Economic Impacts of Immigrants in the Toronto CMA: A Tax-Benefit Analysis

1. Economic Impacts of Immigrants in the Toronto CMA: A Tax-Benefit Analysis • The context and research questions • Data sources • Profile of Toronto’s immigrants • Economic impacts analysis • Concluding discussions

2. Objectives of Canada’s Immigration Program • Demographic • Economic • Social • Humanitarian.

3. Economic consequences • immigrants’ economic impacts on the host society • the well-being of immigrants

4. Three Major Changes in Canada’s Immigration Policy since Early 1980s. • More newcomers were accepted from non-traditional source countries than from the traditional source areas. • Emphasis was shifted from independent immigrants to family reunification and business immigrants. • After 1978, Canada switched to a policy of bringing in substantial numbers of refugees each year, rather than only at the time of special world events.

5. Myths about Immigrants in the U.S. • Many recent immigrants are relatively unskilled. The assimilation experience is not sufficient for the recent immigrants to overcome their initial economic disadvantage. Therefore, they are more likely to participate in the welfare system and form a permanent underclass, further straining the provision of public services and leading to significant increases in the cost of maintaining the welfare state (Borjas, 1990; Borjas & Hilton, 1996; Thom, 1997). • Immigrants originating from some countries are more prone to welfare than those from other countries; and female-headed households are more likely to be welfare recipients than male-headed households (Borjas, 1990). • While family-reunification immigrants may also have skills, it is not clear whether their skills are wanted in the US economy because they are not assessed by the same criteria as for independent immigrants. If their skills do not match those deemed desirable, they are likely to become economic burdens (Brimelow, 1995). • Refugees are entitled to welfare immediately on arrival. Even after 20 years, refugees are still more likely to be on welfare than native-born Americans (Brimelow, 1995).

6. Forms of contributions and Burdens Contributions: • various types of tax paid • participation in economic production • investment in businesses • consumption of goods and services. Burdens • welfare/UI benefits • cost of public money for language training, job skills training, education of immigrant children, and medicare.

7. Research Questions • Do recent immigrants as a whole make positive net economic contributions to Canada’s treasury? • Are family-reunification immigrants (including assisted relatives) more likely to be on welfare support? or do they also make positive net contributions? • Do business immigrants indeed make higher net contributions than all other classes of immigrants? • Are refugees lifetime paupers (as some U.S. studies suggest)? • If immigrants from different countries of origin have significantly different economic impacts, is it simply because of their difference in race/ethnicity, or can their varying abilities to contribute be explained by the differential human capital they brought with them to Canada? • As immigrants integrate and assimilate in the host society, do they move to the level of economic contribution displayed by the average Canadian?

8. Why Choosing Toronto CMA for the Case Study • it is the largest metropolitan city in Canada and has the highest proportion of immigrants relative to its population size • About 40% of all immigrants who came to Canada landed in the Toronto CMA • Toronto CMA attracts a more diverse immigrant mix due to its employment opportunities, the availability of a variety of social assistance infrastructures, and its existing immigrant communities. • Toronto’s local economy is more sensitive to economic impacts of immigrants than is the national economy.

9. Data and Methodology (1) Data source -- IMDB: • LIDS • Age • Gender • family status • country of last permanent residence • level of education • immigration class • and year of landing. • Tax returns • total income • employment income • self-employment income • investment income • federal income tax • social welfare benefit • EI benefit • number of immigrants who reported each type of income, tax and benefit

10. Data and Methodology (2) Method of data analysis: Balance-sheet approach Indicators: • per capita income tax contributions • per capita welfare benefit receipts • per capita UI benefit receipts • tax-benefit ratios • tax-benefit differences. • % of immigrants reporting income tax (15 to 80 year old) • welfare dependency rate (15 to 80 year old) • UI usage rate (15 to 65 years old)

11. Limitations of This Study • it does not include all forms of contributions and burdens; • the taxation data are for one tax year only (1985). The study results may not accurately reflect immigrants’ economic behaviours over time.

