China and Canada: Economic linkages, migration and the Canadian labour market Canada-China Human Capital Dialogue Ottawa November 28, 2012
Outline Canada-China economic linkages Key global labour market drivers Migration and the Canadian labour market Chinese migrants to Canada Migration flows Chinese immigrants: educational attainment Chinese immigrants: labour market outcomes Looking forward 2
Canada-China economic linkages 3
Trade in Billions (CAD) Growing linkages between Canada and China People: 4% of Canadians (1.35M people) are of Chinese birth or ethnic background; China is the largest source of migrants to Canada. Trade: China is now Canada s 2 nd largest trading partner, after only the US. Investment: China (PRC) is the 9 th largest source of foreign direct investment in Canada. 60.0 Canada's trade with China (2002-2011) 50.0 40.0 30.0 Total Imports Total Exports 20.0 10.0 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 *Includes both Hong Kong and the People s Republic of China Source: Industry Canada, Statistics Canada, Conference Board of Canada 4
Government of Canada has signaled that relations with China are a priority Our Government continues to strengthen its ties with China. Our Government will continue to actively engage with China to explore how to best enhance our growing bilateral trade and economic relations. The potential for increased Canadian investment in China is significant given that China is expected to become the world s largest economy by 2020. In February 2012, Canada announced that after 18 years of negotiation Canada and China had concluded a Foreign Investment Promotion and Protection Agreement. This landmark agreement will facilitate investment flows between Canada and China by providing a more stable and secure environment for investors on both sides of the Pacific. Budget 2012 5
Key global labour market drivers 6
Demographic change Canada and China have both now passed the peak of their demographic dividend the rise in working-age share of population that contributed significantly to growth in living standards in both countries. Impending declines in the working-age share of both countries populations will exert downward pressure on their aggregate participation rates, requiring accelerated productivity growth to sustain living standards. In 2010, the working-age (15-64) proportion of the two countries populations were: 74.5% for China (one of the highest proportions); and 69.4% for Canada. 3 Ratio of working-age to non-working age population 2.5 2 1.5 1 1950 1975 2000 2025 2050 Canada China Sources: David Bloom, World Population Prospects 2008; World Bank, World Development Report 2013: Jobs (2012), 7
Globalization and the shift to emerging economies Global economic linkages are growing rapidly, including global flows of goods and services, investment, and people, resulting in a more integrated global labour market. The global economic centre of gravity has shifted toward emerging economies, which now account for almost all global growth; China has led the world in economic growth. Growth in emerging market economies has generated upward pressure on commodity prices, driving a westward shift in the Canadian economy. Growth of real GDP per capita Emerging Markets and Developing Economies Advanced Economies Sources: IMF, World Economic Outlook Database 8
Globalization: growing international migration flows Globally, there are 214 M international migrants, of whom 90M are workers. Canada is one of the largest immigrant-receiving countries in the world; immigrants represented 21.3% of population in 2010 (versus 21% in Australia, 13.5% in US). China receives few immigrants; they represented just 0.1% of the population in 2010. Emigrants represent 4.2% of the Canadian population and 0.6% of the Chinese population; Canada is a net importer of people, China a net exporter. Immigrants as percentage of labour force Source: World Bank, World Development Report 2013: Jobs (2012) 9
Employment Share (%) Employment Growth (%) Technological change and demand for higher skills Technological change consistently linked to higher job skill requirements worldwide. In advanced economies, employment growth has been strongest in highly-skilled jobs. In Canada, job growth in occupations requiring a university degree has far outpaced growth in other occupations, resulting in a rising labour market share of highly skilled jobs. 40 Employment share and employment growth by job skill level, Employment share and Canada, employment 1990-2011 growth (1991-2011) 80 35 74 70 30 60 25 50 20 40 1991 share 15 10 20 30 29 26 30 20 2011 share % growth 5 10 0 Management occupations Occupations requiring a university degree Occupations requiring a college diploma Occupations requiring a high school certificate Occupations requiring on-the-job training 0 Source: Labour Force Survey, calculations by HRSDC. 10
Millions Skills supply: global educational attainment has risen rapidly Rates of postsecondary education (PSE) attainment have doubled in advanced economies and more than doubled in developing economies over the past 30 years. Worldwide, the supply of working-age people with completed PSE has risen by 500M, with 60% of this increase coming from developing economies. China has prioritized increases in educational attainment, raising average years of schooling and generating rapid growth in the number of Chinese PSE graduates. Graduates from postsecondary institutions, China 7 6 5 4 3 2 1 - Source: China Statistics Yearbook (2010) 1980 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 11
