Boon or bust?

An influx of immigrants who work and pay taxes might fix our budget woes and mitigate the effects of an aging population, but what are the costs of doing so?

It's not surprising Norman Nahas believes strongly in the economic benefits of immigration. His family’s story is all about the successful immigrant experience. One could say, in fact, that the Nahas clan embodies it.

Decades ago, when his father, Bassam (Sam), ended his voyage from Lebanon at Pier 21 in Halifax, he had no way of knowing that his son Norman would eventually be running his property development business. He had no business at the time, nor did he have a son. He was only 14 years old, the youngest child in a family of eight children.

Following family members who had already come to Nova Scotia, Sam made his way in the New World, selling insurance, working on the railroad, working at a grocery store. Eventually he and his brothers owned their own grocery chain. In the 1980s, he and a partner bought land in Halifax, from which grew Nanco Developments Ltd., now run by Norman and his two brothers. In 1989, he bought out the iconic King of Donair restaurant chain, which had been started by a Greek immigrant to Canada.

Meanwhile, Norman had married a Canadian and had three sons, all of whom went to university and became professionals.

“The entrepreneurial spirit was quite strong in the older generation, where it was either sink or swim,” says Norman, who left engineering five years ago to look after the day-to-day operations of Nanco. “Then they began to focus on education for their kids.”

As president of the Lebanese Chamber of Commerce in Nova Scotia, he and the Halifax Partnership, a public/private economic development organization, recently studied the impact of Lebanese immigrants on the city of Halifax, providing an example of what immigration can do for a local economy.

What they found was that 1,370 Lebanese immigrants and their descendants directly and indirectly create 4,000 to 5,000 jobs a year. Using census data, they determined that 3.6 full-time jobs are created for every Lebanese immigrant in the city.

The Nahas story is just one of many about how immigration has changed the face of communities across Canada, helping many to prosper and grow. They are the stories that prompt calls for the government to allow more newcomers in, to be vigilant about competing for highly skilled workers and to do more to help them to stay here and prosper.

THE FORECAST

Of course, there are costs associated with processing and supporting immigrants, and the net benefit for a country such as Canada is hard to quantify. But one forecasting model does indicate that an increase in immigration would benefit the country as a whole economically. The study, authored by three Canadian professors and published in 2013 in the British Journal of Industrial Relations, concluded that taking in an extra one million immigrants over a 10-year period would increase Canada’s real GDP by 2.3%.

It would also result in a modest increase in GDP per capita for people already living in the country, according to Peter Dungan, an economics professor at the University of Toronto and one of the authors of the study. “It’s not a huge increase, but it’s there,” he says.

This is partly because new immigrants tend to be concentrated in the working-age group, which means that most end up working and paying taxes for a long time. Another thing is that there are economies of scale to providing government services. “For instance, if you bring in an extra 100,000 people, you don’t have to increase the military proportionately,” Dungan says. “This gives you some extra for all of us to enjoy.”

One issue, though, is that immigrants are falling behind in their ability to catch up to wages earned by Canadians. In the early 1970s, new immigrants earned 75¢ for every dollar earned by a native-born Canadian, controlling for education levels and skill sets. By the mid-2000s, that number had fallen to 62¢. And census numbers going back to the 1990s show that immigrants are earning less and less on average compared with Canadians, even after they have been here for a few years.

“You still get positive economic effects even when immigrants have 70% to 75% of Canadian earnings,” Dungan says. But he points out that the benefit would be much greater if their earnings were more in line with what Canadians earn. “So a clear message is that Canada has to be better at integrating immigrants and making sure that they produce to their full potential.”

This is an often-expressed sentiment.

According to Michael Bloom, vice-president of industry and business strategy at The Conference Board of Canada, immigrant earning levels have taken a significant negative shift from previous decades. “Our strategy has been to seek highly skilled people, more than many countries, and we have been more successful in doing that than most countries,” he says. “But we are not making the most of those people who were, until the 1990s, catching up on income.”

The problem, he says, is that we are not adjusting fast enough to the changing populations coming in. Rather, Canada’s immigration infrastructure still operates as if most newcomers speak English as a first language and come from places that Canada knows well, such as the US or the UK, which is no longer the case.

