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Sorry a Long answer
Claims made in study by researcher at Fraser Institute
a) Economy performs better during the periods of lower immigration but its use of statistics is highly selective i.e.
1. Low income cut-offs (LICOs) are intended to convey the income level at which a family may be in straitened circumstances because it has to spend a greater portion of its income on the basics (food, clothing and shelter) than does the average family of similar size. The LICOs vary by family size and by size of community. The LICO used by authors is highly subjective and doesn’t vary with family size, region.
2. Immigration varies with provinces, compare the immigration inflow b/w NB and ON huge difference and should be taken into account and authors completely missed that.
3. Is economy real performs well when immigration level are low? From 1954 to the present Canadian population increased by just over 16 million, this contains 19% of the direct immigration. Roughly 40% of Canadian current population can be traced to immigration flow (including 1.4 million during 1910-1913), but over the period of 1954-2009 Canadian GDP grew from 150 billion to 1.34 trillion. Another study conducted by Harry Anthony Patrinos and George Psacharopoulos at world bank concludes that the contribution of Human Capital in this growth was in range of 52-58%.
b) I was unable to find data on Canadian economy beyond 1980 from IMF and world bank, so will look at this period, over the period of 1981-1990 and 1991-2004 the Canadian population increased by 2.71 million and 2.18 million respectively with 66% immigration share in 1981-1990 and 58% immigration share during 1991-2004. The Canadian GPD grew by 3.4% (2 recessions, 1987 when Canadian economy shrinked by 5% and 1990) per annum on avg over the period of 1981-1990 and 4.5% per annum during 1991-2004 (2 recessions 2001 and 2008). In period 1991-2004 the federal budget was able to achieve budget surplus for the first time since 1940’.
C) It is also interesting to note that the two countries that take most immigration Canada and Australia have the lowest unemployment rates among the OECD, so immigration doesn’t harm the local labor markets. Whereas increase in minimum wage or wage in secondary labor market (the blue color market) leads to increase in production or service cost, forcing exports to decrease and shift of jobs to countries with lower labor costs. No economic theory proves that min wage helps to decrease poverty, its economic growth which helps to decline poverty and lift people out of poverty line. Immigrants helps to keep prices lower and competitive in import and service sector.
D) High unemployment and direct competition claim was based on a study from Harvard which used US data, but US has high number of illegal immigrants esp from Mexico. Study conducted at Harvard estimates approx 0.5 – 1.5 illegal immigrant in US market at any given time , whereas Canada doesn’t face the dilemma of illegal immigrants. Recent study from conducted in MB, BC, AB, and ON shows that when immigrants are integrated in Canadian labor market their income surpass the overall Canadian average so the competition is wiped out. The only competition is at min wage or at the job which native Canadian will not do at that pay rate, I explained earlier in absence of immigration the wage will increase for these jobs and in end will lead to higher service or production costs, which will ultimately effect the Canadian output.
E) Canada has aging population and lower birth rate problem and immigrants help to overcome shortage in labor market.
F) The cost estimated by authors $13 billion per annum, In 2004 the Treasury estimated the cost should be between $2 to $ 4 billion. The author used the formula
FT = (Ta - Ti) + (Gi – Ga)
To calculate the fiscal cost (Ft) of immigration, where T= Tax, G= per-capita benefits received, a=all Canadians, i=immigrants. First the census is comprise of 5% Canadian population and it changes its sample after every 5 years on avg. So if an immigrant is in 2001 data he might not be available in 2006. Immigrant need some time to get integrated in Canaanite market and by the time he is integrated he may be out of census sample. Also, authors didn’t classified the second generation of immigrants as immigrants and simply took them as Canadian but average immigrant age is 37 years, so only adding the second generation benefits might change this figure from positive to negative. As mentioned in point 3 that the Canadian GDP grew from 150 b to 1.35 trillion in last two decades, and there was budget surplus since 1998 till 2007 (govt stimulus packages in recession caused the deficit not immigration) but the authors completely missed this value added by immigrants in the economy. This increase in domestic economic growth has also led to increase in government revenue but government spending as % of GDP on social system hasn’t increased much since 1980.
I) Immigrants create a larger labor pool, lower costs of production and act as stimulus to the economy by producing larger profits. This directly benefits the local producers as well as, to some extent consumers.
J) Another study, by Frontier institute which followed a large number of immigrants over the period of 15 years, shows that the during the first five years of residency, immigrant do use social services much more than the average Canadian but this gap disappears over the time. On the other hand Fraser institute study uses census data which may not follow an immigrant after 5 years, so this inconsistency in data also persists in results.
K) The avg cost of educating each Canadian child is $150,000 before the child becomes a net contributor to economy, and if take this cost into account and the cost of social services used by skilled immigrant in first five years, then skilled immigrant become beneficial for economy far more quicker and at lower cost than native. Immigrant education costs are not bear by Canadian government and 27% of recent immigrants hold a university degree, versus 13% for Canadian born population. The immigrants generate revenue to fund Canadian child’s education. In fact, the most daunting obstacle facing immigrants is obtaining fair recognition for their credentials and skills so that they may fully participate in economy. This disconnects forces immigrants to live with higher average levels of unemployment for up to 10 years.
L) The immigration has helped Canada to achieve similar living standards, budget surplus, education system like US with lower level of unemployment.
The immigration is a very sensitive political issue than social and is used by politicians for spin purpose. The author completely miss the dynamics of economy and labor market and simply added some figures without looking at dynamics of Canada and US economy and labor market. This resulted in results which might look shocking to readers who don’t have economic knowledge but an upper level undergrad economic student will question the methodology of study. The economic benefit of immigration is much higher for Canadian economy than the average benefits gained by first generation of immigrant.
