As labour markets change, the question arises whether Canada’s immigration policy – and our “point system” in particular – is doing a good job of identifying potential immigrants who will fare well on arrival in Canada.economic growth and innovation, immigration point system, Canadian immigration policy

Alan Green

Charles Beach

Christopher Worswick

English

Research Papers in Economics

e-brief
E EC CO ON NO OM MI IC C G GR RO OW WT TH H A AN ND D I IN NN NO OV VA AT TI IO ON N
Improving Canada’s Immigration Policy
By
Charles M. Beach
Alan G. Green
Christopher Worswick
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September 23, 2009
 As labour markets change, the question arises whether Canada’s immigration policy –
and our “point system” in particular – is doing a good job of identifying potential
immigrants who will fare well on arrival in Canada.
 Our analysis of Canada’s experience indicates that the immigrant selection system is
doing its job. However, a continued focus on economic-class immigrants is warranted,
as is favouring immigrants with more education, in particular a completed university
degree.
 Our findings also indicate that more weight – more points – should be given to younger
immigrants, because they are likely more able to adapt and to prosper in the domestic
labour market.
The authors wish to thank Colin Busby for helpful comments, while retaining full responsibility for this study.
Canadian immigration policy has new challenges in the face of changing demand in the labour market. With
widespread layoffs in 2009, and shifts in Canada’s industrial structure that affect its occupational requirements,
the question arises whether Canada’s immigration point system is up to the job of enhancing the prospects of
both immigrants and the domestic economy. For their part, future immigrants will need to fit into an
increasingly complex, knowledge-based and service-based, skill-oriented economy. This e-brief assesses
whether the current system is effective at identifying immigrants who are likely to succeed on arrival, and
explores possible improvements.
We do so by examining how the Canadian point system, and other major policy levers, affect the skill charac-
teristics and the subsequent earnings of immigrants to Canada. We find that by assigning more points to desirable
attributes, the point system has been working as intended and attracts the intended applicants. While the point
system should maintain its emphasis on education attainment, we recommend a revised age-points formula that
gives more points to younger age cohorts. 
Skilled Immigration and the Point System
To put skilled immigrants in context, total immigration flows into Canada increased from 174,000 in the late 1990s
to 262,000 in 2005, before falling back to 237,000 in 2007. This total inflow generally ranged between two-thirds
and three-quarters of a percentage point of Canada’s population.Immigrants to Canada arrive under several main categories: family class, economic or independent class immigrants,
humanitarian class or refugees, and a small mix of other categories. We focus on the second category, which is the group
intended to address the skill needs of the economy and to which the point system applies (see Box 1). It is the largest category
of immigrants, composing around 55 to 60 percent of the total, and ranging in number from 100,000 to just over 150,000 per
year. This group includes the principal applicant, who is evaluated under the point system, and accompanying family members. 
Evaluating Policies in Terms of Earnings of Skilled Immigrants
To evaluate immigration policy requires an objective criterion. We use the average earnings levels of newly arriving skilled
immigrants.
1We then evaluate immigration policies in two stages: the first looks at the effects of immigration policy levers on the
skill characteristics of immigrants arriving in Canada; the second examines the effects of immigrants’ entry-skill characteristics
on expected earnings. The combined result indicates the effects of immigration policy levers on immigrant earnings levels.
Effects of policy and point system weights on immigration outcomes
As Beach, Green and Worswick (2008) show, it is possible to estimate the effects of key policy levers on the skill levels of landing
immigrants. These policy levers are as follows: the total level of immigrant inflow in a year, the proportion of this total inflow that
arrives as economic-class immigrants, and the maximum point system weights allocated to education and age. 
In the case of education, we find that increasing the total inflow of immigrants significantly reduces the average education
