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Immigration and the Welfare State in Canada: Growing Conflicts, Constructive Solutions

Type: Research Studies
Date Published: October 4, 2005
Research Topics:
The immigrant selection process used by the Government of Canada is in dire need of fixing. Many highly educated recent immigrants cannot find jobs in their professions. Statistics Canada shows that average incomes of recent immigrant cohorts are well below those of Canadians with similar demographic characteristics, even 10 years after their date of immigration. These facts are important because Canada has a pervasive welfare system and it is no longer true that immigrants do not affect the incomes of Canadians directly.

Canada's welfare system relies on a highly progressive personal income structure and provides universally accessible free government benefits. Because of the low incomes of immigrants, this system has resulted in substantial net transfers of taxpayers' money from Canadians to the recent immigrants. These costs are estimated to be $1.4 billion in the year 2000 for the cohort of immigrants that arrived in 1990. For all of the immigrants who arrived during the 13 years before 2003, the cost in 2002 alone is estimated to be $18.3 billion. Such costs have also been noted in Europe's Nordic states, which are known for the pervasiveness of their state welfare systems. Observers there note that the welfare state is incompatible with mass immigration and policies are enacted to curb the latter.

Government employees and academics have studied the reasons for the low incomes of recent immigrants in Canada. The findings of these studies are still tentative, but point to the large numbers of immigrants who bypass the government screens that are designed to allow entry only to foreigners likely to be economically successful. Those bypassing the screen include large numbers of family members and refugees, many of which have low earnings capacity.

There are other causes of low average incomes of recent immigrants. They include the wage-depressing effects their numbers have on the incomes of all workers with low skills in the country; the inability of many immigrants to find work for which their high education qualifies them; and the insensitivity of annual immigration rates to labour market conditions in Canada, a policy of relatively recent origin.

This paper recommends a continuation of the efforts to achieve a better use of the high skill levels of the recent wave of educated immigrants. However, its main recommendation involves a fundamental reform of Canada's immigration selection process to prevent the need for such measures and to avoid large costs to taxpayers in the future.
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