Immigration is not the panacea, as often advertised, to an aging population and low fertility rates. However, the right economic immigration inflow enhances employment outcomes and strengthens the overall economy.
Principal applicants selected under the economic immigration program integrate well into the labour market. But their immediate families do not. Overall, this means that, across all categories, most new immigrants struggle in the labour market after their arrival. One way to encourage better outcomes is to substantially increase the target for economic immigration.
Ottawa has increased annual immigration targets, gradually moving up from 280,000 in 2016 to 350,000 by 2021. Canada admits these immigrants through various streams: economic immigration, family reunification, refugee and humanitarian programs. Annually, the plan is for 58 per cent of newcomers to arrive through the economic program (principal applicants and their immediate family members) while family class and the protection of refugees and vulnerable persons are expected to comprise around 27 per cent and 15 per cent of new immigrants, respectively.
Only principal applicants in the economic category are required to meet selection requirements based on factors such as education, language, age and work experience. These applicants are immediately employable upon arrival. In 2016, about 44 per cent of all economic immigrants were principal applicants, with the rest being their immediate families. This means that, overall, a relatively small portion of all new immigrants − about 26 per cent − are subject to economic selection policies.
Immigrants generally earn less than non-immigrants, but principal applicants in the economic stream perform better in the labour market, on average, compared with other immigrants (according to Statistics Canada’s data). Since 2003, income gaps between principal applicants under the economic program and other immigrants have widened, likely due to stricter eligibility criteria and priority being given to applicants with a job offer and/or a Canadian education. Among principal applicants, immigrants with a work permit have superior labour-market outcomes in terms of earnings.
In contrast, immediate family members of principal applicants in the economic program were among the lowest earners after their arrival in most years since 1982 − the first year for which data are available. For example, based on tax-file data, average earnings of principal economic applicants in the first year since landing were about $43,000 in 2016, compared with $18,000 for their spouse and dependents.
Earnings improve with time spent in Canada, but earnings of non-principal applicants do not rise enough after 10 years in Canada to catch up with principal applicants. The caveat, however, is that these variations in incomes do not take into account differences in important factors that can affect earnings, such as education, skills, type of employment, occupation, age, gender and, more importantly, hours worked. Earlier studies highlight that the majority of principal applicants are men and their dependants spend, on average, fewer hours working. A Statistics Canada study also shows that although female spouses of principal applicants have better labour-market outcomes than women in the family class, due to having higher levels of human capital in terms of education and language ability, such characteristics fail to fully explain the gap between female spouses of principal applicants and their partners.
These results have implications for the federal and Quebec governments.
Ottawa should revise its immigration plan to increase the proportion of immigrant intake through economic immigration, which would mean proportionally fewer refugees and other immigrants accepted on humanitarian grounds or through family sponsorships. The government of Quebec, which recently reduced the annual number of economic immigrants from 31,200 in 2018 to between 21,700 and 24,300 in 2019, should also take notice. This is not the right stream of immigrants to be reducing. Newcomers can support the economy in the short-term most effectively when the focus is on economic immigrants.
Parisa Mahboubi is a senior policy analyst at the C.D. Howe Institute.