EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 2, 1995

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[English]

The Chairman: If everybody is ready we'll get started.

My name is Gar Knutson. I'm the chair of the immigration subcommittee.

I would like to welcome Mr. DeVoretz. We've scheduled about an hour and a half. We'd like to have as thorough as possible a discussion, not necessarily entirely about the book, but about the general area of the economic impact of immigrants.

So I'll turn it over to you.

Professor Don J. DeVoretz (Economics, Simon Fraser University): Thank you very much. I'm honoured and flattered to be invited here.

I'm not going to speak to my entire narrative, as you have it in front of you, but I'll try to give you an overview of the motivation of my research and a brief summary of the findings of the book. Then, hopefully, since you brought me all the way here, you will have lots of questions.

In the last 70 years there's been a constant refrain. The questions are very similar. Do immigrants take away jobs? Are they a net draw on the treasury? How quickly do they economically assimilate into the economy?

In the last 5 to 10 years, a new set of questions has emerged involving the social safety net. Are immigrants the net draw on pension schemes? How do they affect unemployment insurance? In particular, whether immigrants have increased our ability to trade in Asia and the Pacific Rim has been a new question of the 1980s and the 1990s. And finally, the lack of research on immigrant female participation in the economy has become a major concern, especially on the west coast.

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So with these old and new questions on the agenda, in 1993, I started calling up and e-mailing my graduate students from the last 10 years to find out whether we could put together a conference called ``New Economic Issues'', to discuss the questions I've just mentioned.

I have enough graduate students to do most of these papers, but not all, and in 1994 several foundations came forward, including the Laurier Institution in Vancouver and C.D. Howe Institute in Toronto, to supplement my meagre funds and have other people besides graduate students look to these questions.

The point of all this preliminary discussion is that the material in this book is, with the exception of chapter 1, an outgrowth of serious scholarship that has been peer reviewed in oral PhD examinations and twice more by what we call independent or peer review. So the work here was not commissioned by an institute; it was driven by scholarly research, and most of it had taken two to three years to complete prior to the writing of these separate papers.

What are the findings? There are some clear and unequivocal findings.

First of all, on balance, circa 1991, 1992, using census and other information, immigrants still make a small and positive contribution to the economy. The title Diminishing Returns indicates that this positive return is getting smaller. It doesn't mean it's negative; it means that we detected some worrisome trends that require policy initiatives.

In the book, as in my narrative, we highlight some of the concerns, the new concerns. For example, what about immigrants in the pension scheme? The scholarly evidence taken from Statistics Canada and analysed from various sources indicates that the foreign born are not a burden on our pension scheme. In fact, they privately save more to offset the fact that they are ineligible for some of our plans. In addition, this higher net worth or saving is committed to their children in the form of more spending on education and bequests.

So some of the myths about the foreign born being a burden on our pension scheme and perhaps a burden on the educational scheme at the higher level are dismissed. But other evidence is not so positive.

For example, do immigrants take away jobs? There was some very good work done in the early 1980s by several people, including myself, which couldn't detect any scientific evidence that immigrants took away jobs. This is in the early 1980s. The evidence in this book, which takes us up to 1991-92 - a paper by Marr and Siklos - indicates that there is now some relationship between immigration levels and unemployment, another worrisome trend.

On the other hand, we still have lots of positive information. On balance, the treasury transfer, that is the taxes paid minus all the financial costs that can be detected, still indicate that on average in 1991 with census data, the foreign-born family living in Canada will pay in excess of $30,000 more into the treasury than they will use in their lifetime. But again we find a catch or worrisome trend: the most recent arrivals are not transferring as much to the treasury as the older stock or previous immigrants.

So the key question is, will the new people who have arrived since 1986, since this major expansion, replicate the history of the movers who came, say, after 1965? Will their income grow as fast? Will they assimilate as quickly so their tax payments rise?

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The last point I would like to make before I throw it open to questions is that Fagnan, in her paper on income performance, really hits the key to this question. She suggests that it's taking longer and longer for male immigrants to catch up to the income performance of the Canadian-born or older immigrants. In this country, less income means less taxes, so this is a crucial point.

Will the newest immigrant group increase its rate of income growth or will it fall off, as Sheila finds out? This is the crucial question. We don't know the answer to that, so we recommend some policy measures that we hope will ensure that tax growth will be just as quick as it was in the past.

