Immigrants have an undeniable long-term benefit for advanced economies, according to a new report from the International Monetary Fund (IMF).
Both high and low-skilled immigrants make a contribution over time that results in boosting the GDP of the country they move to, the study says.
The benefits are shared across the population of the host country, although high-skilled migration tends to help increase the income of the top 10 per cent of earners.
While immigrants can create problems in the short term centered around integration and increased government spending, these are outweighed by the longer-term advantages.
“While migration presents challenges for host countries, in particular the risk of societal and political strains if migrants do not integrate sufficiently or natives feel displaced, our results suggest that there are long-term benefits to immigration in terms of higher GDP per capita for recipient countries,” the report says.
Labour Market Productivity
While much emphasis is placed on increasing the size of the labour market in countries such as Canada, which is battling an aging population, the report says even more important is that immigrants help increase productivity.
For high-skilled immigrants this might mean by bringing knowledge and passing it on to natives, or by starting their own businesses.
Meanwhile, low-skilled migrants do the kind of jobs for which the pool of natives is small. An example of this in Canada is the fish and meat processing industry.
However, where low-skilled migrants play a key role is where their skills compliment those of natives. A good example is immigrants providing childcare so that native parents can return to work more quickly or work longer hours.
“Such complementarities are more likely in fast-aging societies with rising education levels, where shortages are bound to occur in certain parts of the economy, in particular in non-tradable low skilled services, for which imports cannot substitute,” the report says.
Fiscal Benefit Underestimated
An additional conclusion of the report is that the fiscal benefit of immigration could be being underestimated.
The traditional way to measure contribution is by comparing tax and social security contributions to receipt of benefits and services but, as the report points out, that does not ‘take into consideration the indirect effects of immigration on the aggregate productivity of the economy’.
Key to the contribution of immigrants is labour market integration, a process Canadian policymakers are trying to tackle.
The faster immigrants can get out to work in jobs that are aligned with their qualifications, the sooner they become a contributor to the society of the host country.
The report outlines key policies which can help in that process:
- Language training and active labour market policies targeted to the needs of migrants.
- Better recognition of the skills of immigrants, through certification equivalence, so that they can be employed effectively and the sizable share of high-skilled migrants employed in lower-skilled occupations can be reduced.
- Product market reforms and other measures that lower barriers to entrepreneurship.
Training to assist natives in upgrading their skills can also be important, according to the report.
“While these policies may require additional public spending, they also aid the long-term increase in GDP per capita and, thereby, help migrants increasingly contribute to the fiscal accounts,” the report says.
The IMF report is supported by a vast amount of collaborated evidence.
A leading study concludes that immigrants are far more likely to own businesses than their Canadian counterparts, a key growth component.
Released in March 2016 and titled Immigration, Business Ownership and Employment in Canada, the study says that ‘rates of private business ownership and unincorporated self-employment are higher among immigrants than among the Canadian-born population’.
We know this officially for the first time because data based on immigrant business ownership has only recently become available with the introduction of the Canadian Employer-Employee Dynamics Database, which you can access here.
Statistics also show immigrant children consistently beat their peers with Canadian-born parents in terms of educational attainment.
A paper entitled ‘Educational and Labour Market Outcomes of Childhood Immigrants by Admission Class’ by Statistics Canada reveals the children of immigrants graduate high school at a rate of 91.6 per cent, against 88.8 per cent of children who are third generation or more.
When it comes to university, the gap increases, with 35.9 per cent of immigrant children graduating against 24.4 per cent from the established Canadian group.
Contribution of Immigrant Children
CANADIAN (OR MORE)
Figures: Statistics Canada
At the same time, further figures show the percentage of immigrants in the working-age population has been steadily increasing for the last decade as the Canada-born proportion drops, illustrating the need to make up for the shortfall by bringing in foreign workers.
In 2006 less than 20 per cent of the workforce – those aged 15 and over – were from the landed immigrant population, while more than 78 per cent were born in Canada.
But fast forward 10 years and the latest data released by Statistics Canada shows an immigrant percentage just less than 24, while the Canada-born proportion has dropped almost as low as 74 per cent.
If the trend continues – and there’s no indication it will not – the two percentages will converge.
The numbers are increasingly dramatic over the last 12 months, when the number of immigrants in work increased by more than 260,000, 6.6 per cent higher than a year ago,
In the same period, the number of native-born workers has decreased by 93,300, although it is showing signs of recovery in the last two months.
Analysts say the data shows Canada has reached the point where it cannot grow without immigrants, with Canadian-born workers exiting the labour force at such a rate.
A further study suggests the more immigrants of a given nationality or culture a country welcomes, the more likely the nation of origin is to invest further down the line.
According to the National Bureau of Economic Research, investment comes in the long term, as often the ‘push’ factors of migration mean the nation of origin is not able to invest in the short term.
A good example of this is Syria, extremely unlikely to invest any time soon, but with refugees spreading all over the world, including more than 30,000 in Canada, investment could flow in more stable times when citizens are looking for places to put their assets.
Canada is now pivoting to capitalize on the immigration card. The current liberal government is pursuing policies to increase immigration levels as an important tool to grow the Canadian economy.
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