By Alan M. Field

Canada struggles to shape an immigration policy that brings in the right people for the right jobs – at the right time.

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In 2010 Canada welcomed a total of 280,681 immigrants to its shores – up 11.1 per cent from 2009, and the highest number in 50 years. These immigrants added nearly 0.8 per cent to the country’s population, which reached 34.7 million in 2012. Why are there so many new Canadians, and what impact have they had on Canada’s economy and society? A growing number of critics say that Canada’s approach to immigration policy has been anything but cost-effective or helpful for the country’s economy and its global competitiveness. Although, as the Economic Council of Canada notes, Canada has one of the highest percentages of immigrants in the world, a recent report by the Canadian Chamber of Commerce identified the country’s labour skills shortage as one of the most serious long-range challenges facing Canada’s global competitiveness.

In recent years, the growing inflow of immigrants has been justified to compensate for the undeniable fact that Canada’s population is getting older. Already 18 per cent of Canadians are over 65 years old, and that percentage will rise to 35 per cent within 20 years. Citizenship and Immigration Canada (CIC), the federal agency, has warned that Canada will be dependent upon new immigrants for 100 per cent of the growth in its workforce. Clearly, Canada will need a steady flow of immigrants to build a younger workforce than it can currently create from internal growth, while generating enough wealth to pay for its welfare-state economy. Other justifications cited for increasing the inflow of immigrants into Canada include the notions that by raising its population significantly, Canada will automatically increase its per capita Gross Domestic Product or might (automatically) achieve the greater economies of scale that Canadian industries require for competing more effectively in the global economy.

Nevertheless, many employers, especially in the resource-rich Western provinces, continue to complain about an endemic shortage of skilled labourers. “Every sector of the economy will be hit hard by a shortage of workers,” said Richard Truscott, Alberta Director of the Canadian Federation of Independent Business. “Governments and industry must work together quickly to explore opportunities to improve temporary worker and permanent immigration programs to meet the needs of a growing economy.”

What does this mean for the transportation and logistics sector? A long-standing shortage of skilled workers exists “in all modes of transportation and affects nearly all of the sector’s occupations,” according to a report by Ray Barton Associates, Ltd., a consultancy based in Ontario. According to the Canadian Trucking Human Resources Council (CTHRC), one of the most significant issues facing the industry is ensuring that a sufficient supply of qualified truck drivers is available to carriers. The CTHRC recently estimated that an additional 37,000 drivers will be needed in Canada each year. For its part, according to the Alberta Coalition for Action on Labour Shortages (ACALS), the Alberta government has estimated that there will 114,000 more jobs in Alberta than there are people to fill them in coming years. ACALS said that the shortages will impede such economically vital initiatives as road construction projects that relieve traffic congestion.

Do the shortages suggest that too many immigrants are entering Canada today? Or too few? In fact, most immigration specialists say the problem lies in the fact that Canada has been drawing too many of the wrong kinds of immigrants. According to a recent report by the Fraser Institute, the average immigrant who arrived in Canada between 1987 and 2004 received about $6,000 more in terms of per capita government services in 2005 than he or she paid to the government in the form of taxes. “The massive intake of immigrants is not justified on any grounds,” said Martin Collacott, Chairman of the policy advisory board of the Centre for Immigration Policy Reform. Mr. Collacott, a former Canadian Ambassador in Asia and the Middle East, said that the current inflow of immigration into Canada is the equivalent of 2.5 million legal immigrants coming into the U.S. – about twice the current level of legal immigration to Canada’s southern neighbour. “People [in Canada] are afraid to challenge the system because if they make criticisms, they are criticized as racist, xenophobic or anti-immigrant, when that it not the case,” said Mr. Collacott.

“Immigrants arriving in Canada since 1987 are not doing as well economically as immigrants who arrived before 1987,” explained Herbert Grubel, Fraser Institute Senior Fellow and co-author of the study, Fiscal Transfers to Immigrants in Canada: Responding to Critics and a Revised Estimate. “As a result of Canada’s welfare-state policies, its progressive income taxes, and universal social programs, these immigrants impose a huge fiscal burden on Canadian taxpayers of between $16 billion and $23 billion annually.” According to Grubel and co-author Patrick Grady, Statistics Canada’s Labour Force Survey revealed that in 2010 the average hourly earnings of recent immigrants were $6.30 below the wages of comparable Canadian-born workers.