level of economic-class principal applicants, as more marginal applicants are admitted. On the other hand, increasing the
proportion of a given inflow of immigrants arriving as economic-class immigrants significantly raises average education levels.
And perhaps not surprisingly, increasing the maximum points allocated to education within the point system significantly raises
the average education levels of arriving principal applicants.
Our analysis also indicates that boosting the total inflow of immigrants increases the average age of principal applicants
within the economic class. Augmenting the economic-class share of immigrants tends to reduce the average age of incoming
principal applicants. And an increase in the maximum points allocated for age, within the point system, reduces the average age
of arriving principal applicants (Beach, Green and Worswick 2008). To sum up, the point system works as intended. 
INDEPENDENT REASONED RELEVANT
| 2 e-brief
The Canadian point system assesses economic class applicants on the basis of various labour- market skills or attributes deemed valuable
to the economic advancement of the applicant and to the value of the Canadian economy. Points are awarded for the following factors:
1. Education points are based on credentials and years of study. Maximum points are given for a graduate university degree and at least
17 years equivalent of full-time study, down to 5 points for a secondary school educational credential (maximum points: 25).
2. English and French language ability (maximum points: 24). 
3. Work experience in the applicant's stated occupation (maximum points: 21).
4. In the case of age, as of 2007, maximum points are assigned for applicants in the age interval 21-49, then are reduced for progressively
younger and older ages outside this interval (maximum points: 10).
5. A confirmed offer of employment (maximum points: 10).
6. Adaptability (maximum points: 10).
When all assigned points are added up, they must exceed the pass mark of 67 points (out of a possible 100).
Box 1: The Canadian Point System in 2009
1 While this is a limited criterion and focused on economic success, earnings data are relatively easily measured and available, and connect the
analysis to a large established body of literature on immigrant earnings differentials and post-arrival earnings adjustment.INDEPENDENT REASONED RELEVANT
e-brief /3
2 This second stage of the analysis follows the standard human capital model whereby workers’ earnings are the outcome or dependent
variable of a regression equation and level of education and amount of work experience (related to age) appear – along with other possible
determining factors – as major determining factors.
3 Details of the specific calculations of these two stages of analysis can be found in Beach, Green and Worswick (forthcoming).
Effects of immigrants’ entry-skill characteristics on expected earnings
How have immigrants to Canada done in terms of labour market earnings as a function of their skill characteristics at time of
landing? The effects of education and work experience on immigrants’ earnings depend on: i) the general returns to these skill
levels in the Canadian labour market for workers as a whole; and, ii) any discounting of these returns for immigrants who
obtained their skills and training abroad.
2The latter effect may reflect a lack of appropriateness of the skills for the Canadian
labour market and a lack of recognition of foreign skills by domestic employers.
In Table 1, we illustrate the how changes in the four policy levers affect immigrants’ entry earnings for the full calendar year
following arrival.
3The rows in the table break down the results by sex, and by the channels through which the policy-lever effects
operate. The first column shows the results from an increase in the total level of immigration by 100,000 landings per year. The
second column is an increase in the economic class share by 10 percentage points. And the last two columns correspond to
increases in the maximum points allocated within the point-system schedule to either years of education or age at time of arrival
by 10 percentage points (out of 100). 
Increasing the total level of immigration reduces entry earnings of new immigrants by about 2 percent. But increasing the
economic-class share raises entry earnings by about 1 percent, and increasing the point system weights on years of education
raises entry earnings by 2 percent to 2.5 percent. 
The influence of the age channel on entry earnings is very minor – it is close to zero – while the channel through education
appears powerful. The education channel works well because of the effectiveness of the point system in raising education levels of
