Saturday, December 6, 2008

TWO NATIONS UNITED IN SYMBIOTIC IDIOCY: The Fiscal Burden of Immigration in Canada and the US

The US National Research Council once posed a question that can be applied with equal urgency to the Canadian situation. Are immigrants an asset or a liability in the provision and financing of public services? The answer in both cases is, and has been the latter for some time. What is significant about the predicaments of the two countries is that again, in both cases, authoritative assessments have identified the immigrant selection process or the skill profile of newcomers as the decisive factor in driving up net immigration costs.

Edwin S. Rubenstein, who has written extensively and exhaustively on these matters, explains that mass immigration itself will accelerate a negative effect fiscal impact because “immigrants are poorer, pay less tax, and are more likely to reserve public benefits than natives. It follows that that federal government finances are adversely impacted by immigrants—and this will increase as the foreign-born share of the population increases.”

However, Rubenstein continues, “the quality of foreign entrants has deteriorated for decades. In 1960, for example, new immigrants were generally better educated, earned more, were less likely to be poor than natives. But by the end of the 20th century, new arrivals had two fewer years of education and earned one third less than natives.” Consequently an ever-increasing gap emerged between the public benefits immigrants earned and the taxes they paid.

Steven A. Camarota of the Centre for Immigration Studies concluded in his testimony before a House Committee on July 23, 2006 that “the primary reason why illegal aliens create a fiscal deficit is that an estimated 60% lack a high school diploma and another 20% have no education beyond high school.” Amnesty would solve not their fiscal drain.

Canadian problems issue from the same cause. In 1978 the Immigration Act was changed to favour family class and refugee claimants at the expense of more skilled categories. Charles Campbell, a veteran of the Immigration Appeal Board, wrote: “A 1995 Simon Fraser University study, based on the 1991 census, showed that those immigrants entering before 1981 had earnings equivalent to Canadian-born and the earnings of those arriving post-1980 averaged 60% or less of both pre-1980 immigrants and Canadian-born.”

Herbert Grubel, in his definitive “Immigration and the Welfare State” noted that four decades ago the typical male immigrant caught up to the income level of other Canadians within ten years, but today he would on average, achieve only 80% of the Canadian average. Poor skills, the progressivity of the personal income tax structure and the universality of access to government benefits add to a “net drain on net native taxpayers”. What is interesting is that those immigrants who arrived after 1975 and were surveyed in the censuses of 1990-2000 had higher rates of poverty than other Canadians.

Grubel tracked the 1990 immigrant cohort until 2002 and made some astonishing discoveries. Their economic performance was so poor that after a decade they still paid only 21.3% of the taxes that other Canadians paid. It was not they were absorbing more government services, it was just that they were not in a high enough tax bracket to reimburse other taxpayers for the services they were consuming. For example, they had no income earners in the top 10% echelon, that is, no one earning over $66,000. They paid 39% of the total taxes that other Canadians paid if sales taxes were factored in.

The shift in emphasis from the economic requirements of Canada to a desire on the part of prospective immigrants to re-unite with their families, as signaled by the Immigration Act of 1978, was motivated by both humanitarian and pragmatic considerations. It was thought in government circles that to best exploit that the Asian talent pool where family was so important, the carrot of reunification would lure the best and the brightest from that quarter. Unfortunately, it also lured an unskilled labour force on its family coattails that came to comprise about 80% of Canada’s immigrant mix. So much for the much vaunted Canadian “points” system, which was much compromised by this shift to the “family class”category and an open door refugee policy rife with abuse and fraud.

As Charles Campbell remarked, “family class immigrants and refugee claimants are accepted without consideration for their literacy, skills, age or ability to earn a living.” Kevin Michael Grace of Report Magazine is more colourful. “Family reunification resulted in an efficient Canadian policy of importing the worst and the dimmest: the unskilled and the illiterate in both French and English.” In fact financial journalist Diane Francis noted that 43% of the 600,000 immigrants admitted between 1998 and 2000 did not have a knowledge of either of the two official languages—a skill rather fundamental to financial success in the country.

This circumstance has consequences beyond an immediate fiscal burden. It affects the social security system. When an immigration policy becomes a de facto strategy to expand the pool of cheap labour under the cloak of injecting “skilled labour” the support foundation for the growing demographic of retirees is substantially weakened. American commentary suggests that it takes on average 2-3 workers on average salary to pay for the social security cheque of one retiree, but 5 Walmart employees or 9 workers at MacDonalds to deliver the same tax revenue required to pay for that same cheque. If supporting an aged population is going to be the rationale given for mass immigration, a claim so far demolished by logic and analysis in at least two countries, then importing people qualified to work only at “McJobs” is not the answer.

Of course, for the liberal-left, these are precisely the kind of people we should welcome to our shores, the poor and huddled masses, not the skilled entrepreneurial types who might generate employment or dare we hope, pay for their own keep. Barack Obama, articulated that dated sentiment well when he criticized the Canadian-style points system in the Senate. He said that “it fails to recognize the fundamental morality of uniting Americans with their family members. It also places a person’s job skills over his character and work ethic. How many of our forefathers would measure up under this points system? How many would have been turned back at Ellis Island?”

Unfortunately, character and work ethic alone, which most unskilled immigrants have in abundance, are unable to balance a budget. And skilled immigrants can also come equipped with character and a work ethic, as can workers trained here at home. If morality is to be the test of immigration, then one must question of the morality of displacing the jobs of native workers or suppressing their wages by the importation of low skilled foreign labour that could be performed by those within the country. Labour market economist George Borjas established that such foreign labour reduced the average earnings of native born American men by 4% between 1980 to 2000, and by 7.4% among those American-born men without a high school education.

