Labour Economics assignment 1
Chapter Eleven The Economics of Immigration
© 2012 McGraw-Hill Ryerson Ltd.
Prepared by Dr. Amy Peng
Ryerson University
Learning Objectives
Provide a descriptive profile of immigrants to Canada, including the following information: how many immigrants arrive each year, where do they come from, and where do they settle?
Describe Canada’s immigrant point system, and the role it plays in determining the admission of immigrants to Canada.
Use the supply and demand framework to evaluate the theoretical impact of immigration on the labour market, and use this model to discuss the empirical evidence of the impact of immigration.
Define the concept of “immigrant earnings assimilation,” and explain the pitfalls of using a single cross-section data set to estimate the rate of assimilation.
Sketch a simple economic model of migration, including an answer to the question, when should someone move countries?
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Profile of Immigration to Canada
Until the mid-1980s overall immigration levels fluctuated considerably
200,000 immigrants per year
Per-capita immigration levels are slightly lower
Source regions have changed dramatically
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Profile of Immigration to Canada
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Profile of Immigration to Canada
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Profile of Immigration to Canada
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The Policy Environment
Two “levers”
Number of immigrants
Who is admitted
What the policymakers are trying to achieve?
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Immigration Policy
Assume policy makers are attempting to maximize “national welfare”
Admitting immigrants to alleviate specific skill shortages or contributing to economic growth
Family reunification
Sanctuary from political persecution
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Two Classes
Assessed
Evaluated on the basis of their likely contribution and success in Canadian labour market
Independent immigrants
Point system
Non-assessed
Family and refugee classes
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Canada’s Immigration Point System, 2011
Point system to be used in the skilled worker class has following criteria:
Work experience: Individuals must have at least one year of recent full-time work experience in a broadly defined skilled occupation.
Minimum funds: Individuals must demonstrate sufficient “start-up” funds to support themselves on arrival in Canada.
Minimum score: Individuals need to obtain a minimum score (67 out of 100) according to six selection criteria: education (25), official language (24), work experience (21), age (10), arranged employment in Canada (10).
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The Policy Environment
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The Impact of Immigration on Employment and Wages
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D0
S0
N
N0
W0
W
S1
N1
W1
Impact on Supply Only
D0
S0
N
N0
W0,
W
Impact on Supply and Demand
S1
N1
W1
D1
Effects of Immigration
Positive Effects
Fill markets where there is already a shortage
Increase derived demand
Alter trade patterns
Invest
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Estimating the Effects of Immigration
The difficulties of estimating the effect of immigration
Exploit cross-city variation in immigration
Exploit “natural experiments”
Combining the “cross city” approach and the “natural experiments” approach.
There is no direct evidence on whether immigration has an adverse impact on labour market.
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Economic Assimilation
Assimilate in terms of hours working
Starting out at a lower level than a native born individual
Expect wages to increase over time
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Economic Assimilation Profile
Initially the immigrant may suffer an earning penalty (entry effect)
As the immigrant ages, his/her earnings should also rise
If assimilation is quick
disparity offset by a short catch-up period
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Hypothetical Assimilation Profile
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Immigration
Native-born
Earnings
20
(YSM = 0)
T
Age
65
(YSM = 45)
Entry
effect
Measuring Earning Assimilation: Disentangling Cohort and Assimilation Effects
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The difference in actual earning growth is given by BD
Measuring Earning Assimilation: Disentangling Cohort and Assimilation Effects
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Genuine earnings growth of IM8690 is given by BF, but the difference in
earnings between IM8690 and IM9195 is BD. Part of the difference is due to the lower starting point, or cohort entry effect of IM9195.
Annual Earnings by Immigrant Cohort, 1995 and 2000
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Empirical Evidence on Economic Assimilation
The entry effect is generally worsening over time.
Immigrants are starting out further behind the native born.
The return to a year of education (and experience) is much lower for immigrants educated outside Canada.
The assimilation rates are uniformly too low for the average earnings of any cohort of immigrants to catch up to the native born
Women tend to suffer a slightly smaller earnings entry effect, but the general patterns are very similar
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Immigrant Outcomes and Public Policy
Canadian Point System vs. U.S. Family Reunification
Point system reduces admissions from less developed countries
Has an impact on tilting immigrant selection towards more skilled groups
Independent immigrants fare better than family class and refugee immigrants
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Impact of Immigration on Source Countries
Brain Drain
Less-developed countries may lose their most skilled labour to more-developed countries
Home countries bear the cost of education and skilled emigrant reaps the benefits
Possible remedies
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Summary
Profile of Immigration to Canada
Two policy instruments of the Canadian government to control immigration
Target number
Mix of assessed and non-assessed classes
The potential impact of new immigrants on the labour market
Assimilation profiles of immigrants
Emigration and “brain drain”
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