In summary, the book finds immigrants still make a positive economic contribution but some worrisome new trends have emerged, so that it's possible when we come back in the year 2001 with the next census data these results could be reversed unless we follow some policy suggestions. I have a list of them in the book and I suppose you can quiz me on them or I can go over them now - whatever is your choice. Thank you.

The Chairman: We'll come to them then.

Mr. Nunez.

[Translation]

Mr. Nunez (Bourassa): Thank you, Mr. DeVoretz, for your presentation. I believe you are justly considered as one of our major experts on immigration, especially on the economic impact of immigration for Canada. You have done extensive research in this field.

You say that today's economic contribution of immigrants to Canada is not as important as in the past. Some people claim that we should reduce the number of immigrants by 100,000 or even 150,000 per year. This year, we are going to welcome about 230,000 of them. What is your opinion on this? Do you think the present level is too high, or not high enough?

[English]

Prof. DeVoretz: That's the heart of the issue, isn't it? First of all, I think an economic point of view on this question is only one point of view. There are many other disciplines or ingredients that go into answering that question. As an economist, I'll answer it just from the point of view of economics.

If we looked at the experience in British Columbia, that part of the country, then I would raise the numbers substantially in this country from well above the 215,000 or 217,000 that are forecasted up to even as high as 300,000. If the economic conditions that have prevailed in Ontario and central Canada continue, then I would lower the numbers to around 217,000.

So based simply on economic contributions, especially to the treasury, I would raise the numbers, if we anticipate growth as it's happening in British Columbia and the composition of immigrants we receive in British Columbia, and probably stay the course at 217,000 if the Ontario situation prevails country-wide. I hope that answers your question.

[Translation]

Mr. Nunez: What is the incidence of family members coming here? In the past, immigrants came with their family. Today, it is more difficult. The present government puts barriers to family reunification, despite the promises of the Liberal Party. How far can we go in this way? Should we rely exclusively on independent immigrants or should we also take family considerations into account? Furthermore, when we talk about families, how far do we go? Do we include only the immediate parents and children or can we go further? How do you see that?

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[English]

Prof. DeVoretz: Again, looking at it as an economist, I would say 50-50. I think for each economic immigrant we let in or are able to attract -

Mr. Nunez: Now it's less than 50% I think.

Prof. DeVoretz: If we have 100,000 economic immigrants come in as investors or in the independent class, the economics tells me to allow in another 100,000 in the family class. That's what economics tells us.

The second part of the question, as I understand it, is what are the implications of in fact reducing the family class? Again, I found in interviewing businessmen investors that they come to Canada for many reasons. One of the reasons that they prefer Vancouver over Los Angeles, where they could earn a higher rate of return on their money, is the fact that family reunification is easier.

Until recently, in competitive countries you needed to be a citizen to sponsor your relatives. The point is they're not separate. If you reduce the family class, you will reduce the number of investors. In fact, in British Columbia in the last year there's been a 58% decline in the investor entrepreneurial class partially due to the pressure put on the family class.

[Translation]

Mr. Nunez: You have studied extensively the costs of immigration for Canada, that is to say the costs of welcoming them, of integrating them, of teaching them our languages, of providing them with social services, social welfare or unemployment insurance. Have you taken into account the costs that foreign countries have to bear to educate an immigrant who comes here as an adult? We welcome many professionals, university teachers or doctors who cost a lot to their country of origin. Have you done any research on this?

[English]

Prof. DeVoretz: Yes, I do. Independent of the book, we've carried on several studies just directed toward that question: what was the value of post-secondary education that was transferred from all countries, but especially from the third world, to Canada during the period 1967 to 1981? Then we asked the question again for 1981-1991.

In the earlier period, the amount of the value of that education was about $2.7 billion Canadian in 1981. To give the committee some perspective on that, that's the equivalent of one free year of post-secondary education for the whole country. So that was a gift provided to us by the taxpayers from the Philippines, or India, or the U.K. or other countries. That number has fallen since 1981. The value of that would be about $700 million or one-third the previous value in the period 1981 only to 1987.

So the value is large, but, as in the book, there's been a decline in some of the positive benefits. But it is substantial.

[Translation]

Mr. Nunez: Have you carried out any study on the costs of education between the countries of origin and other countries? In other words, are immigrants going to the United States more qualified and better educated that those who come to Canada? Do you think is is now more difficult to attract some types of immigrants to Canada?