According to Mr. Grubel, some of the arguments offered in favour of growing immigration made sense in the past when Canada was empty territory, and the newly built railroads and roads needed more traffic to make them cost-effective to operate. At the time, it was also expensive for immigrants to come to Canada. “There weren’t any long waiting lists to come to Canada, and there was no welfare state – healthcare or social security – and immigrants were self-sufficient, and they were providing more benefits than costs to Canadian society.”

The current system, which enables Canadian immigrants to sponsor their parents and grandparents as fellow immigrants to Canada, has cost Canadian taxpayers $84 billion in healthcare costs over the past 20 years, said Mr. Collacott. Those costs will rise considerably if the current backlog of 165,000 people who want to enter Canada is eventually broken, and a significant share of such immigrants are allowed to enter the country in a speedier way. Factoring in the backlogs, Mr. Grubel and Mr. Grady estimated in their study that the provisions of the Canadian welfare state “are putting a fiscal burden of about $20 billion to $30 billion on Canadians every year. That is what we will spend over the next 15 years to renew our Navy. We spend this [amount] every year [on immigration] because of the selection procedures we are using to admit immigrants.” According to CIC, a surprising 26.6 per cent (74,459) of the 280,681 immigrants admitted to Canada in 2010 spoke neither English nor French, making it difficult for them to find work, never mind a well-paying job.

On the other hand, the argument that a more populous Canada would automatically be richer than a less populous Canada made no sense from the outset, said Mr. Collacott. If greater population size were the automatic key to greater wealth, the People’s Republic of China and India would have been the world’s richest nations decades ago. The further argument about the value of immigration for economies of scale may have made some sense when Canada was too small a market for some companies to produce large production volumes. The argument then was that Canada could benefit from having a population of as large as 100 million people because its manufacturers would serve much larger domestic markets. But those arguments have lately fallen by the wayside as a result of globalization, noted Mr. Collacott. The Canadian economy has become so closely integrated into that of the U.S. that Canadian companies – like their counterparts in the U.S., Europe and Asia – can achieve global economies of scale by assembling many of their products outside Canada, or simply shipping goods to Canada’s free-trade partners around the world.

More generally, in an April 2012 report by the Montreal-based Institute for Research on Public Policy, Making It in Canada: Immigration Outcomes and Policies, researchers Garnett Picot and Arthur Sweetman enumerate five factors that explain the deterioration in immigrants’ economic outcomes in recent years. “This decline is the cumulative effect of a number of factors,” they write. The five factors are:

• First, during the early stages of the decline during the 1970s and 1980s, fewer skilled and experienced tradesmen and fewer professionals were arriving from the traditional source regions of Western Europe and the U.S.; on the other hand, greater numbers of lesser skilled and less experienced immigrants began arriving from Asia, Africa and the Caribbean.

• Second, the Canadian labour market now treats most new immigrants like new entrants, no matter how much foreign work experience they have. “With the exception of men from traditional source countries,” who have also faced a decline, “the labour market does not, on average, financially reward such experience at all.”

• Third, all new cohorts of labour market entrants, both Canadian-born and foreign-born, “have seen a decline in their inflation-adjusted earnings at entry into the labour market.” The decline has coincided with an increase in labour supply because of demographics.

• Fourth, after 2000 there was a crash in the information technology industries in North America and Europe, and immigrants to Canada in this sector “were particularly hard hit.” Moreover, recent groups of immigrants to Canada generally tend to have less seniority and, therefore, they “experience more negative consequences in sector-specific downturns.”

• Fifth, and perhaps most important for current policy, is the factor of language skills. “Differences in language skills explain a considerable portion of the earnings gap between immigrants and the Canadian-born.”

