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The Economics of Increasing Immigration During an Economic Crisis

Summary:
The following is a guest post by Mikal Skuterud of University of Waterloo On February 14, the Federal Government issued 27,332 invitations for permanent residency to Canadian Experience Class (CEC) applicants in the Express Entry pool. To issue this unprecedented level of invitations, Immigration, Refugees and Citizenship Canada (IRCC) reached deep into the pool, providing invitations to applicants with record-low Comprehensive Ranking System (CRS) scores.   The CRS is a points system used by IRCC to select the “best” candidates in the Express Entry pool. CRS scores are assigned to candidates based on their submitted profiles. Analogous to how universities screen their applicants using high school grades, IRCC sets a cutoff score in every Express Entry draw, held roughly every 2 weeks,

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The following is a guest post by Mikal Skuterud of University of Waterloo

On February 14, the Federal Government issued 27,332 invitations for permanent residency to Canadian Experience Class (CEC) applicants in the Express Entry pool. To issue this unprecedented level of invitations, Immigration, Refugees and Citizenship Canada (IRCC) reached deep into the pool, providing invitations to applicants with record-low Comprehensive Ranking System (CRS) scores.  

The CRS is a points system used by IRCC to select the “best” candidates in the Express Entry pool. CRS scores are assigned to candidates based on their submitted profiles. Analogous to how universities screen their applicants using high school grades, IRCC sets a cutoff score in every Express Entry draw, held roughly every 2 weeks, and issues invitations to all applicants with scores above the cutoff.

The criteria and their relative importance in calculating scores are based on a statistical analysis of what immigrant characteristics best predict immigrants’ earnings during their first 10 years in Canada. The initial CRS points grid was based on the analysis of Bonikowska, Hou and Picot (2015). Adjustments have been made since. Most notably in November 2016, points were reduced for having pre-arranged employment in Canada and were increased for having Canadian (as opposed to foreign) post-secondary educational credentials. The criteria that receive the most points are age (the younger, the better); level of education (the more, the better); English/French language ability (standardized test scores are required); and Canadian work experience (more is better).

The Express Entry pool is comprised of all applicants who have met the minimum requirements of one of Canada’s economic-class immigration programs. The three biggest programs are the Federal Skilled Worker Program (FSWP), the Canadian Experience Class (CEC) Program, and Provincial Nominee Programs (PNPs). The CEC targets candidates with Canadian work experience. Hence, candidates in this stream are more likely to be currently residing in Canada, and this presumably explains why IRCC restricted its February 14 draw to these candidates.

Immigration cutoffs

The cutoff CRS score in the February 14 draw was 75, as shown in the chart above. Using IRCC’s CRS calculator tool (https://www.cic.gc.ca/english/immigrate/skilled/crs-tool.asp), one can get a sense of the profile of an applicant with a CRS score close to 75, the score of the lowest ranked candidate(s) to be invited:

- Never-married, single

- 39 years old

- Level of schooling below a high school diploma

- IELTS score of zero in speaking, listening, reading, and writing

- 1 year of Canadian work experience in a technical occupation (e.g. cook or car mechanic)

- Zero years of foreign work experience

- Not currently employed

    CRS score = 95

In a press release justifying February 14’s unprecedented Express Entry draw, IRCC stated:

“From large companies to major labour unions, Canadians agree that immigration is essential to our economy. One in three businesses with employees is owned by an immigrant, creating thousands of jobs from construction to retail. Throughout the pandemic, newcomers have played an outsized role in Canada’s response, accounting for over one third of our doctors and pharmacists. Put simply, immigration is crucial to Canada’s short-term recovery and long-term prosperity.” (emphasis added) 

As an economist, who has studied Canadian immigration for more than two decades, I struggle to understand how increasing immigrant entries in the midst of an economic crisis with historically high and rising levels of joblessness will aid our short-term economic recovery. As shown in the chart below, data from the most recent Labour Force Survey reveals there are now 1.7 million Canadian jobless workers who have been employed since February 2020 and say they want to work now. Moreover, 29% of them have been jobless for more than 6 months, which is especially troublesome as there is compelling evidence that jobless workers’ odds of getting back to work drops precipitously after 5-6 months.  

Jobless workers

My concern is that the “increased immigration is crucial for our economic recovery” narrative overlooks a long and extensive economics literature documenting the challenges Canada has had, and continues to have, in leveraging immigration to boost economic growth. The simple fact is that Canadian immigrants experience significant labour market integration challenges, even compared to similarly educated immigrants from the same origin countries (e.g. China or India) who settle in Australia and the United States. It is hard to believe that these challenges will not be exacerbated for those entering Canada’s labour markets during the current economic crisis.

It is unusual for countries to significantly increase immigration levels during recessions, for good reason. There is, therefore, scant empirical evidence to tell us what happens. However, the Canadian experience does offer one telling episode. Between 1996 and 2001, Canada saw an exceptionally large inflow of immigrants with educational backgrounds and work experience in information technology (IT) and engineering. Employment in the computer and telecommunications sector grew by more than 50% over this period nationally compared to 12% across all sectors (think Nortel and Corel). However, the crash of the “dot.com bubble” in 2001 put an end to the growth, which Picot and Hou (2009) show had a disproportionately large adverse impact on the earnings of immigrants who entered Canada between 2002 and 2004. Even four years after landing, these immigrant IT and engineering workers had average earnings that were 25% lower than comparable immigrants who arrived in the mid-1990s.

It remains to be seen whether IRCC reaches its historically high target of 232,500 new economic-class immigrants in 2021, as shown in the chart below. But February 14’s Express Entry draw sends a strong signal that they intend to do so, even at the cost of foregoing its merit-based system for screening applicants.

New permanent residents

While policymakers will be watching for a swift and speedy economic recovery in 2021, I’ll be continuing to track the economic integration struggles of Canada’s most recent immigrants.

For more of Mikal Skuterud's writing on immigration, see this WCI post and the papers on Mikal's website here. Also recommended: Riddell, Worswick and Green, “How Does Increasing Immigration Affect the Economy?” Policy Options (here), and the Bonikowska, Hou and Picot paper cited above (here).

Frances Woolley
I am a Professor of Economics at Carleton University, where I have taught since 1990. My research centres on families and public policy. My most-cited work is on modelling family-decision making, measuring inequality within the household, feminist economics, and tax-benefit policy towards families. I hold a BA from Simon Fraser University, an MA from Queen’s, and completed my doctorate at the London School of Economics, under the supervision of Tony Atkinson.

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