As nations compete to win the global talent race, the benefits of high skilled immigration seem clear to policy makers and leaders in Canada. However, when it comes to low skilled immigration, much controversy remains. The furor over waitresses in Weyburn, Saskatchewan, allegedly losing jobs to foreign workers serves to exemplify public anxiety and fears over immigration. Much of the debate in the article published by CBC focuses on politically appealing arguments that centre on the supposed lack “fairness” of foreign workers replacing Canadian-born ones. It completely ignores that one of the main reasons immigrant workers are often more appealing than native ones is the result of government intervention that requires such workers to have closed work permits.
Anti-immigration debate frequently focuses on how immigrants place undue strains on the country’s welfare system, and, in populist discourse, how they “steal” jobs from natives. Often, immigrants earn significantly less than Canadians. This gap in wage levels coupled with the growing number of foreign-born Canadian citizens is leading to increasing immigration related anxiety in the country. Income disparities often lead to the argument that as immigrants offer a
cheaper supply of work, they increase unemployment and reduce wages among natives. However, studies have found that low skilled immigration actually has a small but nevertheless positive effect on the wages of native workers (Shierholz, 2010). More importantly, history has proven time and time again that the liberalization of labour mobility between rich and poor populations does not decrease average wages: despite the total removal of barriers to the occupational choice of black Africans after the end of apartheid, not only did the wages of white Africans experience no significant decline, black and white Africans alike actually experienced an increase in real per capita income (Leibbrandt and Levinsohn, 2011).
Even in cases when immigrants do reduce natives’ wages, such reduction does not justify limiting immigration by the standard welfare economics analysis, for it represents a pecuniary externality and not a technical one. Prohibiting immigrants from joining the labour market would be similar to keeping women from doing so for the sake of maintaining men’s wages intact, or preventing new companies from entering the market because their competition would impose costs on existing firms. As a matter of fact, such economic protectionism, which favours specific sets of people to the detriment of all –including the very people it is trying to protect –, decreases economic output. The best remedy for economic growth worldwide has been the elimination of systems limiting labour mobility: the world has grown richer through the end of slavery, the entrance of women in the workforce, the fall of the Berlin wall, and the assimilation of marginalized groups into society.
Aside from not significantly impacting the wages of low skilled Canadians, immigrants do work that is in high demand but low supply. As the native working population ages and population growth slows, the dependency ratio has been rising. This not only increases the burden of the state to care for elderly citizens, it also means that without immigrant labour, there will not be enough working age citizens to fill the new low skilled positions the economy will add in the next decade. Moreover, globalization has increased the demand for cheap and flexible labour, especially in ageing societies such as ours. By supplying cheap labour and filling low skilled positions, immigrants meet this demand and reduce the price of goods and services for everyone. Looking at American data, Patricia Cortes (2008) found that immigrants reduce the price of goods consumed by high skilled natives by 0.4% of GDP and of those consumed by the low skilled by 0.3% of GDP. Aside from reducing general prices, immigrant labour frees up Canadians to seek better positions: as low-skilled immigrants are better at jobs that do not require extensive language skills, they occupy the positions that require the least skills and allow Canadians to do more value added work. This happens for low skilled immigrants increase the supply of physical skills while making language and cultural skills scarcer in comparison to the overall offering of skills. Consequently, there is a higher premium for natives in the labour market. Equally important, immigrant labour frees up highly educated women from household and child rearing chores and allows them to join or increase their participation in the workforce, which further boosts economic growth.
Restrictionists often point to the social spending costs of low skilled immigrants. Data indicates, however, that expenditures on social assistance programs are lower for immigrants than for native-born Canadians. Moreover, simply looking at first generation immigrant expenditures does not take into account future taxes to be paid once they are fully integrated economically, nor does it consider that second and third generation immigrants are likely to outperform their parents. Studies looking at state and federal budgets in the United States have indeed confirmed the positive effects of immigration: while illegal immigrants cost Texas $504 million more than they paid in taxes in 2005, without them the economy would have shrunk by $17.7 billion (Strayhorn, 2006). In North Carolina, similar results were found, as a study found that in spite of imposing a yearly cost of $61 million on the state budged, Hispanic immigrants add $9 billion to the state’s gross product (Kasarda and Johnson, 2006). Robert Lynch and Patrick Oakford (2013) found that if given a way to legalize their status, current illegal immigrants in America would add an extra $109 billion to $184 billion in federal, state and local taxes. While illegal immigration is lower in Canada than in the United States, the economic and cultural similarities between the two countries make data on the latter a good measurement for the contributions of immigration to the economy.
Immigration also has benefits for the immigrants themselves and for their home countries. An immigrant moving to Canada significantly increases her wages. Moreover, remittances back home mean that poor countries would gain roughly $300 billion if OECD countries liberalized their immigration rules to allow for an increase of 3% in the size of their labour forces (Rugy, 2013). According to Veronique de Rugy (2013), this windfall would give poor countries $230 billion more than they currently receive in foreign aid – and such money would come from increased production in host countries rather than taxpayer sponsored foreign aid. These remittances empower immigrants and their family members in their native countries, as they go directly into the hands of individuals rather than government officials who are often corrupt and use foreign aid for private and illicit uses. Aside from being more beneficial than foreign aid to the receiving countries, the host countries also benefit from a $51 billion boost in higher returns to capital and reduced costs of production (Rugy, 2013). According to Clemens (2011), eliminating barriers to immigration – both high and low skilled – would amount to larger gains to world GDP than the gains to be made by eliminating all trade barriers for goods and services. He estimates that the gains from eliminating labour mobility barriers would amount to 50% to 150% of world GDP, depending on the magnitude of the migration movements. While half of the population of poor countries would have to migrate for the gains to reach the author’s highest estimate, migration of 5% of the population from poor to rich regions would be sufficient to surpass potential gains from a fully free international trade of goods and services.
Even if immigration policy is to only consider the wellbeing of native citizens and disregard or place little value on the welfare of foreigners, low skilled immigration has a positive net economic impact on the lives of Canadians. In spite of what CBC might like you to think, immigration actually creates more jobs for natives. Foreign low skilled workers reduce the overall cost of labour, which is a key component of production. With lower labour costs, it becomes cheaper to operate businesses, and more businesses lead to more jobs. Canadian goods and services are also cheaper due to lower employment costs. And as we all know, cheaper goods lead to higher purchasing power. So next time you walk into a diner to be served by a foreign-born waitress, remember that rather than “stealing” a job, she is freeing a Canadian to do more value added work – and consequently have a higher standard of living.