As awareness of these factors has grown, Canadian policy-makers and stakeholders “have put considerable effort into improving labour market outcomes for immigrants” by modifying selection rules, strengthening language tests and introducing new programs. However, despite some successes, “there has not yet been a marked improvement in outcomes,” says the report.

A policy driven by politics, not economics

With so many immigrants arriving at such great expense to Canada, how is it possible that there is such a shortage of the right kinds of skilled labour? When the Canadian Chamber of Commerce studied the complex issue of immigration policy, noted Warren Everson, its Senior Vice-President for Policy, “We arrived early in the game to the conclusion that two things are clear: Canadian policies were not driven by a desperate urgency due to economic implications.” Politics, not economics, have been the key factor. Added Mr. Everson, Canadian companies “have failed to keep and productively employ” a sufficient number of workers to meet the needs of Canadian industry. “Too many workers leave and there is an unacceptable level of unemployment. It is obvious that the current policy must be overhauled.”

Added Mr. Grubel: “We no longer need the economies of scale now that we have free-trade agreements and mechanization of production, but the political motives [for maintaining the current approach to immigration] are as strong as ever. No one wants to tackle the immigrant lobby, which can deliver just the right number of MPs [in Parliament]. We are stuck until people rise up or the immigrants recognize that it is in their interest to stop this.”

Mr. Grubel noted that although Canada’s Federal Skilled Workers Program  (FSWP) evaluates prospective immigrants on the basis of a point system that takes into account each individual’s age, health and educational level, the point system “is not working well.” In the teeming metropolis of Delhi, India, for example, there are numerous shops near universities where “you can buy a fake certificate” that “proves” that you graduated from that institution. In addition, Canadian immigration officials cannot be sure that even someone who is a legitimate MD from an obscure university in, say, China or India, has skills equivalent to those of graduates trained in Canada, the U.S., Germany, or other advanced countries.

Beyond that, “once they are admitted, the immigrants sponsor their parents and grandparents who are not subject to these tests,” noted Mr. Grubel. The fundamental justification for this approach, added Mr. Grubel, is that the Canadian government “decided that we can’t get anyone who is highly skilled unless we let them take their relatives with them.” In theory, the qualified immigrants must promise to take care of their parents after coming to Canada, “but that law has never been enforced,” and many of these relatives “live on the edge of poverty” and eventually qualify for government assistance programs.

For his part, Mr. Grady testified last fall in Parliament against the “live-in caregivers” program, which accounts for about 29,000 of the backlog of immigration applicants waiting to be processed. “I find it very hard to understand why this program survives for so long and who the constituency for it is, given that the main beneficiaries are upper-income people who get a subsidy for taking care of their children in a very expensive way of ‘at-home’ child care. Of those who come, 40 per cent come to work for relatives. Then, unlike the other temporary foreign worker programs, these people get the opportunity for full status after two years and they are entitled to bring in their family.” If everyone in the backlog were to be allowed into Canada, and they did as well in Canada as the previous one million immigrants to the country, an estimated 26.4 per cent of them will wind up in poverty, at an annual cost of $6 billion to Canada, he said.

About 70 per cent of new immigrants now settle in the three major metropolitan areas – Montreal, Toronto and Vancouver – because current policy facilitates the immigration of parents and grandparents and their caregivers, notes Mr. Grubel. This, in turn, exacerbates the social contrasts between Canada’s urban and rural areas, where there are comparatively few recent immigrants. Noted Mr. Grubel, “The immigrants don’t want to settle in other cities where there are jobs because the climate is awful in many of those locations, and there are few cultural opportunities that meet their multicultural needs.”

The concentrated influx of immigration into the largest metropolitan areas has raised real estate prices to levels at which even many Canadian-born professionals can no longer afford desirable homes, and it has changed the cultural environment beyond recognition to earlier generations of Canadian immigrants. “In Vancouver, there is no land to expand, so the prices are high. Within five years, a visible minority [its Asian population] will be the majority in the region. Metropolitan Vancouver is already the second-largest ethnically Chinese city outside China,” Mr. Grubel added.