And China is expected to become a leading source of postsecondary graduates While China will be eclipsed as the world s leading source of low-cost labour, it will assume a new and potentially more important role as the largest supplier of college educated workers to the global labour force. (McKinsey 2012) Projected sources of global supply of new workers with postsecondary education, 2010-30 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 10% 27% 30% 18% 14% Young Developing India China Young Middle-Income Advanced economies Source: McKinsey Global Institute 2012 12
Canadian postsecondary attainment levels are high and rising Canada is a top performer in terms of overall PSE attainment; 51% of the adult population (25-64 years old) had a postsecondary degree or diploma in 2010. Canada s college participation is particularly high. Percentage of population with tertiary education, Canada and OECD Average, 1997-2010 However, while Canadian university enrolment rates continue to rise, especially among women, Canada s university attainment ranking has slipped as other countries enrolment rates have risen even faster. Source: OECD Education at a Glance, 2012. 13
However, demand for highly skilled workers may be rising faster than supply Internationally, one recent projection indicates that the global supply of workers with PSE will be inadequate and there will be an oversupply of workers without PSE by 2020. Canadian and US evidence show rising earnings premia for PSE, suggesting that domestic growth in demand for highly educated individuals may be exceeding growth in supply, especially in STEM fields (Science, Technology, Engineering and Mathematics). Median earnings premia of Canadian-born men with bachelor s degrees, ages 25-64, in labour force Sources: McKinsey 2012; Congressional Budget Office 2011; Census Canada 2006, HRSDC calculations 14
Migration and the Canadian labour market 15
Immigration represents a significant source of future labour supply As the rate of growth of the domestic labour force slows, immigrants represent a rapidly increasing contribution to net labour force growth. Within five years, virtually all of Canada s net labour force growth will come from immigration; although school leavers will continue to account for most (82%) new labour market entrants. New immigrants and Canadians in the labour force (15+, non-student) 1996-2020 Thousands Projection Source: HRSDC, 2011 COPS Reference Scenario. 16
Canada is a destination for highly skilled immigrants Canada experiences net in-migration of highly skilled immigrants. Selection criteria favouring highly educated immigrants have resulted in a very qualified pool of recent immigrants; Canada s immigrants are among the most highly educated immigrants internationally. China currently experiences net out-migration of highly skilled migrants. Highly-skilled immigration, % of highly skilled labour force Source: World Bank, 2013 17
Recent immigrants are significantly more educated than Canadian-born persons Recent immigrants (5 years or less) are more highly educated than Canadian young people, the comparator group of new labour market entrants: 49% of recent immigrants (ages 25-54) in the labour force have a university degree, compared to just 31% of youth 30-34, and 21% of prime-age Canadian-born persons. 100% 90% 80% 70% 60% Distribution of labour force groups by educational attainment, 2011 19 30 49% 9 22 31% University: graduate degree University: undergraduate degree 50% 40% 30% 20% 10% 0% 41 22 6 21 22 9 Very recent immigrants, 5 years or less Youth 30-34 Post-secondary certificate or diploma HS and some PSE Less than HS Source: Labour Force Survey 18
and so they contribute disproportionately to Canada s human capital Immigrants account for 20% of new labour market entrants, but represent: 27% of new entrants with undergraduate degrees; 36% of new entrants with graduate degrees. In certain fields, recent immigrants are even more highly represented. Among persons with Science, Technology, Engineering and Mathematics (STEM) credentials, immigrants account for: 21% of those with college credentials, 44% of university undergraduate degrees, and 60% of STEM university graduate level degrees. Research indicates that immigrants also contribute disproportionately in the areas of entrepreneurship and innovation (Conference Board, Kaufman Foundation). 100% 80% 60% 40% 20% 0% Percentage distribution of new labour market entrants by educational attainment, and by immigrant / school leaver status (2012) 15 13 85 87 Less than Postsecondary Education Post-secondary certificate or diploma 27 36 73 64 Undergraduate degree Graduate degree New immigrants Youth / school leavers Source: Labour Force Survey 19
% by which earnings exceed HS graduates But there is a widening earnings gap between immigrants and Canadian-born In particular, the premium for immigrants postsecondary education has been falling over time, whereas the premium for Canadian-born PSE has risen. Research points to a range of explanations, including: lack of official language fluency; negative effects of high unemployment rates at the time of arrival in Canada. Median Median earnings earnings premia premiums of men of men with with bachelor s bachelor's degrees by by immigration status, status, ages aged 25-64, in labour force force 60% 50% 40% Canadian-born Total 30% Immigrants 20% 10% 0% 1985 1990 1995 2000 2005 Source: Census, HRSDC calculations 20
Foreign credentials are often discounted by the Canadian labour market Immigrants with Canadian PSE credentials have, in general, labour market outcomes far superior to those with credentials from outside Canada. Source: Census 2006. 21
Chinese migrants to Canada: Migration flows 22