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We know that we receive a lower number of immigrants from Europe, because the economic situation is now much better in those countries. If the situation continues to improve in other countries, pretty soon we will see that the number of immigrants from those countries is going to dry up. Are we therefore faced with a real problem of attracting immigrants? Are we going to have to compete with other major immigration countries such as Australia or the U.S.? What is the solution?

[English]

Prof. DeVoretz: I'll answer the questions in reverse order, as I remember them.

Are we in competition with other countries? The answer to that is yes, very much so. In particular, we're in competition with the United States and Australia. Every time we change a policy, it is announced in The New South China News or other Hong Kong publications. Asian, especially Hong Kong-Taiwanese, immigrants are well aware of what we're doing. So we're in competition with them.

Regarding the recruiting question, which is part of that, it makes it more difficult for us to recruit investor business class immigrants, for example, when we change the family class, as I indicated before. So policy changes that take place here are quickly known in Asia, especially at the top, and we are in competition.

The decline in the investor class and in educational attainment, which I mentioned earlier, is only partly due to policy. You're absolutely correct in noting it's more difficult to get skilled people from any country of the world into Canada, largely because those countries are doing better; they're not pushing them out.

What can we do to attract more skilled people? One of the keys is to keep the integrity of the family reunification program. I think that's a plus, not a minus. Number two, simplify the procedure in which we evaluate people. We currently have many rules for getting the seventy-odd points to enter this country. I think if we simplified it to language, formal education and age, we could recruit people who are going to do well in larger numbers.

Finally, I think we should also assess spouses of the immigrants and give extra points. In other words, if the primary applicant is a male and he can only get sixty-odd points, why not review the attributes of the female who's going to accompany him and give bonus points? This would reflect our need for economic immigrants, our sensitivity toward females, especially what happens to them after they get here, and would increase the skilled numbers through recruiting.

There are policy measures you can take.

Mr. Hanger (Calgary Northeast): Mr. DeVoretz, it's good to finally meet you. I know we did speak on several shows together, but we never really had an opportunity to meet. I certainly appreciate all the work you have done in this area.

I would suggest that a lot of additional information has come before government individuals and the bureaucracy. I know the bureaucracy probably agrees with much of what you have said in some fashion or another.

We've had members of the immigration department before this committee. At one point, they said people from some countries are more culturally equipped than others to integrate into the Canadian economy. Do you agree, and do you think our policy should reflect that?

Prof. DeVoretz: An economist defines ``culture'' in terms of language and in terms of experience in a modern labour force. If I limit my definition to what the economist would view it as, language and experience with modern technology, then I think it's absolutely essential.

The scientific facts are if you go to the 1991 Canadian census and ask yourself what the penalty on earnings is for not knowing English and/or French in the appropriate province, you will find it's like having a 14% extra tax on your income in perpetuity. There's a penalty for not possessing one of the ingredients of a culturally complete immigrant, if you want to look at it that way.

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The second important ingredient in being culturally assimilated is your experience, both in terms of your job qualifications when you arrive and the education you obtained overseas. Grade 12 in country X is often not the same as grade 12 in Canada. Part of the cultural contact is with more modern and sophisticated skills. It's as simple as using modern computers versus ones that are ten or fifteen years old. It puts you at a handicap if you don't have that.

Finally, there's no systematic evidence, if there's a control for these variables, that country of origin affects your economic performance. In other words, if you came from country X and went to a school that taught you proper computer programming, you knew English well and you had five to ten years of experience in a modern corporation in country X, you're not at a handicap when you arrive here simply because you come from Vietnam or country X.

It's not really the country's culture that we can detect economically; it's these other attributes of language, previous experience and education.

Mr. Hanger: Should Canada set its immigration policy accordingly, specifically?

Prof. DeVoretz: Yes, from an economic point of view.

I think we must recognize these features. For example, some training does not translate into equivalent training here. The reason I say ``yes'' is it has welfare implications, unemployment insurance implications and discrimination implications inside this country.

I, for one, don't think we should be soft on these things to bring people over here with false expectations. For example, if medical training does not qualify one to be a practising physician in northern B.C., then I think we should tell people right away, up front what the procedure would be, and not give those people points for entering the system. It's very explicit and we should recognize that.

Mr. Hanger: I had an interesting conversation with certain individuals in the overseas offices about Canada's policy in selecting immigrants. Some of them were very upset by the fact that there seems to be more of a propaganda agenda of painting Canada as a Utopia, saying ``All your dreams will be fulfilled here.''

