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Recent immigrants not faring as well as those who arrived before 1987, costing taxpayers more than $16 billion annually

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Release Date: March 15, 2012
VANCOUVER, BC—Immigrants who arrived in Canada between 1987 and 2004  received about $6,000 more in government services per immigrant in 2005 than they paid in taxes, confirms a new report released today by the Fraser Institute, Canada’s leading public policy think-tank.

“Immigrants arriving in Canada since 1987 are not doing as well economically as immigrants who arrived before 1987,” said Herbert Grubel, Fraser Institute senior fellow and co-author of Fiscal Transfers to Immigrants in Canada: Responding to Critics and a Revised Estimate.

“As a result of Canada’s welfare-state policies, our progressive income taxes, and universal social programs, these immigrants impose a huge fiscal burden on Canadian taxpayers of between $16 billion and $23 billion annually.”

The report is an update of a 2011 study by Grubel and co-author Patrick Grady which used publicly available data to estimate that, in 2005, Canada’s immigrant selection policies resulted in an average fiscal burden on taxpayers of $6,051 per immigrant who came to Canada between 1987 and 2004, and that the average income of those immigrants was 72 per cent of that of other Canadians.

The study is also a response to research sponsored by the government-funded Metropolis BC Project and carried out by Simon Fraser University economists Mohsen Javdani and Krishna Pendakur who examined the incomes of immigrants who arrived in Canada between 1970 and 2004. They concluded that over this period, immigrants received only $450 more in government services than they paid in taxes and that immigrants’ average incomes were 89 per cent of that of other Canadians.

“The main reason for the disparity is that our study looked at immigration data from 1987 to 2004, while Javdani and Pendakur went as far back as 1970,” Grubel said.

“According to Statistics Canada, immigrants to Canada pre-1987 had much higher incomes, and thus made higher tax payments, than those who arrived later. Javdani and Pendakur found significantly reduced transfers because these immigrants were more economically successful than the later cohort.”

Javdani and Pendakur justified their use of data from this period by claiming that the 1987 to 2004 cohort measured by Grubel and Grady underestimated the true earnings of immigrants since those individuals were younger.

“Newly available research from Statistics Canada shows that the income gap between recent immigrants and other Canadians has been increasing, regardless of gender, education, work experience and, importantly, age,” Grady said. 

“In other words, the lower incomes and tax payments of recent immigrants relative to those of other Canadians are likely to persist over all stages of their lives, which invalidates Javdani and Pendakur’s criticism of our estimates.”

Grubel and Grady also reject arguments that immigrants are needed to meet labour shortages, that they bring productivity-increasing economies of scale, and that their children will repay the fiscal burden. New evidence does not provide any grounds for optimism that the children of recent immigrants are going to be able to earn enough to compensate current and future generations of Canadians for the fiscal transfers made to their parents by existing Canadians.

Grubel and Grady conclude that in order to alleviate the fiscal strain on taxpayers, Canada’s immigration selection process should be reformed to emphasize a reliance on market forces to replace the existing, failed system of using points to select immigrants. They also present new evidence suggesting that Federal Skilled Worker immigrants who were admitted on the basis of pre-arranged employment offers had much higher incomes than comparable immigrants admitted under previously existing criteria.

“The exclusive use of such job offers would result in a significant decrease, if not elimination, of the fiscal burden that exists under the present immigrant selection system,” Grubel said.


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