Posted on October 6, 2005

New Paper Points to Growing Conflict Between Canada’s Welfare State and Increased Immigration

Fraser Institute, Oct. 4

There has been a sharp decline in the economic performance of recent immigrants to Canada since 1990, according to Immigration and the Welfare State in Canada: Growing Conflicts, Constructive Solutions, released today by The Fraser Institute.

This paper, written by Institute Senior Fellow and SFU Professor Emeritus Herbert Grubel, examines the causes of the decline in the economic performance of recent immigrants and blames the immigrant selection process used by the government of Canada.

“Simply put, the current system used in the selection of immigrants over approximately the last 25 years is severely flawed,” said Grubel.

The paper cites official statistics showing that recent immigrants, on average, have lower incomes than comparable Canadians even after 10 years’ residence in Canada. As a result of these lower incomes, the progressive income tax structure of the Canadian welfare state and the universal availability of government benefits have resulted in substantial transfers from other Canadians to these immigrants. Grubel estimates the transfer to immigrants who arrived between 1990 and 2002 is approximately $18.3 billion every year, based on 2002 data.

Among the reasons for the low incomes of recent immigrants, Grubel cites the fact that there are large numbers who bypass the government screens that are designed to allow entry only to applicants likely to be economically successful. Those bypassing the screens include large numbers of family members and refugees, many of whom have low earnings capacity.

In addition, many immigrants with professional skills are unable to find jobs for which their high education qualifies them.

In response, Grubel proposes the creation of a new immigrant selection process that would reduce the burden on Canadian taxpayers and reduce the hardships imposed on immigrants who cannot find suitable employment.

“The proposed selection process is modeled after that used successfully under the NAFTA treaty. Under this new system, foreigners can enter Canada on renewable, temporary work visas only if they have a valid employment contract. These temporary work visas eventually lead to landed immigrant status and citizenship for the workers and their families,” he noted.

The employment contract must be for specified occupations or, alternatively, at a rate of pay above a specified minimum.

Unemployed holders of temporary work visas would face deportation after a limited, specified period of searching unsuccessfully for a new job. Private firms in a public-private-partnership arrangement would collect and maintain information needed by government to enforce the regulations. As taxpayers, the holders of temporary work visas are entitled to all government benefits available to Canadians.

The essence of this proposed reform is the replacement of the judgments of government bureaucrats issuing visas with the judgments of private employers about the economic value of potential immigrants.

“The government remains involved by determining the occupations or minimum income requirements needed for qualifying employment contracts. It also remains involved in enforcing the proposed rules and deporting those who do not meet specific work requirements,” Grubel pointed out. “What ends is the misguided attempt by government to match people to jobs, something best left to employers and the job market.”

Established in 1974, The Fraser Institute is an independent public policy organization with offices in Vancouver, Calgary, and Toronto.

Read the full report here.