Some who were obviously doing very well in their own countries were sold this message. They uprooted themselves and came here to find out it is not the case. Economically they were better off, in a way, in the country they originated from.

There seems to be an effort on the part of the Canadian government or whoever to reach a certain target rather than to be careful about who they select. We just say we want to have 215,000 immigrants and we will do everything we can to reach that target. But there doesn't seem to be the number of qualified, if you will, people lining up at the door to come to the country. Would you view that as a reality?

Prof. DeVoretz: That has been a reality since Clifford Sifton. In some ways we've advertised the country as being more glamorous than it is. I don't think it ever gets 50 degrees fahrenheit or above in December in Winnipeg, as he suggested.

Notwithstanding that rhetoric, there are some important considerations in recruiting, over and above selling us as the UN number one country. If people come here and make a mistake based on the information we gave them or that they garnered from their friends and relatives, they can return. I'm not as concerned as some people are. There's always an open door to leave.

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In fact we know the gross amount and the net amount are markedly different. It's been estimated by a demographer at the University of Western Ontario that between 50,000 and 80,000 emigrants from Canada appear every year. So there's a large number of people who either are disappointed or use Canada as a stepping stone. That should be no evidence that we're either propagandizing or using the wrong selection procedures. It's been going on a long time, and people can recoup their own mistakes.

I foresee moving away from the uniquely government role in advertising the country by presenting private industry with some recruiting rights. I think there should be a policy that allows individual companies or industries to actively go out and recruit the skilled people they feel they need, and not wait for a government points system.

I'm not saying turn over the whole program to one company; I'm saying it's very difficult, even for me at 52, to figure out the latest need in computer programming. Many of these slots can be potentially handed over to recruiting by a professional organization, with important provisos that this doesn't continue ad infinitum.

That would get away from trying to meet the 215,000 quota target and from perhaps giving misleading information, because there would be a contractual obligation by the firm in bringing them over, and it costs a lot of money. So you would get around it.

That's my policy solution to that criticism.

Mr. Hanger: What's more important to the economy, deficit and debt or immigration policy? Do we fix the economy by attacking the debt and encouraging investment or by accepting more immigrants?

Prof. DeVoretz: The evidence to date says this is one of the few areas in economics where you can have your cake and eat it too. If the policy is careful in having at least 50% in the economic class, the finding of Akbari and others that over their lifetime immigrants contribute more to the treasury than they use in services allows an attack, albeit it a small one, on deficit while having a large immigration program.

We have calculated how many immigrants per year we would need to make up for the pension shortfall alone - that's one aspect of it. The number, sir, is so enormous that I dare not mention it. The point is immigration is not a policy tool to eliminate a shortfall in one area, but on the margin it can help.

Mr. Assadourian (Don Valley North): On a scale of one to ten, what kind of impact do the settlement policies of the government have on new immigrants trying to find a job?

Prof. DeVoretz: I think the economic impact of particular settlement policies is close to a ten.

English lessons, and English taught to women in particular, will have an enormous impact on their earnings. Female immigrants, as documented in this book and elsewhere, often end up in dead-end jobs and without any English training, and they cannot get time off or have money for English training. When that's provided, it raises their earnings. It also raises their husband's earnings, because they can go to school.

I would, in short, rate it a ten on language training focused on certain groups in particular.

For other aspects of the settlement program, it's very difficult to give an economic number. I would be hesitant. There's no scientific information to suggest, for example, that learning about our institutions - how to approach a UI claim or citizenship or any of the general information that's given - helps economic performance. I will say it has to be positive, but we just can't document it.

Language, however, is very well documented and gets a ten.

Mr. Assadourian: Do you have any suggestions to improve the settlement programs?

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Prof. DeVoretz: Yes. I think wherever we can provide more resources to female immigrants, we'll be increasing the productivity of immigrants. Males do very well, thank you, by themselves after arrival here. If there's a choice to be made on a scarce dollar, I would say it's female immigrants in the labour force from whom you get the bigger return.

Mr. Assadourian: You mentioned that immigrants make a small but positive contribution overall, compared to immigrants fifteen or twenty years ago. Is that because of changes in the policy or because of changes in the economic situation in the world?

Here in Canada, are people contributing less and taking more, and is that why the deficit is the way it is now?