12. Figure 1 One Million Immigrants Landed in Toronto CMA between 1980-1995

13. Table 1. Composition of Toronto’s Immigrants by World Region of Origin and Landing Period, 1980-1995 (in percentage)

14. Table 2. Composition of Toronto’s Immigrants by Immigration Class and World Region of Origin, 1980-1995 (in percentage)

15. Table 3. Composition of Toronto’s Immigrants by Education and World Region of Origin, 1980-1995 ( in percentage)

16. Table 4. Income, Income Tax, and Benefits for Immigrants in Toronto CMA and for the National Population of Canada, 1995 (adjusted by age)

17. Table 5 : Economic Impacts of Immigrants in Toronto CMA by Immigration Class, 1995(figures in brackets are for principal applicants)

18. Table 6: Economic Impacts of Immigrants in the Toronto CMA by Level of Education, 1995

19. Table 7: Economic Impacts of Immigrants in the Toronto CMA by World Regions of Last Permanent Residence, 1995

20. Table 8. Economic Impacts of Immigrants in the Toronto CMA by Year of Landing, 1995(figures in brackets are for refugees)

21. Research Questions • Do recent immigrants as a whole make positive net economic contributions to Canada’s treasury? • Are family-reunification immigrants (including assisted relatives) more likely to be on welfare support? or do they also make positive net contributions? • Do business immigrants indeed make higher net contributions than all other classes of immigrants? • Are refugees lifetime paupers (as some U.S. studies suggest)? • If immigrants from different countries of origin have significantly different economic impacts, is it simply because of their difference in race/ethnicity, or can their varying abilities to contribute be explained by the differential human capital they brought with them to Canada? • As immigrants integrate and assimilate in the host society, do they move to the level of economic contribution displayed by the average Canadian?

22. Conclusions • Toronto’s immigrants (admitted between 1980 and 1995) did not obtain social assistance in excess of the income tax they pay. In other words, there is no evidence that these immigrants are an economic drain on the host society. Instead, they as a whole make positive net contributions to both Canada’s and Ontario’s treasuries. • Toronto’s immigrants in general have not been able to contribute to the governments’ coffers at the same level as the average Canadian does. Since a low T-B ratio is usually caused by low income and insecure employment, it is also indicative that Toronto’s immigrants have not achieved levels of economic performance and security comparable to those of the native born Canadians.

23. Conclusions 3. there remain important internal differences. • The economic immigrants have the highest ability to pay income tax, especially the independent immigrants This proves that the point system has been working well for the economic well-being of Canada. • The retirees are also able to make a substantial positive net contribution because they pay income taxes but receive (or are eligible for) little social assistance. • Entrepreneurs and investors actually paid less than the average immigrants do; and the high UI usage rate of investors (including their spouses and dependents) is also unexpected.

24. Conclusions • immigrants admitted for family reunification, especially assisted relatives, make net positive contributions to governments’ coffers, though their T-B ratio is lower than that for economic immigrants. So, they are not economic burdens to Canada and Toronto, as many have perceived. • The only immigrants who received more benefits than the amount of taxes they paid are refugees and their dependents. However, refugees do not seem to be life-time paupers, as those who have been in Canada for more than 10 year do pay more taxes than they collect benefit (albeit with a marginally greater-than-one T-B ratio). With refugees and their dependents accounting for only 7% of the immigrant population, the cost of providing benefits to them can be adequately offset by the positive income tax transfers from other immigrants in the Toronto CMA, or even offset by positive tax transfers from immigrants from non-traditional source areas only (see Tables 5 and 7).

25. Conclusions • The differences in economic impacts between immigrants from the traditional source areas and the rest of the world cannot be fully explained by higher English or French proficiency in the former group. Many immigrants from the Caribbean and African countries do speak fluent English or French, but their levels of economic contribution are lower than those of the immigrants from the traditional source areas.Their significantly different economic impacts are largely because of the differential human capital they brought with them to Canada.

26. Conclusions 7. It is neither possible nor desirable to accept immigrants only from the traditional source countries, and to accept only economic immigrants who possess the most human capital • the traditional source areas themselves would not meet Canada’s need for immigrants to shore up its population growth. • to maximize economic contributions is only one of the four government objectives. • it would be unfair for Canada to select only the best immigrants from the already talent- and capital-deprived countries, thus exacerbating the brain-drain problem in thosecountries.

27. Future Studies and Policy Implications • More empirical studies of immigrants’ economic impacts are needed for future changes to Canada’s immigration program. They should include as many forms of contributions and burdens as possible and balanced program goals. • On the basis of empirical studies, a critical contribution-benefit ratio acceptable to Canada can be developed and an appropriate mix of immigrants can then be determined to achieve the ratio. • The economic impacts of immigrants should also be periodically monitored against the critical contribution-benefit ratio and adjustment to immigrant mix be made if necessary. • More efforts and political willingness are needed to identify and remove all social and institutional barriers that obstruct immigrants from making economic contribution to their full ability. • A high degree of safeguards and monitoring is also needed to avoid abuse and misuse of Canada’s business immigrant program. • Because all Canadians (including newcomers) have equal entitlement to normal family life, it should not be made more difficult for extended family members to apply for immigrating to Canada. • Canada should screen both external applicants and internal refugee claimants carefully to select and accept only genuine refugees. This is to the best interests of both Canada and the genuine refugees.