The impacts of immigration on the receiving economy. Arthur Sweetman

Transcription

1 The impacts of immigration on the receiving economy Arthur Sweetman 1

2 Structure of the talk 1. (Mostly) Canadian background - integration 1. Labour market outcomes 2. Arrivals and departures 3. Intergenerational and conditional earnings 2. Economic impacts of immigration on the domestic economy 1. Traditional Canadian conclusions 2. Several key concepts (& controversial results) 3. Conclusions 2

3 PART 1: BACKGROUND 1.1 Opening Caveat Integration & impact depend on (at least) the: structure of the receiving economy (two sided) selection that occurs integration policies and practices While it s useful to get ideas from other countries, outcomes differ with context 3

4 An Example: Australia, Canada and the US (Antecol, Kuhn & Trejo, 2006; using 1980 & 1990 data) They find: Employment is key to integration in Australia Wages ($/hr) is key in the United States Canada is in between Overall, initial immigrant relative annual earnings are highest in Australia, lowest in US Rate of increase/integration highest in US, lowest in Australia Domestic institutions matter 4

5 Of the 3: In recent years Australia has had the most selective immigration policy & immigrants there have, on average, had the best outcomes relative to the domestic born Usually attributed to selection But, still some questions about selection vs (e.g.,) scale of immigration flows Massive increase in Australian immigration rates in the past few years will give work to researchers in the future 5

6 Immigration rate, , Canada and United States Years Canada United States 6 Rate

7 1.2 For Canada and the US Dramatic Decline in Labour Market Outcomes There has been a decline in labour market earnings for recent arrival cohorts There is a substantial rate of economic integration, but the time required to catchup with the Canadian born is increasing Close to, or beyond, retirement for many Even if catch-up occurs, the life-time earnings difference is substantial 7

8 Difference in log earnings of females age difference in log earnings years since migration Cohort c6670 c7175 c7680 c8185 c8690 c9195 c9600 Source: Canadian Censuses 1981 through 2001 Warman and Worswick (2004) 8

9 Difference in log earnings of males age difference in log earnings For men: (1) decline greater (2) late 1990s bounce larger years since migration Cohort c6670 c7175 c7680 c8185 c8690 c9195 c9600 Source: Canadian Censuses 1981 through 2001 Warman and Worswick (2004) 9

10 Post 2000? Did Outcomes Improve? Most analysis uses 2000 census We had hoped that labour market outcomes would improve Small improvement immediately post-2000 But, was followed by a return to 2000 levels 10

11 Low-income rates, : Recent immigrants and comparison group aged 20+ (Note Scale) Low - income rate Immigrants in Canada 1 full year Immigrants in Cda <= Comparison 2000 = census year Note: Comparison group: Canadian born plus immigrants more than 10 years Source: Statistics Canada, Picot, Hou and Coulombe,

12 Having incomes below the low income cut-off (LICO) is increasingly common for immigrants Pre-tax, Post-transfer Low-Income (LICO) Rates Percent Business Cycle Peaks in 1980, 1990 & 2000 Not Cdn-Born Cdn Born Source: Statistics Canada Picot & Hou (2003) Year 12

13 Source regions have changed (2000 Census) Total (%) pre 1961 (%) Period of Immigration (%) (%) (%) (%) US Europe Asia Africa Carrib C&S Oceania & oth

14 Self-reported visible minority status (2000 Census) (% ) Immigrant Non-immigrant All Immigs pre Immigrant arrival cohort Immigration, Labour Market Outcomes & Economic Impacts 14

15 Earnings Gaps for Visible Minorities by Immigrant Status Gap Relative to Comparable Cdn Born Non-Vismin (%) Cdn Born Immigrants by Age at Immigration. <Age13 Age20-29 Age Sweetman - Issues in the Economics of Immigrantion 15

16 1.3 Related background issues Arrivals & Departures Public Administration Matters!! Look at earnings in a more complex framework By generation With and without adjusting for observable characteristics 16

17 ,000 Arrivals Count: Permanent Residents by Immigration Class 160,000 Family class 140,000 Economic immigrants Refugees Other immigrants 120, ,000 80,000 60,000 40,000 20, Number of People Source: CIC, Facts & Figures Year

18 Departures (Are immigrants staying?) Retention rates for males age at landing Source: Statistics Canada, Aydemir and Robinson,