In Canada, Statistics Canada revealed in a May 2007 report that while mass immigration had increased the labour pool 13% from 1990 to 2006, the wages of educated workers suffered the most, going down 7%. Why? Canada drew slightly more skilled immigrants proportionately into the country than America and therefore its native educated workforce faced more competition. Fiscal burdens are borne in different ways. Not only in deductions from your paycheque, but reductions in your paycheque from job competion, or worse still, a layoff or contract lapse when you have been undercut by outside forces. That can happen to you if whether you wear a white collar or a blue collar. Ask an IT worker who used to make a hundred grand until someone with an H-1B visa came along and took his job and got paid 60% for doing the same thing.

What are the fiscal burdens borne by taxpayers? According to Grubel, the 1990 immigrant cohort cost Canadian taxpayers $18.3 billion per year, or $554.50 per Canadian per year. To put this in perspective, according to Rubenstein’s analysis of the fiscal impact of US immigration, $30 billion was transferred by native American taxpayers to immigrants in 1997. Canadians are therefore spending five and one half times as much on immigration subsidy transfers as their American counterparts, or 16% of total federal spending---more than what was spent on health care!

It was Milton Friedman who warned that a choice had to made between open immigration and the welfare state. Take your pick. You can’t have both. Canada, however, continues to wear blinders, inviting unsustainable immigrant numbers while watching lines for surgical procedures and emergency care grow and periodically pumping more cash into a public system on life support. And still in denial while doctors send patients across the border and private clinics are hounded to death. It was the NDP, Canada’s left wing party, or its predecessor, the CCF, which pioneered socialized medicine. Now, janus-like, it is at once a proponent of increased immigration that would favour more family class entrants, and at the same time a fierce tribune of uncompromised universality in health care, oblivious to developments in social democratic jurisdictions overseas.

As Grubel writes, “the hitherto tolerant and thoroughly globalized Nordic countries are building higher dikes at their borders not against goods and services, but against people and poor countries.” They have had to practice global triage medicine, with nationals accorded exclusive treatment. Compassion cannot have an unlimited price tag. In Australia that price was found to be $250,000 in health charges for each migrant over 65 who was sponsored by younger family. American states can’t build walls at their borders but they can close hospitals and some have even turned their backs on legal immigrants. In 2003 Colorado became the first state to remove legal immigrants from Medicaid, saving $2.7 million, and in June of 2007 the Governor of Maryland proposed to save $7 million by cutting off Medicaid coverage for children and pregnant women who are legal, permanent residents.

In the scramble for scarce dollars, something must give, and it will be universality and socialist rhetoric. “Make the rich pay” is something that should have gone out when the Laffer Curve came in. Canadian social democrats, when they are elected, quietly park their speeches about corporate welfare, and realize that ultimately individuals pay taxes, and that rich individuals, and corporations, if jittery, find wings. And when they fly a lot of union pension funds and individual worker’s stock portfolios fly with them. It is hard to tax a moving target or one that yields less revenue with each increase in the marginal rate. So where does a centre-left government turn to next to finance its hungry welfare state bulging with immigrants? You guessed it, the old stand by, economic growth. And what does it turn to fuel that growth? The other old stand-by, immigration. So the cycle continues.

Conspicuously excluded from this comparative continental glance at the fiscal costs of immigration was a mention of the costs of illegal immigration. This was done for two reasons. The central reason was that the issue of illegal immigration for the United States is paramount and for Canada it is not. The United States may have anywhere between 12 to 20 million or more illegal aliens and Canada has but 100,000 to 200,000. Less than 2 million if our nation had America’s population base, a joke by their standards. Only 8% of migrants entering Canada every year are coming in illegally. In America it must be quadruple that. The blatantly abused Canadian refugee process is costing taxpayers well beyond a $100 million a year but the American taxpayer spent $338 billion in 2007 on illegal immigration, or $1119 per citizen. No comparisons can be made.

But the second rationale for ignoring illegal immigration here is to rectify American neglect of the problems of legal immigration. Legal immigration and the establishment of a large immigrant foothold provides a safe harbour and magnet for illegal immigrant traffic. It is quite doubtful that the first problem, that of out-of-control illegal immigration, can be addressed until legal immigration is either shut down by a moratorium or dramatically scaled back.

In summary, Canada and the United States are two countries united by symbiotic idiocy, equally duped by the rhetoric of a population pyramid scam, of the myth of unending immigrant-driven population growth being the key to prosperity. But if a durable social safety net for all is a central feature of this prosperity, it is imperiled by the composition of the immigrants whom these countries recruit. They are customized to benefit cheap labour employers and to bankrupt American hospitals and strain the Canadian medical system to the breaking point. Mass immigration of this kind will not generate the revenues to support our budgets.

But this summation must be qualified with this observation. Not all burdens are fiscal. Some are environmental. While it would have been of great relief to our health and education budgets, to mention two, if immigration intakes had stressed quality rather than quality, skilled rather than family class, it must be noted that the environment doesn’t care about selection criteria. Stoffman’s question “Who get’s in?” is less pressing than the question of how many we allow in. The ecological footprint of legal, skilled immigrants is just as severe as that of illegal, unskilled ones. And their burdens are substantially less unforgiving than fiscal burdens.

So why devote attention to the fiscal costs of immigration? Because it is those fiscal costs which drive governments, including centre-left governments which profess to have a “green” agenda, to finance faltering social programs like medicare with immigrant-fed economic growth. It is important to draw them and their supporters to the underlying cause of the fiscal crisis. Rather than point the finger at corporate sharks hoping to feast on the corpse of a dying medical system, Canadian leftists and liberals would do well to look at their own hypocritical support for family-class mass immigration policies which guarantee its demise.

Mass immigration or the welfare state.
Economic growth or the environment.

Too bad those choices weren’t clearly written on the ballot last election.

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