The concern with the concentration of immigration in Canada’s three major cities has been with us for many years,” write Garnett Picot and Arthur Sweetman in their April 2012 report. This desire for a greater regional distribution of immigrants is related to two major challenges: “Deterioration in economic outcomes of new immigrants,” and occupational and labour shortages “driven by the aging of the workforce, related retirements and other issues related to the demographics of the baby boom.” The authors add: “Smaller communities argue that they need immigration for economic growth and to respond to shortages, and there is also a belief in some quarters that immigrants’ economic outcomes would improve if more immigrants located in smaller Canadian cities.”

On the other hand, noted Mr. Everson, “It is not as simple as saying that we just want people [immigrants] who are in the prime of life and have a higher education. We recognize that workers are in the context of a family, and we take a holistic approach.” He added, “Most people recognize that immigration policy must be holistic,” rather than focus entirely on bringing in younger workers who can generate enough wealth to finance the welfare state, and who won’t impose any costs on that state for decades to come. The question is how far the system bends to accommodate those family members, he added.

For his part, Mr. Collacott fears that current policy, which fails to meet the needs of Canadian companies for skilled workers, is bringing in too many low-cost, low-skill workers. He said that studies show that when companies have ready access to low-cost workers, they often fail to invest in technologies that improve their productivity – and that of the country – over the longer run. “If you keep bringing in cheap labour to serve as employees, companies won’t invest in productivity increases,” he said. For evidence, he cites the “Bracero” program that invited low-wage Mexicans into the United States to work on California farms, when manual labour was in short supply during the Second World War. After the Bracero program was ended in 1964, California agribusinesses could no longer hire low-wage Mexicans to do many tasks, so they were forced to mechanize their operations, and productivity rose in numerous agricultural commodities.

New directions in federal policy

In recent weeks, the Harper government has announced several initiatives aimed at directly addressing these challenges. Most significantly, by targeting younger and more language-proficient immigrants, a newly announced package of federal government immigration reforms could eventually end the “vicious circle of unemployment” for newcomers, said Jason Kenney, Federal Minister of Citizenship and Immigration, in March. “For too long, the story of immigration to Canada has been summed up by the frustration of the highly trained professional who arrived with the expectation of being able to work at his or her skill level,” Kenney told a business gathering in March. “We’re going to stop this practice of inviting highly trained people to come to Canada if they don’t have jobs or they’re not likely to succeed in the labour market.” Minister Kenney added, “We’ll be reforming our immigration programs to do more in ensuring that our historic openness to newcomers works to fuel prosperity in Canada.”

The federal government reforms will focus on attracting precisely those sorts of people who are most likely to do well in Canada – and contribute more to the Canadian economy – rather than bring in university graduates and professionals, irrespective of their ability to actually qualify for Canadian professional standards and find appropriate jobs in Canada. Those workers will not necessarily be armed with advanced diplomas. In April, Minister Kenney announced that the federal government plans to make it easier for skilled workers without university degrees to immigrate to Canada in order to fill growing labour shortages in the construction, natural resources and related sectors. A modernized FSWP, to be unveiled later this year by Citizenship and Immigration Canada, will create a separate and streamlined program for skilled tradespersons, who are often in high demand in construction, transportation, manufacturing and service industries.

As things stand now, applicants for FSWP are assessed against a 100-point grid, with 67 points being the cutoff between success and failure. The grid takes into account each candidate’s language ability, education, work experience, age, whether or not he or she has a job offer in Canada, as well as his or her overall adaptability. Points are rewarded for factors such as previous work or study experience in Canada, the spouse’s education, and relatives in Canada.

Traditionally, some criteria in the FSWP grid, such as years of education, have favoured professionals and managers more than they have favoured skilled tradespeople, so skilled tradespeople comprise only 3 per cent of all immigrants who currently enter Canada under FSWP. The proposed FSWP would create a means for skilled tradespersons to be assessed based on new criteria that give greater weight to practical training and work experience, rather than to formal education. Although the new program for skilled workers will avoid some of the complexities of the traditional points systems, skilled tradespeople will nevertheless need to meet minimum language requirements because of the widespread recognition that language competence is a determinant of immigrant success even in occupations that do not require university degrees.

End of Part 1
To be continued next week.