Immigration – the demographic deficit

Two debated aspects of immigration policy are its relationship to the demographic factors associated with an ageing Canadian population, and the ease with which newcomers are integrated into the Canadian labour force. These topics throw light on whether and how immigration can address the problem of the Canadian work force becoming a declining share of the Canadian population, termed here the demographic deficit.

Demography and economics

Demography receives little attention in economics, although introductory texts frequently refer to the teachings of Thomas Malthus (1766-1834). Malthus, a parson, promoted abstinence because he argued that population growth increased faster than the production of food to support the growth with unfortunate results, especially for poor people. In the long run, he argued, a declining population would address the problem. Today, he might be surprised that the global population of about 1billion in his time (1810) doubled by 1930, doubled again by 1980 and has now reached over 6 billion in 2010 and is still increasing but at a slower rate.

What Malthus failed to forecast was the increase in agricultural production that has supported, with some localised famines, a larger global output of food and other products. Rather than an overall production shortfall, the current problem is that farm surpluses in some areas of the world are not distributed to places in need of them. He was, however, right to point to population factors in understanding the growth prospects for individual national economies.

The current demographic time bomb is now different, and thought to be the age profile of individual nations, where the population is ageing and the birth rate declining. It is now less than the 2.1 children per woman of child-bearing age that is considered necessary to retain the current population, and needs to be above 2.1 to increase population size. Here demography meets immigration policy with the latter seen as one way to address a declining and/or ageing population, an option proposed by some for Canada.

In the next sections I examine two aspects of the relationship between employment and immigration. The first is the contribution that immigration can make to the skill profile and size of Canada’s population, and the second is the integration of immigrants into Canada’s labour force.

The deficit

Demographic factors are leading to a situation where the Canadian labour force will become a decreasing share of the total population. There will be more dependents, old and young, than there will be persons in the labour force. Increased immigration is one proposed solution. Is it? Yes, in the sense that all current members of the labour force are either the result of recent or past generations of immigrants. Without them, Canada would have no labour force.
However, from the perspective of current immigration flows, the labour contribution of newcomers is minimal today and will take time to have an impact on the future size of the labour force. Consider the latest figures for incoming permanent residents of just under 250,000 persons annually categorized as follows: Family Class 26.5%,;Economic Class 60.3%;Refugees 8.8%;Other 4.4%.

The 149,047 economic migrants, the largest category in 2008, are the ones who might be expected to enter the labour force. Of this group, 61,109 or 41% are principal applicants and the remaining 59% dependents accompanying them. The principal applicants added about 0.4% to the Canadian labour force of about 17 million persons. Some dependents may also work at once and certainly the younger ones will in the future. Relative to the total intake of permanent residents in 2008, only 25% will likely add immediately to the current labour force. The contribution of current immigration is positive but small and spread out over time.

Should we worry about this? My answer is no, because in the economy there are forces at work that automatically make adjustments to both shortages and surpluses. In fact, adjustments are taking place as we speak and historical examples show how this has happened in the past. When shortages occur prices (wages) rise, and when surpluses arise prices (wages) fall. Suppliers and customers respond to these changes in familiar ways. Consider the following:

1. As wages rise due to labour shortages, capital is substituted for labour. The automotive production line now has far fewer workers and far more robots per car assembled; banks supply cash from machines rather than tellers; car owners pump their own gas and servicing occurs every 6000kms as opposed to much shorter distances; telephone calls are switched and connected automatically in contrast to banks of operators doing it manually; photographs show Doukhobor women pulling ploughs – these were later replaced with steam tractors; restaurants offer self-service as opposed to waiter/tress service; call centres are outsourced to cheaper sources of labour; typists are replaced by individuals using word processors rather than dictating documents for later typing – typewriters are seldom found in offices or the home. The examples are endless especially with the introduction of information technology.

2. Labour productivity has increased due to technological change. The most glaring example is the agricultural sector that has benefited as a result of rising crop yields due to fertilizers, improved seeds and management practices, as well as increasing use of machinery. We now produce more output with less labour. The share of farm workers in the Canadian labour force has declined both absolutely and relative to other sectors (from one million and 19.6% of the labour force in 1950 to 306,00 and 1.8% in 2010) while Canada’s population have increased.

3. When there is a shortage of labour or wages rise, firms may outsource work either abroad where wages are lower or to other parts of the country where there is a labour surplus. In recent years, workers have migrated internally from Eastern Canada to the resource boom in Alberta.

