Economic Growth and innovation, Canada, immigration, skilled immigration, point system

Charles M. Beach

Christopher Worswick

English

Research Papers in Economics

Institut
C.D. HOWE
Institute
Charles M. Beach,  
Alan G. Green, and  
Christopher Worswick
Toward Improving Canada’s 
Skilled Immigration Policy:
An Evaluation ApproachChapter
1 Introduction
T
he federal government’s approach to immigration and the general 
international context of immigration have faced major challenges in recent 
years. Accordingly, this is an appropriate time to examine the operations and 
effectiveness of Canada’s policies concerning the inflow of skilled immigrants. 
Media concerns have highlighted the worsening process of integrating 
newcomers to the Canadian economy, the large costs of forgone opportunities 
from not making full use of immigrants’ skills, and the complexity and lack of 
transparency of the current system (see, for example, Paperny 2010; Wente 
2010). The media have also raised questions about the type of newcomers 
Canada should attract and what characteristics likely would lead to immigrants’ 
success in this country (Mahoney 2010). These concerns come at a time when 
Citizenship and Immigration Canada has announced that, in 2010, Canada 
landed the largest number of new permanent residents in 50 years (Citizenship 
and Immigration Canada 2011). This year is also the 60th anniversary of Mabel 
Timlin’s famous treatise, “Does Canada Need More People?” (1951) and the 
20th anniversary of the former Economic Council of Canada’s influential study 
on the “Economic and Social Impacts of Immigration” (1991), which first 
proposed a target rate for immigration of 1 percent of the population. 
In terms of Canada’s domestic environment, demographic and labour 
market conditions have dramatically changed since the 1990s. Canada’s 
population and workforce are aging rapidly as birth rates remain below 
replacement levels, to the extent that immigration soon will account for 
virtually all Canada’s labour force growth. Moreover, the eldest members of  
the babyboom generation are now reaching retirement age, and the resulting 
flood of retirees will lead to significant skills shortages that immigration will 
have to help alleviate.Chapter 1
page 2
At the same time, a 15-year period of economic expansion, which led 
to the tightest labour market in three decades and a shortage of skilled 
workers, gave way in 2008 to one of the worst recessions since the 1930s 
and sharply higher unemployment. In such a recessionary labour market, 
recent immigrants experience far higher rates of unemployment and 
underemployment than do non-immigrants. As well, the high Canadian dollar 
and ongoing globalization have led to a marked decline in the manufacturing 
sector, a traditional source of jobs for immigrants for many decades. There is 
also an ongoing shift toward a more complex, knowledge-based, skills- 
oriented economy, and the restarting of employment growth in manufacturing 
in 2010 has been concentrated in high-technology, high-value-added areas in 
which immigrants increasingly will have to fit. Many immigrants also must 
seek employment in the services sector, which traditionally is characterized  
by relatively lower average earnings levels than in manufacturing. A higher 
degree of earnings inequality likely will make it harder for immigrants to 
become integrated fully into the Canadian economy.
Indeed, the past two and a half decades have seen a marked worsening 
in the adjustment process of new immigrants as their earnings levels have 
dropped significantly relative to Canadian-born workers, the earnings gap 
between Canadian- and foreign-born workers has widened, and the catch-up 
interval between the earnings of immigrants and Canadian-born workers has 
lengthened. These results have come at the cost of fewer human resources  
and skills available to the Canadian economy, a potential threat to social 
cohesion, and the likely loss of skilled immigrants who choose to return home  
or move on to another country that they see as offering greater opportunities  
to get ahead.
The international environment for immigration has also been changing 
rapidly. Growing globalization and, until 2008, years of sustained economic 
growth in many parts of the world have led to growing international 
competition for skilled labour. The European Union, for example, recently 
introduced a “blue card” plan similar to the US green card program to attract 
skilled labour. A number of other countries, such as the United Kingdom, 
have recently adopted a point system as part of their effort to attract more 
skilled labour or are considering such a move (Spain, France, and Denmark). 
Germany has just announced an effort to attract highly skilled immigrants. 
Although Canada essentially invented the point system as a keystone of 
its immigration policy in 1967, that system no longer seem to operate as 
effectively as it does in, say, Australia, and long delays in the acceptance of 
immigrants’ applications typically occur. And the elephant in the room is the 
United States, which is now considering bringing in a point system of its  