19 1.4 Generational Population Shares (%) Immig 2 nd Gen 3 rd Gen Non- Vismin 3 rd Gen Vismin plus N US ,165 Cda ,054 Sample is aged 25-65, Cdn 2001 census, US CPS 3 rd Generation Vismin plus includes those who self identify as visible minorities, aboriginals and citizens at birth born outside of Canada Source: Aydemir and Sweetman (2008) 19

20 Years of School Compared to 3rd Generation US Canada Males Females Males Females imm<=age *** *** 1.081*** 0.668*** imm>=age *** *** 1.009*** 0.103*** 2nd Gen-Mom 0.251*** 0.155*** 0.857*** 0.717*** 2nd Gen-Dad 0.407*** 0.213*** 0.799*** 0.721*** 2nd Gen-Both 0.239*** *** 0.985*** Statistical controls for age. *** statistically differs domestic non-visible minority at 1% level. From Aydemir & Sweetman (2008). 20

21 Earnings differences across immigrant generations without & with statistical controls US Males Canada imm<=age *** *** 0.184*** imm>=age *** *** *** *** 2nd Gen-Mom *** * 2nd Gen-Dad *** *** 2nd Gen-Both *** *** Years of School 0.121*** 0.086*** Other controls Age only Yes Age only Yes *** statistically significant at 1, 5 & 10% levels Generation coefficients are difference from domestic non-visible minority From Aydemir & Sweetman (2008) 21

22 TABLE 3 COLUMN FREQUENCY % 1996 CANADIAN CENSUS - FEMALES Canadian Born Foreign Educated Immigrants Canadian Educated Immigrants Field College BA MA Othr College BA MA Othr College BA MA Othr Education Economics Other Engineering Medicine Source: 1996 Canadian Census. Dashes imply that the cell contents are suppressed for reasons of confidentiality.

23 Do not speak official language at home (2000 Census) (% ) Immigrant Non-immigrant All Immigs pre Immigrant arrival cohort Immigration, Labour Market Outcomes & Economic Impacts 24

24 Overall The big policy story is that there has been a remarkable decline in the labour market earnings of recent immigrant arrival cohorts in Canada & US The entry effect has increased dramatically The integration rate appears to have increased, but the catch-up time is much longer than previously This has lead to a substantial increase in poverty for new immigrants The decline appears to be larger when control for the observable characteristics of the immigrants (esp., age, education) AND, there are increasing differences 25

25 Proximate causes Change in mix of source countries/ language/ discrimination etc. (SEE LITERACY PLOTS) Decline (to about zero) in rate of return to pre-immigration labour market experience (larger in Canada) General decline in labour market outcomes for new labour market entrants IT bust of early 2000s that particularly affected immigrants 26

26 PART 2: Immigration s economic impact on the domestic economy Public and Research Discussion: Not much in Canada Major topic in US, UK, and recently in NZ Much US research Some international lessons, but, not possible to simply apply other country s results VERY CONTROVERSIAL!! SUMMARY: Most analysts suggest that immigration s impact on GDP/capita is probably positive, but quite small (and some say potentially negative) 27

27 2.1 Two traditional Canadian views differ on direction, but agree any impact is small Macdonald (Royal) Commission research overview said: The broad consensus is that high levels of immigration will increase aggregate variables such as labour force, investment and real gross expenditure, but cause real income per capita and real wages to decline [Marr and Percy, 1985, p 77] 28

28 The Economic Council of Canada (Swan et al. 1991) was more positive on some dimensions and concludes: In contrast to previous investigators in Canada and Australia, we do find that immigration enhances economic efficiency within the host community. The effect flows almost exclusively from the greater size of the population that immigration brings. the gross efficiency gains are positive but very small 29

29 What is at issue in economic context? Traditionally, economic impacts have been viewed as the value to those already in the country (Canadian born and previous immigrants) of new immigration Alternatively, (though not taken up here) could look at impact of immigration on new immigrants, source regions, or subsets of the population 30

30 2.2 Some key ideas 1) Economic vs. social costs/benefits 2) Aggregate (e.g., GDP) vs. individual (e.g., GDP/capita) costs/benefits 3) Economies of scale in production 4) Complementarities vs. substitutes in production Beneficial spillovers vs. displacement 5) Demographics (baby boom aging) 6) Fiscal/tax implications 7) Product market implications 8) International trade implications 9) Also other issues (e.g.,) Supply of physical capital Geographic distribution 31

31 2.2.1 Economic vs. Social/Cultural Impacts Note that an impact is a change from what would otherwise have been the case E.g., How much more are people earning because of new immigration? Distinct question from how much are people earning? Very difficult question to answer The focus today is on economic issues BUT, could alternatively look at, for example, social and/or cultural impacts 32

