The following is a guest post by Mikal Skuterud, professor of economics at University of Waterloo Despite my interest in Canadian immigration policy, I’ve been hesitant to read Doug Saunders’ latest book Maximum Canada: Toward a Country of 100 Million. The idea that the solution to Canada’s economic challenges is more people, and a lot more people, seems naïve. In hindsight, I waited too long. Saunders’ account of Canada's immigration history is intriguing and his writing, as always, engaging. Canada's history of leaning towards protectionist trade policies and xenophobic immigration policies, what Saunders refers to as the "minimizing impulse," has almost certainly left a lasting legacy. It’s hard to believe that more ambitious and expansionist policies through the post-war years
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The following is a guest post by Mikal Skuterud, professor of economics at University of Waterloo
Despite my interest in Canadian immigration policy, I’ve been hesitant to read Doug Saunders’ latest book Maximum Canada: Toward a Country of 100 Million. The idea that the solution to Canada’s economic challenges is more people, and a lot more people, seems naïve. In hindsight, I waited too long. Saunders’ account of Canada's immigration history is intriguing and his writing, as always, engaging.
Canada's history of leaning towards protectionist trade policies and xenophobic immigration policies, what Saunders refers to as the "minimizing impulse," has almost certainly left a lasting legacy. It’s hard to believe that more ambitious and expansionist policies through the post-war years would not have put us on a stronger economic footing today, although big hypothetical questions like this are complex and extremely difficult to answer definitively.
Nonetheless, the economic challenges facing Canada today are very different and Saunders’ overriding recommendation that a population of 100 million by 2100 should be a policy priority remains, in my view, remarkably naïve.
Saunders acknowledges, more than once, that the population level, in itself, is not a viable policy lever to boost economic growth. As he puts it: "more is not better." The challenge is having "the right people, in the right numbers" working together in the right settings (page 152).
But that's a massive challenge that the book doesn't do enough to describe. Canada has always struggled to attract and retain the most inventive, ambitious, and talented, as the book describes exceptionally well in its first chapters. But this challenge has, if anything, become bigger over time, as growing U.S. universities and salary premiums attract the world’s best and brightest and Canada’s relatively generous welfare state attracts migrants who are less sure of their talents seeking a landing pad should they fall through the economic cracks.
Chapter 7 touches on these challenges but overlooks a large Canadian literature examining them. Despite the much greater attention given to credential recognition issues, including in Saunders’ own discussion of the challenges, the evidence reveals that the challenge is largely not about how Canada integrates immigrants. Research shows that the literacy skills of Canadian immigrants are not only highly rewarded, but equally rewarded to their Canadian-born coworkers. In other words, Canadian immigrants struggle not because their skills are undervalued, but primarily because of shortfalls in the skills needed to be successful (Ferrer, Green and Riddell 2006; Clarke and Skuterud 2016).
Saunders’ claim that "we don't have great data on immigrant jobs" (p.195) is wrong. The quinquennial Canadian Census is a rich source of information on the occupations and industries that immigrants work in, as is the monthly Labour Force Survey. An extensive literature examining these data reveal a dramatic deterioration in the economic integration of Canadian immigrants since the 1980s, which Canada continues to struggle to reverse, despite extensive reforms in our immigrant selection and settlement policies.
The uncomfortable truth is that the first-order challenge has always been, and continues to be, the immigrants that Canada attracts and retains; what labour economists call "immigrant selectivity." This challenge is most stark when we compare economic outcomes of Canadian and U.S. immigrants. For example, Ferrer, Clarke and Skuterud (2019) compare the earnings of university-educated Chinese and Indian immigrants who settle in Canada and the U.S.. While those who settle in the U.S. earn more than similarly-educated U.S.-born workers, in Canada, immigrants earn substantially less.
Blit, Skuterud and Zhang (2019), on the other hand, replicate U.S. research showing large beneficial impacts of skilled immigrants on patents created per capita and find much smaller beneficial effects in Canada. They conclude that for most countries, skilled immigration is unlikely to be a panacea for sluggish innovation and that the U.S. experience may be exceptional.
The potential for increased immigration levels to boost economic growth is further complicated by the fact that the objective of selecting "the right people, in the right numbers" involves an unavoidable quality-quantity tradeoff. This tradeoff is explicit in Canada’s Express Entry System, which prioritizes economic-class applicants with the strongest educational background, work experience, and English/French language skills.
In October 2020, the government announced ambitious new immigration targets that, if reached, will put Canada on the path to reaching the 100-million population objective. As we are already seeing, increasing invitations for admission is producing a decline in entry standards. In other words, in order to increase entries, the government is being forced to reach deeper into the applicant pool and admit immigrants who are less likely to integrate successfully. And this is happening in the midst of an economic crisis with historically high levels of long-term joblessness.
As of December 21, there were 147,487 principal applicants in the Express Entry applicant pool. The challenge in reaching the 100-million objective is not immigrant supply. Saunders argues, probably correctly, that Canada’s historical “minimalist impulse” has kept us from achieving our productive capacity, but there is also an upper absorptive capacity limit, which is undoubtedly smaller in periods of high joblessness.
There is no question that raising immigration levels will boost Canada’s GDP; the size of our national “economic pie.” But what matters for the economic well-being of Canadians is not the size of the overall pie, but the size of the individual slices. As Saunders acknowledges, big countries are sometimes poor (India) and small countries rich (Norway). While increasing the productivity of the existing population unambiguously increases the size of the average slice, increasing the pie by adding more people has a much more ambiguous impact. Despite much wishful thinking about the impact of immigration on innovation and public finances, the Canadian evidence points to a neutral impact on GDP per capita. That is, immigration is unlikely to make those of us already here better off; but neither is it likely to make us worse off.
The narrative that immigrants make us all richer is appealing and goes a long way in convincing Canadians to embrace increased immigration levels as a national policy objective. Unfortunately, it is at best naïve and at worst dishonest. What is much more certain is that immigrants themselves experience significant welfare gains when they settle in Canada. This is particularly true for humanitarian and family-class immigrants, as well as the families they join and leave behind. But in trying to sell immigration by emphasizing how good it if for us, the narrative of how good it is for immigrants themselves is sadly lost.
Mikal Skuterud, University of Waterloo
Blit, Joel, Mikal Skuterud and Jue Zhang (2020), “Can Skilled Immigration Raise Innovation? Evidence from Canadian Cities,” Journal of Economic Geography 20(4): 879-901.
Clarke, Andrew and Mikal Skuterud (2016), “A Comparative Analysis of Immigrant Skills and Their Utilization in Australia, Canada, and the United States, Journal of Population Economics 2: 849–888.
Ferrer, Ana, David Green, and Craig Riddell (2006), “The effect of literacy on immigrant earnings,” Journal Human Resources 41(2): 380–410.
Clarke, Andrew, Ana Ferrer, and Mikal Skuterud (2019), “A Comparative Analysis of the Labor Market Performance of University-Educated Immigrants in Australia, Canada, and the United States: Does Policy Matter?” Journal of Labor Economics 37(S2): 443-490.