China is the top country of origin overall for migrants to Canada In 2011, migrants from China (PRC) accounted for: 22 % of all foreign students (1 st among source countries); 11 % of all permanent residents (2 nd ); and 1.4 % of all temporary foreign workers(14 th ). 40000 Migrants to Canada by category and source country, 2011 35000 30000 25000 20000 Permanent Residents Students 15000 10000 Temporary Foreign Workers 5000 53,092 48,148 43,873 43,282 26,712 18,294 0 China (PRC) US India Philippines France UK Source: CIC Facts and Figures 23
A rising proportion of Chinese migrants to Canada are students China accounted for 22,000 of 98,000 foreign students entering Canada in 2011. Overall foreign student entries to Canada have risen, from 66,000 in 2004. 80000 Peoples Republic of China Migration to Canada by Category 70000 60000 Foreign Students (Flow) 50000 TFW (Flow) 40000 30000 Permanent Residents (Flow) 20000 TFW (Stock) 10000 Foreign Students (Stock) 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: CIC Facts and Figures 24
Chinese immigrants: Educational attainment 25
Chinese immigrants are, on average, highly educated Over half (56%) of Chinese-born persons in Canada ages 25-54 have a university degree. 60.0% Distribution of Chinese-born by educational attainment, ages 25-54 56% 50.0% 40.0% 42% 30.0% 20.0% 21% 19% 17% 10.0% 12% 11% 8% 11% 3% 0.0% No certificate, diploma or degree High school certificate or equivalent Apprenticeship or trades certificate or diploma College, CEGEP or other non-university certificate or diploma University certificate or degree Canada Chinese Born *Chinese Immigrants compared with total population Source: 2006 Census 26
Successive cohorts of Chinese immigrants have been increasingly highly educated Nearly three quarters of recent immigrants from China (25-54), have a university degree. 80.0% Distribution of Chinese-born by educational attainment and period of immigration, ages 25-54 70.0% 60.0% University certificate or degree 50.0% 40.0% 30.0% 20.0% 10.0% College, CEGEP or other non-university certificate or diploma Apprenticeship or trades certificate or diploma High school certificate or equivalent No certificate, diploma or degree 0.0% Before 1991 1991 to 1995 1996 to 2000 2001 to 2006 Period of Immigration Sources: Census 2006 27
Participation Rate (%) Young Chinese immigrants have high levels of PSE participation Young Chinese immigrants are much more likely than other young immigrants to attend university, with attendance rates of 88%. Participation rate of young immigrants (age 21) in university, by area/country of origin 100 90 80 70 60 50 40 30 20 10 0 China Other Asia Africa Eastern and Southern Europe Anglosphere Western and Northern Europe Other East and South- East Asia Americas (except USA) Source: Ross Finnie and Richard Mueller, 2010 28
Proportion (%) and 2 nd generation Chinese-Canadians also outperform other groups 2 nd generation Chinese-Canadians are significantly more likely to have a university education than other groups. 70 Proportion of second generation with a university degree by source country of parents, individuals ages 25-43 60 50 40 30 20 10 0 Source: Making it in Canada Sweetman and Picot, Census 2006 29
Chinese immigrants: Labour market outcomes 30
Unemployment Rate (%) However, high educational attainment is not always reflected in labour market indicators 12 Unemployment rate by country/area of birth, ages 25-54 10 8 6 4 2 0 Philippines United States of America Europe Hong Kong Canadian Born India South America China, People's Republic of Central Asia and the Middle East Africa Source: Census 2006 31
and high levels of educational attainment do not necessarily result in high skill jobs Skill level of occupation by location of postsecondary study Source: Census 2006, StatsCan Employment outcomes of PSE immigrants 32
Employment Rate (%) Unemployment Rate (%) Labour market performance improves with duration of residence in Canada Labour market indicators for Chinese-born by period of entry, ages 25-54 90 Employment rate Unemployment rate 14 80 12 70 60 10 50 8 40 6 30 4 20 10 2 0 Chinese (Total) Before 1991 1991 to 1995 1996 to 2000 2001 to 2006 0 Source: Census 2006 33
Looking forward 34
Key issues affecting Canada-China linkages and human capital flows Trade Agreement to proceed to exploratory discussions on deepening trade and economic relations; implications for migration Temporary entry is a key part of all trade agreements Investment Foreign Investment Promotion and Protection Agreement (2012) Natural resources, manufacturing are key sectors Immigration policy Articulated Government of Canada goal of better aligning immigration policy with labour market needs Changes to Federal Skilled Worker Program (greater weight for official language ability, Canadian experience) Recent federal-provincial agreement to implement Expression of Interest model Canadian Experience Class (expedited, more flexible pathway to permanent residence is expected to assist international students) Other migration policies Foreign students (recent Advisory Panel recommendation that foreign student numbers in Canada be doubled by 2022) International youth exchanges Temporary foreign workers 35
Human capital investments are key Investments in human capital, and ensuring that existing human capital is fully utilized, are central to growth in productivity and living standards in all countries. Advanced economies will succeed on the strength and quality of their human capital. In fact, a government could choose to make human capital central to its economic development strategy, on the theory that where the best talent resides, innovation will thrive and investment capital will flow to support all kinds of economic activity. McKinsey Global Institute, Help wanted: The future of work in advanced economies, 2012 36