Prof. DeVoretz: The decline in the contribution is due, at least by half, to policy, in my scientific investigations. In other words, the rise in the numbers of people who are not economically assessed tends to reduce the tax contributions. In the 1970s the split was about 50-50; 50% of the immigrants were economically assessed. In the mid-1980s no one was economically assessed. For example, in 1984-85, almost all were family class.

So what we're seeing is the legacy of a policy in the 1980s that de-emphasized economic immigrants. I think it's changing around; I think it's reversing in the correct direction and that in ten more years the contributions will go up. So I would say there's a policy implication to it.

But policy can only do so much. As was suggested earlier, the traditional sources of immigration have dried up. The reason Norwegians don't come to fish in British Columbia any more is per capita income in Norway is roughly 50% higher than it is in British Columbia. So no policy is going to attract Norwegians to come to British Columbia. You can't lay all of the blame on policy.

Mr. Assadourian: You mentioned immigrants must have seventy points to come to Canada. Would you agree with the suggestion that we should allow five points for family reunification applicants if they will live in a rural area when they join the family? That way we would increase the population of rural areas instead of that of cities.

Prof. DeVoretz: My short answer to that is I would do everything the charter would allow to disperse immigration throughout this country. In fact, when I speak in Halifax or in other communities that don't receive a lot of immigrants, they ask how they can induce more people to come there.

The main scientific finding on this question is immigrants tend to go where previous immigrants went. It's very difficult to change that. I would be in favour, more or less, of any policy that would pass the charter.

Mr. Assadourian: What impact do you see on third world countries when we bring in highly skilled or highly educated immigrants from those countries? Related to that, have you done any studies on immigrants going back to their ancestral homelands after the collapse of the U.S.S.R. and of communism in Europe?

Prof. DeVoretz: The answer to the second question is no, sir, we haven't done anything yet. There is some information on older immigrants returning to Italy and to the Philippines.

Your question about the cost to the third world and compensating them was a big issue in the 1970s, but I don't think it's such a big issue now.

There is a great deal of concern, however, that we are only taking skilled immigrants. We take a balanced flow from the Philippines. I have not read or heard any criticism of our current - that is, post-1984 - immigration policy that says we only take their best, and one of my areas of specialization is the Philippine economy.

Mr. Assadourian: Thank you.

The Chairman: At the tail-end of your presentation you said you had some recommendations. Maybe you could run through those.

More specifically, I'd also like you to comment on Mr. Marchi's policy announcement of last year. What I think I'm hearing is a ringing endorsement of it. Maybe you can disabuse me of that if it's not the case.

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Prof. DeVoretz: I think I'll go to my policy suggestions and then try to characterize Minister Marchi's suggestions.

My policy suggestions, first of all, are predicated on the fact that we must have regional policies in place. Wherever possible we must look to what the regions want.

Number two, we have to recognize that we have some new problems and need to put some new policies in place. I'll get to my regional policies right away.

Number one, I think if there are concerns about the impact of the family class on welfare, or UI, the regions should be allowed to set some policies here in terms of what I call a surety bond. A bond should be put in place with collateral up front based on the experience of welfare use in each province. It shouldn't be country-wide.

The reason for this is that one of the studies in the book, and it's been documented elsewhere, indicates that immigrants to British Columbia simply do not use welfare; it's just not there. So to put a bond in place for British Columbia is an extra penalty. I would say this if the reverse were true in some other province. So I think regional policies are important. The first one is the surety bond. That would remove all the concerns of the people who live near me, whether I'm working in Toronto or the Fraser Valley, about immigrants using the social safety net at the taxpayers' expense. I think this is absolutely an essential policy.

Number two, I think we have to come up with a changing emphasis on how we recruit immigrants. I think we should simplify it. I don't think we're in the area where we can project exact needs. An economist would say look at human capital, which is language - and I already mentioned English and/or French - the younger the better, more points if you're younger. I also mentioned that if you're in a family or household unit, the spouse should be given points added to the family, recognizing the realities of the 1990s.

The last point in the simplification of the process is check to make sure the education in the country of origin matches ours. It's not that difficult. I'm on the admissions committee at Simon Fraser University and we have books in front of us to tell us what education level translates into what. We have history; we know what countries are misrepresenting themselves. So I think education, age, English language skill and spouse points would simplify the recruiting process and get more people in.

