Any well designed immigration policy involves many trade-offs. I wish to clarify what some of these trade-offs are within which current policy changes can be viewed.
Immigration serves several roles. It helps build a nation as waves of immigrants have contributed to moulding Canada. It contributes to family welfare by facilitating family unification. It has a humanitarian component that brings in a significant number of refugees each year. It aims to foster regional economic development. Immigration contributes to demographic growth as fertility rates in Canada are below replacement levels, and it attenuates the natural aging of the Canadian population and labour force.
Immigration also brings many economic benefits. Immigrants contribute to labour market skills that can increase productivity and fill labour market gaps, help maintain economic growth through increasing aggregate expenditures and facilitate global networks of people and ideas.
What emphasis is put on these different roles obviously involves trade-offs. What is new to these trade-offs are three relatively recent concerns. One is aging of the baby boom cohort of workers who are now starting to retire from the work force, resulting in a large loss of skills to the economy. Second is the growing international competition for skilled workers from India, China and elsewhere. And third is the growing awareness that recent cohorts of immigrants to Canada have been losing ground and falling behind the non-immigrant population in their economic outcomes.
One approach to this impending shortage of skills is simply to increase overall immigration levels. But estimates from a recent study by the C.D. Howe Institute show that doing so without changing the current mix of immigrant arrivals and the policies under which they arrive will further reduce the average earnings of immigrants. But skill-evaluated economic class immigrants – those who arrive for largely economic reasons – do consistently better in the Canadian labour market than other classes of immigrants, according to a recent study by the Institute for Research on Public Policy.
So an alternative approach – one suggested in The Globe and Mail's current series – is to concentrate an increase in immigration completely within the economic class. The analysis in the C.D. Howe study estimates that a doubling of arrivals under the economic class would raise the average earnings of immigrants by about 6 per cent. The total level of immigration under this scenario would go up to about 400,000 a year (about 1.2 per cent of Canada's population).
But we could do better still by recognizing some of the problems within the economic class or skilled immigration programs themselves, and addressing them. This is the route the government is following. These problems include: the large backlog of applicants in the federal skilled worker (FSW) program; the inadequate weight the current point system (under which FSWs are admitted) gives to the skilled trades and the failure of the FSW program to adequately reflect specific employer needs in a dynamic economy; recognition of the critical importance of language in the modern economy and how it should be assessed; difficulties and frustration at trying to get foreign credentials recognized; and an explosion in the number of temporary foreign workers coming to Canada as a stop-gap measure to get around the delays and unresponsiveness of the current system.
How to deal with these problems again involves major trade-offs. Immigration policy has been shifting toward a narrower occupational gap-filling approach and away from a human capital approach based on broad-based skills such as amount of education, language fluency (in either English or French) and youth (as a proxy for flexibility, adaptability and resilience). But the former approach was tried in the 1970s and ultimately rejected as specific occupational needs are hard to predict accurately in a rapidly changing economy and the process of adjusting the admission screen to reflect changing occupational needs was too slow. There is no reason to believe we can do any better at this approach now than back then.
Skilled immigration policy has also been shifting away from reliance on the federal skilled worker program (based on the point system screen) and toward emphasis on direct employer selection of prospective immigrants (through the rapidly growing provincial nominee programs, also known as PNPs) and the temporary foreign worker program. Evidence shows that PNP-class immigrants initially do better in the labour market than FSW immigrants, but within four or five years, on average, the latter group pulls ahead in their labour market outcomes. Because of the market pressures they are under, employers generally reflect immediate or short-run needs, whereas immigration is a long-run phenomenon with immigrants becoming part of the Canadian economic and social fabric.
More generally, then, a selection system for skilled immigrants should have several components to reflect these different needs and be multi-tracked in order to achieve a balance among these different trade-offs.
Charles M. Beach is a professor of economics at Queen's University.
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