32 2.2.2 Absolute versus per person (or per capita) Confusion between the impact of immigration on the aggregate size of the economy, in contrast to the impact per capita Consider GDP (not ideal measure, but ) Immigration clearly impacts the total size of the economy GDP increases as more people are economically active However, most people care about GDP/capita That is, the standard of living Future immigration s impact on the standard of living of those already in the country is not well understood Probably small effect Economic impact is more than labour market earnings (eg price of goods) Distribution of different impacts across the population Individuals experience very different economic impacts 33

33 2.2.3 Economies of scale in production (key traditional economic benefit of immigration) IDEA: Holding the structure of the economy constant, what happens when its size is increased? Immigration is, of course, never a pure scale effect Most observers think constant returns to scale (CRS) is most reasonable today No benefit or harm from modest changes in size Increased global trade decreases need for local market Personally: For countries such as Canada and New Zealand, I suspect some economies of scale may exist If CRS, then implies no (or little) economic benefit from pure scale increases 34

34 2.2.4 Benefits from Compositional Changes Most observers think that any economic benefits derive from beneficially altering the composition of economic factors of production Want complementarities (as opposed to substitutes) in production (e.g.,) DIFFERENT Age distribution Different skill distribution (filling holes when/where shortages) Education, trade expertise, entrepreneurship But, stopped (now restarted) occupational targeting Physical/financial capital Want (net) positive externalities 35

35 If structure of new immigrant flows is too similar to existing stocks (where no shortages), then general equilibrium effects imply some displacement of existing resources may occur Concern about new factors of production reducing the value of existing factors, or changing their relative value E.g., a large inflow of skilled workers might require a large amount of complementary physical capital to be productive If physical capital not fast enough in adjusting, could alter short run capital/labour ratio and increase economic return to owners of physical capital relative to human capital (Beaudry and Green) 36

36 Displacement in the labour market Methodologically difficult question to address!! In-country geographic mobility may undo local effects so that immigration has national wage impacts Controversial Canada-US-Mexico study finds a 1% increase in the immigrant population depresses wages 0.3 to 0.4% (Aydemir & Borjas) But, uneven across skill groups New high skilled workers likely mostly substitute for existing high skilled workers (may complement low skilled workers) wage effects follow Recent immigrants more affected (closer substitutes) New domestic entrants into the labour market are, on average, also highly skilled 37

37 2.2.5 DEMOGRAPHICS - Immigration s effect on the demographic structure is very modest Immigration can, clearly, be quite effective at increasing the size of the population/ labour force Less effective at changing the composition/structure For Canada, even doubling current immigration rate would have relatively small impacts on the age distribution over long periods Could alter policy: younger immigrants Challenge to Policymakers and Pub Admin!! General point policy for big `wins` is risky 38

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39 2.2.6 Fiscal/Tax issues New immigrants inherit share of outstanding flow of costs (e.g., existing government debt), and also share of benefits (e.g., natural resource endowment) Not clear how this balances on the margin Taxes and transfers Lower immigrant earnings imply lower taxes and greater social transfers (Devoretz & Pivnenko) May be unexpected redistributional effects US taxpayers in states with high fractions of immigrants do not benefit, whereas those in states with few immigrants do (costs local; benefits national) Good area for future research 40

40 2.2.6 Product Market Effects Some argue that were it not for immigration: Entire industries would not exist (or would be dramatically smaller) Product market prices would be a lot higher for some goods But, unclear how this interacts with international trade 41

41 2.2.7 International Trade Head and Ries (1998) find that a 10% increase in immigration is associated with a 1% increase in source country exports, and a 3% increase in imports Various discussions about international competitiveness go in opposite directions Not clear how flows of workers and good counterbalance each other 42

42 3. Conclusion Immigration is part of the fabric of societies such as New Zealand and Canada Clear social/cultural benefits But, there is a need to be attentive to labour market outcomes Useful to distinguish between, for example, earnings, and earnings conditional on characteristics 43

43 The evidence at the moment does not currently appear to support there being either large economic benefits or costs to immigration However, the scant evidence on impacts is VERY controversial (& methodology matters A LOT) Small positive total economic benefits is probably the best summary at the moment There is likely a broad distribution of effects with different sets of individuals experiencing different impacts Given, for example, issues of complementarities and substitution, the details of immigration policy and the management of the immigration system likely have important ramifications for the economic impact on subpopulations and the nation as a whole 44