How immigrants affect the economy: Weighing the benefits and costs

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This is part of The Immigrant Answer –The Globe's series on the future of immigration in Canada. Read the original story here.

A few months after arriving in Canada in 2005, Edwin Sonsona was working 20 hours a day at six different jobs. He began each morning at 3 a.m., delivering the local newspaper.

By the time the sun was up he would don a uniform to flip hamburgers at McDonald's for $7.25 an hour. He rushed packages around town as a courier and set up store displays for Coca-Cola. Then he would go to a warehouse where he supervised the unloading of clothing destined for Winners stores. In the evenings he delivered Kentucky Fried Chicken until 11 p.m.

He kept up that pace for a year, sleeping four hours a night and taking one day a week to dedicate to his church. It was exhausting, but everyone told him he needed to gain Canadian experience.

"I said to myself, 'I'm starting from scratch. Nobody's going to help you,' " Mr. Sonsona said. "Moving from your native land, if you're not motivated, you're not going to be successful – you're going to be a sour-grapes man."

Mr. Sonsona's experience illustrates many of the hardships faced by immigrants over the last 30 years: Although he has an engineering degree and had been a mid-level employee at a multinational company in the Philippines, Canadian employers gave Mr. Sonsona entry-level, low-skill jobs. Even when working six of them, Mr. Sonsona was still earning less than $30,000 per year, substantially below the Canadian average, meaning he was contributing a relatively small amount in taxes.

Today Mr. Sonsona, now 41, has left the bustle of Winnipeg for small-town life in the immigration hotbed of Steinbach, Man. He is employed full time as a genetic technician at a hog-production company. He also takes shifts as a personal-support worker and works as a dance DJ on weekends. He runs a remittance business from his house that transferred $300,000 back to the Philippines last year (he got about $10 per transaction). And he plans to open an Asian food store later this year. His income is up to about $50,000.

In the long term, he wants to open a hog concern in the Philippines, a mirror image of his Canadian employer: When the Manitoba operation needs more workers, he'll be able to send trained people who already understand how things are done.

Sitting with his young son and daughter, Mr. Sonsona wears a T-shirt that says: "All things are possible." He is very happy with his life in Canada. A political party even asked him to be their candidate in the last provincial election, but he turned it down – he already wonders where he gets the energy.

Someone once asked him how he could stand to work in the smelly atmosphere of a hog barn. He said he replied, "Every morning when I sweep [up after]the pig, I tell myself it's one more dollar in my pocket."

For Mr. Sonsona, that's a measurement that counts.

COSTS

Settlement

When an immigrant comes to Canada there are some costs associated with getting them settled. They may need English or French lessons or help navigating the Canadian system, finding schools for their children and beginning a job search. The federal government spends $883-million per year on those services, and each province contributes its own, smaller share.

If immigration (even in the economic-immigrant category) were to rise substantially, those costs would, too – partly as an investment in reducing the potential strain on public services.

Services

As new permanent residents, immigrants become consumers of Canadian public services, such as health care, education, welfare and infrastructure. They contribute to those services through their taxes. A recent Fraser Institute study by Herbert Grubel and Patrick Grady argues immigrants impose a burden of about $6,000 each by consuming more in services than they pay in taxes. But economists Krishna Pendakur and Mohsen Javdani argue the amount is closer to $450. (Each side disputes the other's methods.)

What's clear, though, is that immigrants recently have tended to earn less than the general population.

Unemployment

In the late 1970s, immigrants earned about 85 to 90 per cent of what the Canadian-born earned. By 2006 that figure had fallen closer to 60 per cent, according to a recent study from the Institute for Research on Public Policy. Although employment rates tend to catch up within five to 10 years, it's taking longer and longer for wages to match.

To change those ratios would require, at minimum, greater upfront spending on matching immigration to the country's needs, and in settlement assistance. Citizenship and Immigration Minister Jason Kenney's current reforms have yet to call for additional investment in selection or settlement.

Remittances

Many immigrants also send money to family in their native country, removing a portion of their income and spending power from the Canadian economy. A Statistics Canada study found that about 30 per cent of immigrants sent money home in the first two to four years after their arrival in Canada, at an average of about $1,450 per year.

BENEFITS

The size of the pie

"Does [immigration]have a positive impact? The answer is probably yes," said University of Toronto economist Peter Dungan. "The benefits have clearly declined over time, though, because people are not earning to the extent that their equivalent criteria or credentials should allow them."

If Mr. Sonsona and immigrants like him bring complementary talents to Canadian skills and capital, then all Canadians should benefit. The economic pie gets bigger and so does everyone's share of that pie, as measured by gross domestic product per capita.

In Prof. Dungan's forecasting model, devised with two co-authors, an increase of 100,000 immigrants to Canada (chosen under the current selection model) would result in a 2.3-per-cent increase in real GDP over 10 years. But since the population would increase by 2.6 per cent over that period, GDP per capita could actually decline slightly.

However, if Canada were to double the number of economic-class migrants only, as The Globe and Mail has proposed, average entry wages for all immigrants would rise by between 5 and 6 per cent, according to a model devised by Queen's University economist Charles Beach.

Innovation

Studies show that immigration can also foster innovation. A Conference Board of Canada study found immigrants make up 35 per cent of university research chairs in Canada, much higher than their 20 per cent share of the population.

Trade

The same study argued that immigration has a significant impact on Canadian trade links. It proposed that a 1-per-cent increase in immigration from a specific country would lead to a 0.1-per-cent increase in the value of Canadian exports, largely as a result of the international networks that immigrants bring with them. They also bring with them a desire for goods from their home markets, which would contribute to a 0.2-per-cent rise in the value of imports, and a more interesting and varied market for all consumers.

Quality of life

A diverse population is also believed to make a community more attractive to creative, talented people. As a paper written for the Martin Prosperity Institute argues, cities such as Toronto have benefited from attracting people from around the world, particularly as the collision of their skills, abilities and perspectives can lead to improvements in productivity.

To find out what immigration looks like in your community, see an interactive look at solutions to Canada's immigration problem and share your own story click here.