own as part of a prospective major restructuring of its immigration policy.page 3
Toward Improving Canada’s Skilled Immigration Policy: An Evaluation Approach
Canada thus needs to respond nimbly to growing international competition 
for skilled labour or risk falling behind. Workers, particularly skilled workers, 
are becoming much more internationally mobile as economic opportunities 
change. The recent financial shock and severe economic recession in many 
developed economies offer a unique opportunity for Canada to attract skilled 
young immigrants from these areas. To do so, however, Canada needs to 
maintain its attractiveness and to replace the lengthy backlogs, complexity, and 
uncertainty in the current immigration process with a more effective, efficient, 
and transparent set of procedures.
Recent legislative changes and program developments in the immigration 
area highlight the need to re-examine the role and effectiveness of Canada’s 
immigration system. In the past several years, the Temporary Foreign Worker 
Program, which admits largely less-skilled workers, has grown dramatically: 
between 2006 and 2010, more workers arrived under this program than 
under the regular Federal Skilled Worker Program, and indeed in 2010 the 
number exceeded that for all new immigrant arrivals together (Citizenship 
and Immigration Canada, 2011). This program sought to fill immediate labour 
market shortages that arose during the long period of economic expansion, 
especially in the western provinces, but does it make sense to continue the 
program in an era of relatively high unemployment? Perhaps there is now a 
need to re-examine the objectives of Canadian immigration policy and its shift 
to a more short-run, employer-driven economic emphasis. The 2008 Bill C-50, 
which revised the federal Immigration and Refugee Protection Act, also sought 
to reduce the backlog and speed up the processing of applications, particularly 
of skilled workers, and delegated substantial additional powers to the Minister 
of Citizenship and Immigration in pursuit of this aim. It is, however, unclear 
how these powers will be exercised and what effects they will have on the 
whole process. Ottawa also implemented a Canadian Experience Class 
program that makes it easier for foreign students enrolled in post-secondary 
programs and some temporary foreign workers already working in Canada to 
apply for permanent immigrant status. In addition, in 2008, Citizenship and 
Immigration Canada began to require skills-evaluated immigrants to fall into 
a set of specified occupations listed by the minister, thus shifting immigration 
policy more toward filling occupational gaps, a role it had played in the 1970s. 
These major shifts in recent Canadian immigration policy and practices 
clearly show the change in the role immigration is viewed as serving. As 
a result, a tool or criterion now seems to be needed to evaluate how well 
different classes of immigrants are doing in the Canadian labour market. The 
purpose of the study, therefore, is to develop such a tool and apply it to an 
examination of how major policy levers relevant to Canada’s skilled worker 
immigration program affect the earnings levels of workers shortly after their Chapter 1
page 4
arrival in this country. In developing a useful empirical framework for such 
an analysis, we provide an extensive survey of recent Canadian literature on 
immigrant earnings and outcomes. We also critically review recent changes 
to Canadian immigration policy in light of our criterion, and consider some 
alternative ways to address current immigration concerns.
The volume proceeds as follows. In Chapter 2, we present a brief history 
of Canada’s immigration system, with a focus on skilled immigration and the 
point system, and offer an overview of the current structure and operation 
of the system. In Chapter 3, we review the evidence on major changes in the 
patterns of immigrants and foreign workers arriving in Canada. Together, 
these two chapters provide the necessary background material for the volume’s 
core analytical contribution, presented in Chapters 4, 5, and 6. In Chapter 4, 
we summarize the findings of our recent study of the effects of the point 
system and major immigration policy levers on the skills characteristics of new 
arrivals. Then, in Chapter 5, we examine the implications of these results for 
the development of a tool with which to evaluate how newcomers are doing 
in the Canadian labour market, as well as the effects of immigrants’ skills 
characteristics on their labour market earnings. In Chapter 6, we present the 
results of simulating several policy alternatives using an integration of the 
findings in the previous two chapters. Finally, in Chapter 7, we consider where 
Canada ought to go from here, and suggest some alternative proposals for 
reforming Canada’s system for the immigration of skilled workers.

Toward Improving Canada's Skilled Immigration Policy: An Evaluation Approach

http://www.cdhowe.org/pdf/Immigration%20Book_Ch1.pdf

Toward Improving Canada's Skilled Immigration Policy: An Evaluation Approach

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