Prof studies macroeconomic impact of immigration on Canada

The last time anyone took a focused macroeconomic look at the impact immigration is having on Canada was in 1992. Since then, the economic structure of the country has changed radically, says York Professor Tony Fang. Globalization has increased and technology has advanced dramatically. It’s time, he says, someone took another look at how immigration is impacting the economy and the demographics of this country.

Recently awarded a Social Sciences & Humanities Research Council of Canada grant to conduct his study, “The Macroeconomic Impacts of Canadian Immigration: An Empirical Analysis Using the FOCUS Model”, developed and maintained at the Institute for Policy Analysis of the University of Toronto, Fang and his team will study the impacts of large-scale immigration on the Canadian economy.

As lead researcher, Fang says they will take several factors into account when looking at the immigration impact on economic and demographic indicators, including economic growth, per capita income, labour productivity, earnings, unemployment and inflation. “You can’t just look at one factor at a time,” he says. Many of the factors, such as interest rates, wages, inflation, monetary economic policy and standard of living, are all connected and interdependent. Even residential construction is affected by immigration.

Left: Tony Fang

A series of simulations will be conducted by Fang, who teaches human resources management in the School of Administrative Studies in the Atkinson Faculty of Liberal & Professional Studies; York economics faculty member Steven Wald; Professor Morley Gunderson of the University of Toronto’s Centre for Industrial Relations and Human Resources; and director of the Policy & Economic Analysis Program at the University of Toronto, Professor Peter Dungan.

The simulations will track the path of the Canadian economy over the next decade to determine what the impact would be if immigration was to double from its current level and if immigration ceased to contribute to population change. Statistics Canada data reveals that from 2001 to 2006, immigrants accounted for nearly 70 per cent of population change. In addition, some of the model simulations will also incorporate labour market differences between migrants and those born in Canada to better capture the effect of large-scale immigration on Canadian-born workers.

“Some argue that the economy has moved into a more knowledge-based or skill-based direction, which may place a lot of emphasis on education, skills and knowledge as the driving force for productivity, for standard of living, for innovation and creativity,” says Fang.

A look at per capita income will provide an assessment of the net impact of immigration, while labour productivity, as a key driver of per capita income, will also yield important insights, he says.

“The major source of labour productivity increase will come from creativity and innovation, and therefore it is important for us to understand when we actually take all these immigrants into a country like Canada, are we actually making good use of their skills and knowledge. It’s really an issue about utilization of their education, skills, knowledge and so on. So it’s important to understand the relative costs and benefits to large-scale immigration.”

The number of economic indicators examined in this study will provide information for policy-makers at all levels of government to get a handle on the costs and benefits associated with large-scale immigration so they can make informed decisions around immigration levels and immigrant selection. “This is especially important because sometimes the responsibilities are split among the different levels of governments. For example, the federal government is responsible for selecting potential immigrants. The provincial and municipal governments are in a more legitimate position to help immigrants settle in their destination of choice and therefore there is a lot of need for coordination in order to make the immigrant experience more successful.”

The results of the research will also provide helpful insights for academics, human resource management professionals and immigrant settlement services.

Until now, Canada has not made much use of the macroeconomic model, but that is in stark contrast to the experience elsewhere where this approach has provided important empirical evidence to policy-makers, says Fang.

“In other developed countries like Australia and the UK, they have done a number of studies in these areas to better inform policy-makers, to decide an appropriate course of action in terms of the number of intakes of immigrants and the type of immigrants we want to introduce and also different source countries,” Fang says. “Immigration brings a lot of new opportunities, but also new challenges.”

The potential immigrant’s ability to adapt to a new country, a new economy, a new environment and a new culture, is one of those challenges. “We know they have experienced some challenges in terms of assimilating in the economy and in society,” says Fang. Over the last two decades, the country of origin of immigrants has shifted from European countries like the UK and France to Asia and Africa.

“In this study we not only look at immigration as population shock, as most studies have focused on; we hope to incorporate a lot of other data, such as the census data, labour force survey, the immigrants landing records, in order to get a better measure of the quality of labour for immigrants in terms of educational attainment, their intended occupations in Canada and also their possibility of getting jobs, their labour force participation rate, the employment rate and unemployment rate,” says Fang. “So we get a better measure not only in terms of the number of immigrants which contribute to the population increase, but also in terms of the contribution to the economy, productivity and so on – a measure of quality of immigrant labour.”

According to Statistics Canada, an estimated 1.1 million immigrants came to Canada between 2001 and 2006. Immigration is forecasted to account for an increasing share of population growth. The study of the economic impacts of immigration to Canada is, therefore, very similar to an analysis of a large-scale population change, with pervasive effects throughout the entire Canadian economy, says Fang, who has taught, worked and consulted in the areas of human resources management, industrial relations, labour markets and social policy.

Fang has served as a research economist at Human Resource and Skills Development Canada and as a business and labour market analyst at Statistics Canada.

For more information about the study, contact Fang at

By Sandra McLean, YFile writer