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Effects of Immigration on the Canadian Economy

By khizram May 29, 2013 1487 Words
Effects of Immigration on the Canadian Economy
Canada is known globally as the “nation of immigrants”. Canada’s current population is currently almost 35 000 000 (34 957 572 and counting).1 Over 6 million (19%) of these are immigrants.2 Canada has a current immigration rate of 240 000 to 265 000 immigrants a year.3 Currently provinces Ontario, British Colombia and Alberta hold most of Canada’s immigrants, with 28% in Ontario, 27% in British Colombia, 16% in Alberta and the remaining 29% scattered throughout the country.2 Many Canadians believe immigration harms the economy as jobs are taken by immigrants. In reality immigration is very beneficial to the Canadian economy. Canada is highly reliant on immigration to keep its economy growing. Also immigration increases productivity. And finally, the biggest benefit of immigration is that immigrants increases demand.

In comparison to most developed countries, Canada has a very low population. With an area of 9 985 000 km2, it only has a population of 34 957 779.4The United States for example on the other hand has an area of 9 827 000km2 and has a population of 311 591 917.4 Like many other countries Canada also has a declining birth rate. Some reasons for this are, women focusing more on their careers, rather than starting a family, couples having children later in life as a result of delayed marriage, or have less children as not as many children are need (children were needed in the past to work on farms, and as many didn’t survive the first five years of life, couples had many in hopes some would survive), no longer need of male heirs, etc. Due to declining birth rates without immigration, Canada’s population would be increasing at declining rates. Immigration contributes greatly to the growing Canadian population. (Refer to figure 1) Canada has a current birth rate of 1.9* in comparison to the birth rate of Canada in 1960 which was 3.9 children per woman.5 (Refer to figure 2) 42.2% of the population is baby boomers.7 (Refer to figure 3) As the baby boomers get ready to retire Canada should have more than enough young people ready to replace and support them. The ratio of retirees to workers should ideally be 1:8.10 Canada was pretty close when the baby boomers were between the ages of 13-19 with the ratio standing at 1:6.11 Today the ratio is 1:3.11 If the was 1:1, it would mean more job availability. But on the contrary it would also mean, higher taxes, as money is needed to support the retiring and for pensions, also it would mean employers have less choices when hiring worker (if there is only one applicant, qualifications hold no importance) and finally a 1:1 ratio would make it difficult for the population and economy to grow. If immigration is not allowed if immigration is not allowed in Canada, Canada’s future would be much like that of japan. Japan’s current population is 127 817 2274 and is expected to drop to 87 million by 2060.14 (Refer to figure 4) Japans economy is now struggling as it has a birth rate of 8.38/100015 and an ageing population of 23.9 %.16 (Refer to figure 5) The ratio of japans retirees to workers is 2:1 this means there are only 2 working people available to support 1 retired. 16 Andrew Coyne, a columnist in the National Post proposed, Canada should increase its immigration to 850 000 a year, and David Baxter, an expert Demographer who interviewed for the Globe and Mail believes Canada should increase its population to “avoid the unspeakable: a population that stops growing.”18 Although this seems very extreme currently, it may very likely happen according to current reports sometime in the future.

As according to recent research immigration is more of a “need” than a “luxury” (want), to the Canadian economy, but there are definitely some “luxurious” benefits gained from it. In comparison to Canada who only allows in of 240 000 to 265 000 immigrants annually3, The United States allows in 651 000 immigrants a year.12 This can be a leading cause as to why The United States has had a great economy for the greater part of the decade until the recent four years as immigrant increase productivity. The United States ranks number 4 on top economies in the world, Canada ranks 7.13 As entrepreneurs immigrate in to a country, more jobs are created. It is very beneficial when along with the entrepreneurs from the existing population and entrepreneurs who have immigrated in, create jobs for the Canadian population. 15 854 of immigrants entering Canada are entrepreneurs.19 Spain for example has an unemployment rate of 37.9%.20 (Refer to figure 6) A reason for this can be that Spain has an immigration rate of 5.02/100020 (Refer to figure 7) Only 12.7% of Spain’s population are entrepreneurs.21 Is Spain allows more entrepreneurs to immigrate into the country unemployment rates may go down. Along with creating jobs, another benefit of a large population from a business view is more people willing to make investments into the country. As immigrants and born citizens both invest into local or national businesses, Canada‘s businesses can produce more due to increase in money amounts. This benefits the consumer as well because according to the law of demand, as producers are able to produce more, supply is increased, as supply increases prices decrease, hence allowing more consumers to purchase the product. This by default gives the producers higher revenues.22 Also although immigrants are entitled to government services, like health care, education, pensions, social services, and such, they like the rest of the Canadian citizens, they must also pay taxes. The belief that legal immigrants abuse welfare and government services is actually false. In reality studies show that only a small portion of immigrants use government service: free medical 5%, unemployment insurance 4%, food stamps 1%, welfare payments 1%.23 More people paying taxes can lead to two main possibilities. One, taxes are lowered as there is a greater number of people paying them. This is beneficial to the general population. Or two, there is an increase in government revenue. Depending on what the government decided to do with the increase in revenue, it can benefit the population; if invested into the country, or it can benefit the government sector; if used to increase government salary. In either case it benefits the nation, and the people of the country. Finally, one of the biggest benefits of immigration is that immigrants increase demand. As the population increases, demand increases as well. Basic need like food, clothes, etc. must be bought. As demand increases for basic needs, producers make a greater profit as more of the product is sold. If the product in inelastic for example fuel, producers make a much greater revenue. Compare figure 1 to figure 8, as population has increased, so has demand. For example population of Ontario is expected to increase by 37.4%.24 The demand for houses a basic need (shelter) is increasing. (Refer to figure 10) An increase in demand for houses also means more houses need to be built in order to increase supply. This means that workers need to be hired for this purpose. Therefore an increase in demand also creates jobs, if producers choose to increase supply. Along with basic needs, immigrants also increase a demand for luxuries. Like citizens, immigrants require much the same things for example cable and phone services, material objects, furniture, cook ware, etc. If the demand for a certain luxury good is high and elastic prices will go down. This will benefit consumers as for the low prices, and the producers as for the increase in revenue. In the supply and demand sector a greater population will have a positive effect on Canada. People often immigrate to Canada or a country like Canada, in hopes of a better life style, job and education opportunities, and health care reasons. As members of the United Nations, UNICEF, and strong believers in human rights, we as Canadians should accept immigrants and allow people the chance to come out of poverty. Also we should be more accepting of immigrants as they provide the nation with many benefits, like the increase in population, increase in entrepreneurial skills, and finally the increase in demand. In comparison to what immigrants take form citizens in the Canadian economy the offer up much more. The effects of immigration on the Canadian economy have thus far been positive and according to recent research will continue to be so. *birth rate of Canada in 2009 show in table, but birth rate in Canada has not changed since 2009, 1.9% is applicable to 2012 according to figure: 1b6.

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