Claims made in study by researcher at Fraser Institute
a) Economy performs better during the periods of lower immigration but its use of statistics is highly selective i.e.
1. Low income cut-offs (LICOs) are intended to convey the income level at which a family may be in straitened circumstances because it has to spend a greater portion of its income on the basics (food, clothing and shelter) than does the average family of similar size. The LICOs vary by family size and by size of community. The LICO used by authors is highly subjective and doesn’t vary with family size, region.
2. Immigration varies with provinces, compare the immigration inflow b/w NB and ON huge difference and should be taken into account and authors completely missed that.
3. Is economy real performs well when immigration level are low? From 1954 to the present Canadian population increased by just over 16 million, this contains 19% of the direct immigration. Roughly 40% of Canadian current population can be traced to immigration flow (including 1.4 million during 1910-1913), but over the period of 1954-2009 Canadian GDP grew from 150 billion to 1.34 trillion. Another study conducted by Harry Anthony Patrinos and George Psacharopoulos at world bank concludes that the contribution of Human Capital in this growth was in range of 52-58%.
b) I was unable to find data on Canadian economy beyond 1980 from IMF and world bank, so will look at this period, over the period of 1981-1990 and 1991-2004 the Canadian population increased by 2.71 million and 2.18 million respectively with 66% immigration share in 1981-1990 and 58% immigration share during 1991-2004. The Canadian GPD grew by 3.4% (2 recessions, 1987 when Canadian economy shrinked by 5% and 1990) per annum on avg over the period of 1981-1990 and 4.5% per annum during 1991-2004 (2 recessions 2001 and 2008). In period 1991-2004 the federal budget was able to achieve budget surplus for the first time since 1940’.
C) It is also interesting to note that the two countries that take most immigration Canada and Australia have the lowest unemployment rates among the OECD, so immigration doesn’t harm the local labor markets. Whereas increase in minimum wage or wage in secondary labor market (the blue color market) leads to increase in production or service cost, forcing exports to decrease and shift of jobs to countries with lower labor costs. No economic theory proves that min wage helps to decrease poverty, its economic growth which helps to decline poverty and lift people out of poverty line. Immigrants helps to keep prices lower and competitive in import and service sector.
D) High unemployment and direct competition claim was based on a study from Harvard which used US data, but US has high number of illegal immigrants esp from Mexico. Study conducted at Harvard estimates approx 0.5 – 1.5 illegal immigrant in US market at any given time , whereas Canada doesn’t face the dilemma of illegal immigrants. Recent study from conducted in MB, BC, AB, and ON shows that when immigrants are integrated in Canadian labor market their income surpass the overall Canadian average so the competition is wiped out. The only competition is at min wage or at the job which native Canadian will not do at that pay rate, I explained earlier in absence of immigration the wage will increase for these jobs and in end will lead to higher service or production costs, which will ultimately effect the Canadian output.
E) Canada has aging population and lower birth rate problem and immigrants help to overcome shortage in labor market.
F) The cost estimated by authors $13 billion per annum, In 2004 the Treasury estimated the cost should be between $2 to $ 4 billion. The author used the formula
FT = (Ta - Ti) + (Gi – Ga)
To calculate the fiscal cost (Ft) of immigration, where T= Tax, G= per-capita benefits received, a=all Canadians, i=immigrants. First the census is comprise of 5% Canadian population and it changes its sample after every 5 years on avg. So if an immigrant is in 2001 data he might not be available in 2006. Immigrant need some time to get integrated in Canaanite market and by the time he is integrated he may be out of census sample. Also, authors didn’t classified the second generation of immigrants as immigrants and simply took them as Canadian but average immigrant age is 37 years, so only adding the second generation benefits might change this figure from positive to negative. As mentioned in point 3 that the Canadian GDP grew from 150 b to 1.35 trillion in last two decades, and there was budget surplus since 1998 till 2007 (govt stimulus packages in recession caused the deficit not immigration) but the authors completely missed this value added by immigrants in the economy. This increase in domestic economic growth has also led to increase in government revenue but government spending as % of GDP on social system hasn’t increased much since 1980.
I) Immigrants create a larger labor pool, lower costs of production and act as stimulus to the economy by producing larger profits. This directly benefits the local producers as well as, to some extent consumers.
J) Another study, by Frontier institute which followed a large number of immigrants over the period of 15 years, shows that the during the first five years of residency, immigrant do use social services much more than the average Canadian but this gap disappears over the time. On the other hand Fraser institute study uses census data which may not follow an immigrant after 5 years, so this inconsistency in data also persists in results.
K) The avg cost of educating each Canadian child is $150,000 before the child becomes a net contributor to economy, and if take this cost into account and the cost of social services used by skilled immigrant in first five years, then skilled immigrant become beneficial for economy far more quicker and at lower cost than native. Immigrant education costs are not bear by Canadian government and 27% of recent immigrants hold a university degree, versus 13% for Canadian born population. The immigrants generate revenue to fund Canadian child’s education. In fact, the most daunting obstacle facing immigrants is obtaining fair recognition for their credentials and skills so that they may fully participate in economy. This disconnects forces immigrants to live with higher average levels of unemployment for up to 10 years.
L) The immigration has helped Canada to achieve similar living standards, budget surplus, education system like US with lower level of unemployment.
The immigration is a very sensitive political issue than social and is used by politicians for spin purpose. The author completely miss the dynamics of economy and labor market and simply added some figures without looking at dynamics of Canada and US economy and labor market. This resulted in results which might look shocking to readers who don’t have economic knowledge but an upper level undergrad economic student will question the methodology of study. The economic benefit of immigration is much higher for Canadian economy than the average benefits gained by first generation of immigrant.
