Canada’s newest political party, the People’s Party of Canada
(PPC), has begun a Trump-like immigration reform amid the upcoming Canadian
election. The PPC leader, Maxime Bernier, is spearheading these efforts, claiming that immigration has negative impacts on the economy and on its citizens. This is an interesting
take on immigration given that a recent poll suggested that a majority of Canadians
actually supported immigration. Bernier backs his proposed policy suggesting
that immigrants are putting financial burdens on non-immigrant Canadians. It
was shown, however, in the latest 2016 census, that there was no evidence of
immigrants receiving more benefits, paying less taxes, or taking jobs from
non-immigrants. Immigrants, with a higher level of education than other Canadians,
in most cases, are earning less than their non-immigrant counterparts. This is
a sad truth that has appeared in Canada’s labor market often.
With this
background, let’s look at how immigration can help the economy in the long-run
model. In the long-run, labor and capital are mobile across sectors. Therefore,
with an increase in immigration, the labor with go to work in the labor-intensive
industry. Since capital is also mobile, some capital will be shifted from the capital-intensive
industry to the labor-intensive industry to keep the capital-labor ratio
constant, as it is in the long-run. In Canada, the immigrants are more likely
to move to spots where labor is most needed, since the industries are often
regionally concentrated. With this move it is found that, in Canada, immigrants
are doing jobs that are complement to, rather than substitute to, those of non-immigrants.
This fact is another suggesting factor that the immigration can increase wages for
non-immigrant workers. A graph, presented in the article, even shows evidence that the mobility of immigrants per capita to areas in Canada over the last 10 years has a direct relationship with higher wages for non-immigrant Canadians. Even if we look at this in the short run, though wages
may decrease at first due to an increased labor-capital ratio, returns for the
owners of capital will be greater because the marginal product of capital is
higher.
In conclusion,
it is important for politicians to understand the economic benefits of
immigration. Granted, there can be situations in which immigration can hurt our
wages when immigrants and non-immigrants are competing for substitute jobs. U.S.
President Donald Trump praises the approach being taken by the PPC, as they
look to take immigrants on economic class rather than family class. This is already
being done in Canada with over half of immigrants coming from higher economic
class, which has shown positive economic effects as of now. It is evident that
the PPC’s policy reform is not one of economic backing and is a political
scheme that will most likely not play out well for Maxime Bernier and his
supporters.
Matt,
ReplyDeleteI agree with your overall analysis of the situation. When looking at the long run, immigrants will help the economy. The capital labor ratio will stay equal and the benefits will grow. I do question the effects of the short run. Especially when thinking about in in terms of allowing immigration by economic class rather than family class. I am curious though about how economic class immigration works. If there is some sort of bias that only allows people who make X amount in, could this lead to an effect on the upper or middle class? What is the criteria? If only allowing doctors in, this would kill their short run income and I do not think it would fly by any means. However, if using an economic based immigration system was balanced and only allowed so many from each class could this help combat the short term wage loss? I would think it could as you would have less people per class, therefore reducing the amount of wage drop. Not sure if any of what I said is correct, but it is worth thinking about.
I totally agree with your argument! I think what's interesting is how politicians try to manipulate data and the truth to make people "buy" their story. For example, in this situation, Bernier could isolate the negative aspects of each scenario (long-run and short-run) and claim that immigration has negative effects overall; he would do say by saying that immigration lowers wages (which is true in the short-run) and also by saying that immigration doesn't make the economy better off/grow (basing his point off of the fact that everything is constant in the long-run). These points would be true, but they don't tell the whole story, which is exactly what politicians want... to make themselves look better to uneducated voters.
ReplyDeleteI agree with your analysis of the situation in Canada. Politicians will always try to sell their side and make it seem as if their viewpoint couldn't possibly be wrong. However, with a little research, people can see that immigration has a positive effect in the long run. The thing that the PPC gets away with though is the fact that immigration in the short run lowers wages. Most people see this and think that if this happens in the short run, why wouldn't it happen in the long run? Many voters are uneducated and therefore will listen to almost anything politicians say.
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