Recall the “magnet hypothesis” from the third part of this series, which worries some people: immigrants will come to Canada to take advantage Canadian benefits while giving relatively little back in return. But on the contrary, evidence suggests they are actually fiscally neutral, so there appears to be little need to worry about this problem.
This hypothesis aside, it was previously found Canadians benefit from immigration in other ways, such as the “positive externalities” created because migration affects the cultural, racial, religious, and ethnic composition of our country.
Furthermore, it was found immigration benefits Canada by increasing trade with the immigrants’ home countries due to:
Reduced transactions costs associated with language, culture, and local knowledge
Knowledge diffusion
Facilitating networks of trust which replace or facilitate markets
Immigrants exercising their preferences for purchases
Finally, immigrants in STEM occupations can influence productivity and wages via contributions to human capital formation and innovation. Immigrant inventors and scientists also bring knowledge and technologies, such as the Jewish scientists during WWII. Then there is also new knowledge and skills that complement domestic ones.
Summary Remarks
Immigration has the potential to benefit everyone in Canada, not just theoretically but also based on empirical evidence cited throughout this series. However, it requires our governments develop policies which not only help immigrants enter Canada and become assimilated economically, but to also ensure they are accepted by Canadians regardless of their reasons for being here. It is my hope what we have written over the last month is beneficial in determining how these goals can be reached.
Thank you for reading this post to the end, and I look forward to writing for you again next week.