4. The military has adapted by using drones as opposed to piloted flights and equipment rather than persons to detect and disarm IEDs. Wartime is a good example of how adjustments have occurred. In both world wars, the military absorbed a big chunk of the Canadian labour force while at the same time domestic production expanded with women drawn into the work force. At war’s end, men replaced women for civilian production but since then the participation of women has increased and there is still room for further increase. Policies such as subsidized childcare assist these changes.

In sum, the evidence suggests that there are effective ways to cope with labour shortages aside from the minimal contribution of increasing immigration which has other economic and social costs and consequences. This is not to argue against any immigration but for being flexible to adjust flows and types of migrants as domestic conditions change, and for starting a dialogue on what the total level of population should be as well as its age and skill distribution. I also recognize that there may be more acute shortages in some occupations, such as assistance for the elderly and the young, and for seasonal farm workers, than in others. At present this is partly addressed in Canada by the use of temporary foreign workers.

Singapore is one example of how a small country, but as large as Norway, has addressed the problem. Out of a total population of 4.8 million, there are 3.6 million residents of which 3.2 million are citizens and the remaining 400,000 permanent residents who could become citizens, similar to Canada’s intake of permanent residents. The remaining 1.2 million (4.8 – 3.6) are non-residents or the equivalent of Canada’s temporary foreign workers. Thus 25% of Singapore’s total population, and a higher percentage of the country’s labour force, consists of temporary foreign workers. This represents one example of how a country has used its population policy to meet its employment needs.

Job certification

A second and related aspect of the demographic deficit is the issue of incorporating newcomers into the labour force. These persons are educated abroad and may have received training for skills required in Canada but not at a level that meets Canadian standards. There are repeated stories of Asian trained doctors who end up driving taxis in Canada because the foreign medical training does not meet Canadian standards. In part this is the issue of certifying foreign credentials.

Migrants arrive in Canada with certain levels of education, particular training and skills and varying degrees of ability to work in one or both of the official languages, French and English. In terms of educational and skill levels there is a problem in comparing standards in different countries as well as evaluating qualifications from abroad as a result of different types of training received. It is similar to the problem of evaluating foreign trained students that apply to Canadian universities.

The Ministry of Citizenship and Immigration (CIC) has worked on certification issues but a number of problems remain. First, within Canada, each province has requirements to qualify as a tradesperson or a professional. This often applies to Canadian born persons as well, and is one of the costs of the way we conduct federalism which results in restricted mobility within Canada to practice a certain type of work. This situation is unlikely to change soon.

Second, there are differences in the quality and content of educational and training programs in different countries. A barber trained in Asia may be immediately employable in Canada to cut hair. A surgeon trained in Asia may not have had access to the same equipment and techniques used in hospitals and universities and needs to undertake further training. The same is true for a foreign trained nurse who will be expected to work with equipment in Canada with which she or he has had no experience. The lack of comparability of what may appear to be a similar skill set creates a barrier to immediate employment in Canada.

The impact of different standards is evidenced by Canadians who travel to Mexico and other countries for dental work and other medical procedures, and who find on their return that indeed the cost was lower but the work was not performed satisfactorily and has to be redone resulting in higher costs for the patient.

I have had medical treatment in the US at my own expense due to wait times in Canada. Standards in the US are in my view similar to those in Canada, but I would have thought twice about getting the treatment in a number of other countries even if it was cheaper. Quality differences exist for the receipt of any service within Canada as well as between Canada and other countries. I can also pay more or less for a lawyer and accountant in Canada but the level of service may differ.

Certification is not the only issue. The language ability of the immigrant can be a barrier to employment even if skill levels are approved. Ultimately, the immigrant has to get a job and this cannot be guaranteed by the state but depends on the potential employer-employee interaction.

Conclusion

In sum, the argument that immigration is a cure for the demographic deficit of an ageing population is only minimally true and gives rise to other issues (education, social welfare and security) that are not generally considered. One way to approach this issue is to consider the question that is seldom if ever discussed, namely what size of population does Canada want. By answering this question, which to me seems as fundamental as deciding what size of family to aim for, we can then lay out the various paths to get there and show the implications of the age structure that the alternatives imply.

Each country is different, but there are examples of countries that have had smaller percentage increases, presumably for policy reasons, than Canada. For example, Switzerland’s total population has grown from 6.2m in 1970 to 7.6m in 2007, with the Swiss share of the total population rising from 5.2m to 5.9m while the foreign share rose from 1m to 1.7m over 37 years. In Norway, the population rose from 3.2m in 1950 to 4.9m sixty years later in 2010. These comparisons are made in order to show that there are alternatives to consider. What Canada needs is a conversation on this topic before deciding on the size and nature of immigration inflows

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