How does Immigration Affect the Canadian Economy?

Abstract

This paper will offer a persuasive discussion on the impact of immigration to the nation of Canada. The introduction will trace the genesis of immigration from the time of the refugee to the current time of deliberate immigration. In this part, the discussion will be based on the migration policies that exceptionally allowed and encouraged refugees to migrate to Canada. Still, the modern migration policies that allow skilled immigrants into the country will be discussed. Next, the paper will tackle how immigration in Canada has contributed to economic growth. In this case, the paper will discuss how immigration improves innovation, its impact on the domestic labor market, and how it rectifies government fiscal balances. Those contributing factors will unveil the impact of immigration on the Canadian economy.

History of Immigration in Canada

Since the end of the Second World War, refugees and other individuals dispossessed by Violence and war formed a significant part of the immigration flow in Canada. During the postwar labor shortage, Canada admitted thousands of displaced persons. Those individuals were made homeless at the end of the war and those unable to return to their country. Most displaced persons who sought refuge in Canada were Jewish Holocaust survivors, a group that did not have a family or a community to return to. In addition, other displaced individuals who went to Canada had refused repatriation since their country had fallen under Soviet domination. All those refugees who settled in Canada and started their families have since been assimilated into the society. During the 1970s, Canada responded to the predicament of refugees from those countries under dictatorship. After the unsuccessful Hungarian uprising in 1967 and the 1973 severe political reforms in Czechoslovakia by the Soviet Union, the entire refugee community fled westward. In fact, Canada responded by establishing normal immigration procedures that would admit its share of refugees. In addition, Canada made an exceptional allowance for refugees from political disturbances in Latin America and Uganda, among others.

Currently, Canada has a broad migration policy that reflects its ethnic diversity. Besides refugee immigration, citizens from other countries are encouraged to migrate and settle in Canada. In fact, Canadian migration policies encourage skilled immigrants as well as other individuals. There are four categories of immigrants in Canada: economic migrants (business people and skilled workers), family class, Immigrants for humanitarian reasons, and refugees. Those who migrate to Canada become citizens after due processes are followed. Indeed, in 2008, the immigration policies incorporated changes that would streamline and enhance the flow of immigrants.

Immigration and Innovation

Immigrants help boost Canada’s innovation performance as the country struggles to be at par with other developed countries. In fact, immigrants are motivated persons, who are willing to take great risks in search of opportunities, a situation that predisposes them to be innovative individuals. At all organizational, individual, national, and global levels, immigrants are associated with increased innovation in the country. Canada is ranked 14th in the 17th most industrialized nations; therefore, it is a consistently below-average performer in its capacity to innovate. According to The Conference Board of Canada (2014), several measures demonstrate the benefits immigrants bring to the country. In Canada, immigrants win proportionally more performing arts and prestigious literary awards. Surprisingly, immigrants only comprise 23% of the finalist in the Giller Prize, while 23% of Governor Generals Performing Arts Awards are all immigrants.

Next, the trade levels between the immigrant nations and Canada are affected by immigration rates. Based on the factors that influence trade, an increase of 1 % in the number of immigrants to Canada can increase the volume of imports by approximately 0.21% and increase the volume of export by 0.11%. Lastly, direct investment from a foreign nation is greater than those nations that are well represented in Canada in immigration policies. In addition, those immigrants from those countries are the source of experience and diverse knowledge that increases innovation and competence in Canadian businesses (The Conference Board of Canada, 2014).

The Domestic Labor Market

Theoretically, immigration has affected the Canadian economy in various ways, such as an increase in the domestic labor market. The increased number of immigrants in Canada has increased the labor supply, thus lowering unemployment rates and domestic wages among the domestic worker. If the immigrants are more skilled than the domestic workers, the aggregate productivity and the GDP per capita increase in the long run. In addition, immigrants increase the aggregate demand, particularly in the case of increased housing demand and investment from business-class immigrants. Immigration fosters trade with the former home nation where immigrants came from. It is worth noting that immigration in the domestic labor market depends on whether there are negative impacts on the supply side that can be compensated by aggregate demand and productivity from the immigrants. In addition, they will lower their wage if they are ready to work for lower salaries than the natives. In the case of illegal immigrants, they shift the labor supply making it more elastic since they are willing to take any amount to secure a job (Friedberg & Hunt, 1995).

Government Fiscal Balances

Nadeau (2011) avers that in Canada, there are expectations that immigration will influence the government’s fiscal balances, which include expenditures minus taxes. The aging population imposes a heavy fiscal burden on the economy through age-related programs; for instance, healthcare and pension plans. Therefore, immigration is considered the best way to mitigate this burden. The impact of immigration on the fiscal balance is theoretically indeterminate, just like in the case of the labor market. However, to consider the impact, it is worth noting that despite taxes, immigrants use government services like health care, education, public pensions, social assistance, and employment insurance. Therefore, by adding to the population size, immigrants help spread the cost of public goods such as pollution and national defense. In addition, immigration alters the age distribution of the country’s population by reducing public expenditure and yielding more taxes. In fact, future immigration will rectify the fiscal imbalance ensuing from an aging population. In this context, it is anticipated that by 2015, developed countries’ rate of population will be negative, with the birth rate being less than the death rate. Therefore, net migration to Canada will maintain a positive growth rate, rectifying any fiscal imbalances brought by aging populations (Pekkala & Kerr William, 2011).

In essence, despite the contribution offered by immigrants in Canada, many obstacles limit them from maximizing their contribution to the economy. Those challenges include inadequate recognition of qualification and international experience, failure to tap foreign language competence and skills that could be used in global markets, and lack of opportunities for the immigrants to utilize their acquired skills fully. To utilize immigrants’ skills in the country, employers can formulate favorable policies and practices and adopt effective strategies such as integrating, hiring, and retaining immigrants in the labor market. In this context, immigrants should be hired at all levels of the business, including management roles, which will make them dedicated and motivated in their work. Still, the organization should encourage immigrants to share their views and consider their diverse contributions, which might be essential for innovation. Next, the organization should match the workforce to its clientele, tap the benefit from the diversity of its staff, and encourage better positioning of its market to meet the demands of its clients.

References

Friedberg, R. M., & Hunt, J. (1995). The Impact of Immigrants on Host Country Wages, Employment and Growth. Journal of Economic Perspectives. Vol 9, No. 2, 23-44.

Nadeau, S. (May 20, 2011) The Economic Contribution of Immigration in Canada-Recent Developments What do we know? What does it mean for policy? Research Group on the Economics of Immigration. The University of Ottawa. 1-26.

Pekkala, S., & Kerr, W. (2011). Economic Impacts of Immigration: A survey. Harvard Business School. A Working Paper 09-013. 1-48.