THE COMPETITION

Not only are lower wages and underemployment a waste of talent, but these factors also hurt our competitive position when it comes to recruiting and retaining the skilled people we want to attract.

“If people come to Canada and they can’t get the level of services that allow them to fully integrate and connect to the labour force and find a place in communities, some of them will leave and word will get back to their home countries that things aren’t so good in Canada,” Bloom says.

As competition for educated and skilled immigrants intensifies around the globe, the experts say this is a reputation Canada cannot afford to have. Our competitive position is crucial in this regard because census figures show that by 2030 virtually all of Canada’s net growth in population will be coming from immigration.

Another factor is Canada’s aging population, which means that in years to come there will be a decreasing percentage of people available to provide social and economic support for seniors. According to Statistics Canada, in 2006 there were five working-age people (aged 20 to 64) for every senior, down from seven in 1971. By 2056, it is projected that there could be only two working-age people for every senior.

“We have to recognize this inexorable demographic blow,” Bloom says. “If we recognize it and say therefore that we are going to improve the way in which we add to the human wealth of the country, then we are going to be okay. If we fail to do that, we’re going to be in deep trouble.”

Randall Hansen is director of the Centre for European, Russian and Eurasian Studies at the Munk School of Global Affairs and a Canada Research Chair in Immigration and Governance in the political science department at U of T. He has studied global immigration patterns and says that the evidence is fairly clear.

“Econometric research shows that skilled immigration produces a small net positive economic benefit, and in most cases low-skilled immigration produces a small economic cost for the host society,” he says.

But he believes public discussion about the effects of immigration is prone to exaggeration either way, because neither the benefits nor the costs are as great as they are sometimes made out to be. He applauds efforts to better match skilled immigrants to jobs for which they are suited and to support immigrant integration, but he’s not optimistic that an ultimate cure for the so-called “brain waste” can be found.

“I’m curious about how we’re going to manage this because we’re an open-market economy and people hire whomever they like to hire [subject to anti-discrimination legislation],” he says. “I do think we should do something about it, but I don’t think we are ever going to solve these problems. I think they are inherent in immigration — that’s part of what it means to be an immigration society.” 

THE "TAXI DRIVER SYNDROME"

It is sometimes called “the taxi driver syndrome,” where highly qualified immigrants end up driving cabs to make ends meet because their experience and credentials are not recognized by employers here. 


Michael Chan, Ontario’s minister of citizenship, immigration and international trade, concurs that there is no magic formula for seamless integration that will allow all immigrants to immediately make full use of their education and job experience from their homeland.

“I don’t care how smart a person is or how experienced a person is, a newcomer coming into a new environment will always be presented with challenges,” he says. “In order to integrate into the society, it takes a bit of time. That is the reality.”

Still, as an immigrant himself — Chan came to Canada from Hong Kong at the age of 18 in 1969 — he knows firsthand about those challenges and wants to do as much as he can to help new immigrants succeed. “In Ontario, we try our very best to integrate them,” he says. “But I think we can do better.”

Streamlining the immigration process and bringing in more people to work in industries facing labour shortages are on his agenda. And he strongly believes in attracting more post-secondary students from outside of Canada and encouraging them to stay here after they graduate.

Other measures proposed by immigration advocates include having various governments spend more on language training, making professional certification processes less onerous, reducing Canadian experience requirements for some jobs and supporting NGOs that help immigrants find work that makes use of their skills.

Meanwhile, back in Halifax, Norman Nahas has been doing his best to aid the cause. His study has helped convince the federal immigration minister to nearly double the cap on immigrants to Nova Scotia to 1,350. In conjunction with the provincial immigration minister and the premier’s Immigration Advisory Council, his efforts have also helped to change the rules so that foreign students can stay if they land a job offer within one year of graduation. He also works with the Halifax Partnership’s Connector Program, which pairs new grads with mentors to help them find jobs that will allow them to stay in the province.

“We have funded 10 people from the Lebanese community to go through this process and we have had some success,” Nahas says. “We want people to stay and work here and pay taxes and to contribute, not just to come to Nova Scotia to smell the flowers when they retire.”

About the Author

Susan Smith


Susan Smith is a freelance writer in Toronto.

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