Finally, as I say, I think economics is only one of many tools to run an immigration program. I think we have to recognize that we can't simply get only economic immigrants; we have to remember the family class is part of the total. It doesn't come through directly in the studies, but it's very clear when you interview people. You have to give points to the family class, especially if the family class has economic attributes. I am more and more in favour of the idea that mothers and fathers do perform a useful task when they are brought over to watch children, by eliminating the cost of day care. I think that is a compelling argument in British Columbia.

So those are my major policy points, the surety bond and changing of the....

My assessment of Minister Marchi's program is that, in all due modesty, of course, I do agree with some of it. I was on the standing committee that made many of these recommendations to him and I am very delighted that he picked up on some of them. I would hope that the surety bond would go forward. I am not in favour of all of his policies.

I wrote an op ed piece in The Vancouver Sun where I strongly disagreed with the landings fee. I think the surety bond would be enough.

In general, I think the economics of the policy suggestions that have been made by the current government are positive. However, I strongly disagree with the landings fee, and I think the numbers should go up, not down. I think that's a mistake. I think the family reunification class should not be shrunk, but we should use some points in there to call for the best of the family reunification class and use a surety bond to make sure the taxpayers don't take any of the burden. So we have differences.

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The Chairman: Let us assume, for the sake of argument, that the landing fee was Paul Martin's policy and set it aside for the time being. With regard to the issue of the bond, my understanding is that to sponsor an immigrant, you have to be making only about $16,000 per year. Wouldn't it make more sense to raise that amount?

Prof. DeVoretz: Well, sir, it's the poverty line; however, Census Canada defines it for the unit at hand. So for the sake of argument, we'll take $16,000.

That means, according to the 1991 census in Vancouver, every immigrant household that entered between 1986 and 1991 could sponsor the family, because the average household income for that group is $16,791. That means, of course, it's too low. I mean, not everyone is in a position to sponsor.

A problem with just raising that limit, sir, is the problem of collection if they're unfortunate in the sense that they lose their jobs in a downturn. What do you do? It's impossible; you can't collect from people who in turn are legally on welfare or UI.

The second problem is what we call in economics the moral hazard. There are a few - I want to emphasize a few - people who come and recruit their relatives to come here with the express intention of using the safety net. We know this. We know this from studies of insurance and elsewhere; it's called the moral hazard. By raising that level, you're not going to eliminate those few numbers.

Putting a bond in place up front rather than raising it means no collection problems and no rationale three years later for not paying it. So I think a bond has a lot of independent merit. The size of the bond, of course, is the absolute key, sir.

The Chairman: Would you like to suggest a number?

Prof. DeVoretz: I can tell you how to do it, and I can give you a number for British Columbia, which I worked out. I would go to the 1991 census and ask the following question: how much in the way of assets do immigrants who have recently arrived have so you can get an idea of their ability to pay? When I do this for British Columbia, the chief asset is the house. Fifty-seven percent of the people who arrived in British Columbia between 1985 and 1990 own a home valued at $176,000 or more.

That means there's a lot of collateral available for the ``typical'' immigrant who recently arrived to put up for a bond. You don't put the money up; you put collateral up, as I'm sure you know. So the outer limit would be one-third of that number, which would be about $45,000. That, of course, is the outer limit.

If I look to the experience factor in British Columbia, what's the risk British Columbia taxpayers are experiencing from having the family class in? What is it costing them? The number drops down to around $10,000.

In short, by looking at scientific estimates, I would come up with the following suggestion for British Columbia - and you could do it for Ontario or anywhere. You would want two bonds, each of $5,000 for a total of $10,000, because the risk is a discounted value of $10,000. I'd have two bonds, because in the first five years, if you were good, you would get the collateral back as an incentive to be good in the next five years.

In short, you can, by using census data, measure the risk to the taxpayer, calculate it, and find out whether it's politically acceptable.

Mr. Hanger: I understand what you're saying about the bond aspect, as far as being an item that may be easier to administer, but overall there seems to be a general lack of desire to enforce anything within the Immigration Act or even any of the regulations.

Should there be a commitment on the part of a sponsor, for instance, to live up to his part of the agreement? No one is around to ensure that happens.

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So if we're going to be placing more regulations and more items to regulate, it still falls back to the same concern: who is going to enforce it?

Prof. DeVoretz: I recognized that problem when I made the bond suggestion, sir. You don't want the government issuing the bonds and enforcing them.

We have a very vibrant private sector, which issues bonds for Molly Maid, which is a maid service in Vancouver. Anybody who brings things across the border is bonded. I'm suggesting that private bonding agents issue these bonds and assess your collateral. Government is not involved at all.

