The Economics of Mass Immigration Presentation to the Association of Professional Economists of British Columbia Vancouver, June 9, 2017

“I recommend to parliament that the number be:” Quick and Dirty Survey Canada currently admits 280,000 landed immigrants a year. Please vote for one of the three alternatives: “I recommend to parliament that the number be:” Increased Stay the same Decreased

Basic Model, Marginal Immigration A worker in a developing country earns $10,000 This worker moves to Canada and earns $30,000 Increase in worker’s and world output: $20,000 Effect on Canadian workers’ Income: Virtually zero

Labour Market Canada

Effects of Mass Immigration L-L’

Size of Effects on Canada 10% of Borjas’ Estimate for US Increase in Income of Owners of Real and Human Capital 43.5 billion Decrease in Labour Income $40 billion Net Migration Gain (Harberger Triangle) $3.5 billion

Implications of Results Growth in earnings of capital explains Support for more immigration by business as owners of real capital Support from professionals as owners of human capital Lower Income of Labour explains Rise of Populism Demand for more Equalization Policies

Mass Immigration and the Welfare State Main Features of the Welfare State: Progressive Income Taxation Universal Benefits Milton Friedman: “Free Immigration and the Welfare State are Incompatible.”

Ratios of recent immigrants to Canadian-born earnings, census years, Age 25-54 Source: Statistics Canada (2008), Earnings and Incomes of Canadians over the Past Quarter Century

Income and taxes paid by recent immigrants and non-recent immigrants including native born Canadians in 2005

Taxes paid by Canadian and recent immigrants, all levels of government, 2005/2006

Calculation of Fiscal Transfer FT = (To – Ti) + (Gi – Go)   Where FT is the average per capita fiscal transfer, T is the average per capita taxes paid, G is the average per capita benefit received through program spending, Subscript o denotes “other Canadians”, Subscript i denotes recent immigrants. FT = ($17,372 - $11,299) + ($16,138 - $15,882) = $6,073 + $256 = $6,329

Total Cost to Taxpayers 1 Life-time transfers to average Immigrant If the average immigrant pays taxes and receives benefits for 45 years between his or her arrival and end of life, every recent immigrant benefits from transfers worth $284,805, disregarding all effects of discounting and inflation. Annual Cost of Net Immigrants 1987-2004 in 2006 During the 18-year period from 1987 to 2004, a total of 3.9 million immigrants arrived in Canada. In 2006 they would have imposed a cost of $24.7 billion if none of the immigrants had emigrated, died, or returned to their native countries. However, of these immigrants 1.2 million emigrated, died or returned to their native countries. The remaining 2.7 million immigrants in 2006 received transfers worth $17 billion.

Total Cost to Taxpayers 2 Annual Cost of Net Immigrants in 2011 Between 2005 and 2010 approximately another 1.5 million immigrants arrived in Canada. Assuming that their numbers were not changed by mortality and other factors and that their economic record is the same as that of the 1987-2004 cohort, in the year 2011, they will have added another $9.5 billion to the $17 billion noted above, for a total of $26 billion Annual Cost of Net Immigrants in 2013 New Immigrants since 2010 will have raised burden to $30 to $35 billion

2nd Generation Immigrants Men Average employment income in 2005 (Census)

Other Effects of Mass Immigration Eliminate unfunded liabilities of Social Security Programs Eliminate labour shortages Bring economies of scale Manufacturing Urbanization Benefits of Multiculturalism Bring good feelings about relieving global poverty

Policy Recommendations Improve Immigrant Selection Procedure: Landed Immigrant Status only to candidates who have employment contract with Canadian firm at pay at least equal to average wages in area of employment. Reduce number of annual immigrants to 100,000 (or less) for limited time. No obligation to admit parents and grandparents.