arriving immigrants and because of the powerful effect that education has on workers’ earnings levels. In percentage terms, the
effects are slightly stronger on female than on male immigrants because of females’ higher rates of return to education 
in the Canadian labour market. 
Table 1: Effects of Policy-Lever Changes on Average Entry Earnings of Immigrants
Note: The above figures are the difference between the first full-year average earnings of landing immigrants with the indicated policy change vs. without the change.
Source: Authors’ calculations
Change in
Immigration Levels
Change in Economic 
Class Share
Change in Wt. 
on Education
Change in Wt. 
on Age
Effect via Education
Men -2.00% 1.07% 2.28%
Women -2.11% 1.13% 2.40%
Effect via Age
Men -0.14% -0.27% -0.082%
Women -0.07% -0.14% -0.038%
Combined Effect 
Men -2.14% 0.80% 2.28% -0.082%
Women -2.18% 0.99% 2.40% -0.038%
Combined Effect ($ 2008)
Men $-977.6 $365.5 $1,041.5 $-37.5
Women $-703.8 $319.6 $774.9 $-12.3| 4 e-brief
INDEPENDENT REASONED RELEVANT
Translating these percentage effects into dollar terms gives the figures in the bottom rows of the table. They show that, at about a
thousand dollars per year for men, the largest entry-earnings effects of the alternative immigration policy levers are the weights on
years of education within the point system. 
Two extensions of these results may be considered. In the first, one can look at the effect of increasing immigration by 100,000
persons a year solely through the economic-class stream. The result is a net decline in men’s entry earnings of 1.23 percent (or by
$561 per year) and in women’s entry earnings of 1.05 percent (or by $340 per year).
The second extension looks at the case of Citizenship and Immigration Canada increasing the number of maximum points allocated
to education from 12 to 16, such as in 1993, where the extra 4 points were awarded for completion of a university bachelor’s degree.
The result is that men’s entry earnings are estimated to rise by 2.68 percent (or $1,224 per year) and women’s by 2.82 percent (or
$911 per year).
Implications and Conclusion 
The following conclusions about Canada’s immigration policy for skilled workers extend from the results:
￿ The substantial increase in the proportion of economic-class immigrants over the last 15 years has raised the average entry
earnings of landing immigrants. Hence, Canada should continue to retain a high proportion of economic-class immigrants as part
of its policy objectives.
￿ Increasing the points-weight on education – both years of education and completion of a university degree – has also raised the
average entry-earnings levels of arriving immigrants. These weights on education should be retained.
￿ The points-weight on age has weak earnings effects. But this in part reflects the symmetric way that age points are allocated, with
equal point declines outside the 21-49 year age interval. This contrasts with, say, the New Zealand system where maximum points
are allocated for younger age groups (20-29 years) and then decreased for successively older-age intervals (up to age 55) – an
asymmetric age-points formula. Canada should consider a similar asymmetric formula because it provides much stronger policy
incentives to bring in younger, more adaptable immigrants.
Canada’s point system works reasonably well in attracting economic-class immigrants. If Canadians want to enhance their immigration
system to produce immigrants who do better economically after arrival, immigration policy should shift more weight to the economic
class of immigrants, and assign more points to younger potential entrants. The benefits would flow to both new immigrants and the
Canadian economy as a whole.INDEPENDENT REASONED RELEVANT
e-brief /5
This e-brief is a publication of the C.D. Howe Institute.
Charles M. Beach, Professor of Economics, Queen’s University; Alan G. Green, Adjunct Emeritus Professor of Economics, Queen’s 
University; Christopher Worswick, Professor of Economics, Carleton University.
For more information contact Charles M. Beach at 613-533-2278.
This e-brief is available at www.cdhowe.org.
Permission is granted to reprint this text if the content is not altered and proper attribution is provided.
References
Beach, Charles M., Alan G. Green, and Christopher Worswick. 2008. “Impacts of the Point System and Immigrant Policy Levers on Skill
Characteristics of Canadian Immigrants.” In Barry R. Chiswick, ed., Immigration: Trends, Consequences, and Prospects for the United States.
Research in Labor Economics. 27: 349-401 . Amsterdam: Elsevier JAI Press.
–––. Forthcoming 2010. “The Impact of the Point System on Immigrant Earnings in Canada.” Draft report for the C.D. Howe Institute. Toronto.

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