Opinion: Canadians are right to worry about immigration levels by Professor Herb Grubel

Almost half of Canadians think Ottawa’s target of 500,000 immigrants a year is too high, poll finds Author of the article: Herbert Grubel,  Special to Financial Post Published Jan 04, 2023  •

Canadians are increasingly worried about immigration. A recent Leger Poll found that 49 per cent of us think the federal government’s new target of 500,000 immigrants a year is too many, while fully 75 per cent are concerned the plan will result in excessive demand for housing and social services. For his part, the immigration minister, Sean Fraser, tells us we need not worry: immigrants themselves will provide the labour needed to build the housing stock they’ll need.

The majority of Canadians have always welcomed immigrants and believe they benefit the economy and themselves. What worries them today is the prospect of mass immigration that they believe the housing market cannot absorb without much higher prices. They know the minister’s soothing reassurance is not supported by experience. Past immigration did increase the labour force but did not prevent high housing costs. Excessive regulations and rent control are the main reasons housing is so expensive, not a shortage of labour.

Immigrants not only add to the demand for housing, they also increase congestion for a wide range of public services: doctors, hospitals, schools, universities, parks, retirement homes, and roads and bridges, as well as the utilities that supply water, electricity and sewers. In theory, the supply of all these things could be expanded reasonably rapidly. In practice, expansion is slow. But the main reasons for that are, not a shortage of labour, but inadequate planning, insufficient financial resources and, as a result, construction that lags demand.

The case for keeping annual immigration at traditional or even somewhat lower levels rests on more than the effect on house prices and public services, however. Immigration also depresses the wages of low-income workers, which results in greater income-equalizing transfers and the higher taxes required to pay for them. It also reduces employers’ incentives to adopt labour-saving technology, an important source of growth in labour productivity and wages, and it allows employers to avoid the cost of operating apprenticeship programs to train skilled workers.

Japan’s widespread success in using robots to deal with labour shortages caused by its aging population illustrates what could be done in Canada. In Germany employers operate apprenticeship programs to train skilled workers in the numbers industry needs. In this country, such programs could relieve the shortage of skilled labour while benefiting people already here, rather than new immigrants brought in specially to take highly paid skilled jobs currently going asking.

Despite the Leger numbers suggesting many Canadians have concerns about big increases in the rate of immigration, the debate about it tends to be one-sided. We hear from the many groups that benefit from mass immigration: employers, immigration lawyers and consultants, real estate developers, political parties that traditionally do well in immigrant communities, idealists who want us to “imagine there’s no countries” and so on.

On the other side, the Leger numbers suggest, is a majority that is not at all opposed to immigration in principle but begins to inform itself on the subject and maybe even become politically active only when the costs become so large they can’t be ignored any longer.

In Switzerland during the 1970s an economic boom led to labour shortages and immigration was liberalized. It turned out that the need to produce housing infrastructure and public services for these immigrants actually worsened the labour shortage. The silent majority of Swiss citizens organized and took advantage of the opportunity to get government policy changed by demanding a public referendum that ultimately ended the liberal immigration policy.

In Canada, changes in policies come through Parliament and the election of politicians. Numbers like those in the Leger poll may begin to suggest to politicians that they can increase their election chances by catering to the majority who would prefer somewhat reduced immigration but also a fundamental reform of the system currently used to determine the number and characteristics of immigrants.
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Such a reform would put greater emphasis on market forces rather than politicians and bureaucrats in setting immigration levels. Immigrants would be admitted only if they possessed a formal offer of employment in Canada that paid at least the average earned by workers in the region where they would be employed.

Under this system, employers’ self-interest would ensure that workers would have the skills and personal characteristics required for success on the job. The requirement for minimum pay would prevent floods of immigrants competing with Canada’s low-wage workers and ensure that those who did come had the income needed for a life free from the need for public subsidies.

Worrying about immigration is not enough. Only the election of politicians committed to this kind of reform will restore mental peace.

Herbert Grubel, himself an immigrant to Canada, is an emeritus professor of economics at Simon Fraser University and a senior fellow at the Fraser Institute.