The only time it becomes involved is when a report has been defaulted on, in which case the moneys go directly to the treasury. There's no involvement here at all. There's no collection. Nobody calls up the Ministry of Social Services and indicates that, for three months, person X has been collecting, is in the family class, and the bond is defaulted. The proceeds go immediately from the private bonding agent to what's owed to welfare, and they keep the difference. The government is not involved at all. It is the same for liquor crossing the border.

Mr. Hanger: I see a concern, too, in the whole area of the landing fee. Again, a bureaucracy would have to be developed just to administer that particular point.

I'd like to go back to the economic impact. We spend $500 million a year or more on immigration programs. Would our economy be better benefited by spending more of that on immigration or by spending that much on high-tech education for Canadians?

Prof. DeVoretz: Again, I think it's on the mixture of immigrants. I think it's more appropriate to look at how that money is best spent within that department rather than move that money to other departments.

The quickest way to get high-tech information in this country is to get computer programmers from around the world who are facile in the newest languages and the newest techniques, and to allow private business to recruit them, as they're actively doing in Toronto. So I don't think it's necessarily a trade-off between moving these dollars somewhere else in the economy. I think you can do a better job by allocating.

The second point is we must always remember that the budget of Citizenship and Immigration serves us as Canadian citizens, as well as people who come in. A large portion of that budget is to ensure the legal integrity of our borders, and the processing procedure itself ensures this.

So I would judge as an economist when I look at all the services they provide. On the margin you're not dealing with $640 million; it's more like the $145 million they believe they're going to generate by the landings fee.

When you get down to that smaller number, sure there's always room for reallocation, and I've suggested some of the ways in which we could do it by being sure that some of the recruits actually have, for example, the training that is set.

Mr. Hanger: Would you see at the present time - of course the $500 million being spent - that number, by altering the mix substantially, declining? We're talking about $500 million in landing fees or in resettlement costs. Do you see that number...?

Prof. DeVoretz: Well, whatever the number is - I don't have those in front of me.

Mr. Hanger: Whatever the number is now, do you see it declining if we altered the mix substantially or were more cognizant of the fact that we should be looking at the numbers?

Prof. DeVoretz: You'd have to do more than alter the mix. You'd have to take some of the other suggestions, which are in the book and are in turn making sure that people who come here come equipped with new training and language skills. Then, of course, it would reduce that considerably. Yes.

So it's more than just changing the mix; it's recognizing that whoever comes here has a certain minimum skill.

Mr. Hanger: How do you measure the carrying capacity, economic and cultural?

Prof. DeVoretz: Well, the economist looks at the carrying capacity quite simply in terms of the economics of it. They go to taxes, and they subtract the costs of the social services, and, as long as it's positive, as long as immigrants are making a contribution to the treasury, ``we have not exceeded the carrying capacity''. This idea goes all the way back to the 1950s, and it's prevalent throughout the world.

.1155

So I would say that the 250,000 that we had, or 243,000, in the last couple of years is our carrying capacity. The most recent group is contributing only $4,000 to $5,000 extra to the treasury, so it's getting close to our carrying capacity.

I think our cultural carrying capacity can be increased. I don't know what it is, sir, but I know it can be increased if immigrants in fact voluntarily move or are encouraged to move throughout the country. For example, in Halifax or in other areas, they say, why aren't immigrants coming here? The cultural capacity of Halifax is quite large. However, the cultural capacity of certain areas may be very small.

Mr. Hanger: How do you view these tracking polls the immigration department has been involved in since 1975, looking at attitudes and the like right across the country and clearly pointing out that there's a certain uneasiness with high levels of immigration, especially in centres like Toronto, Montreal, and Vancouver, of building this into an immigration plan? Should this not be as significant as anything viewed on the economic side?

Prof. DeVoretz: I have also been tracking the immigration polls since prior to 1975, and the one question that I look to is, does the country need more immigrants? One of the continuing features of Canadian public opinion is that 40% always answer that question with no. Changes in that number don't startle me.

The key issue is when you ask them a supplementary question: why do you feel the country doesn't need more immigrants? The most common reason from every poll from 1973 on, including the latest ones, is that immigrants take away jobs; that's the common fear. You'll notice that the negative response rises with unemployment rates.

So I think more important than the exact number is the reason it's occurring. If you can run a policy that ensures immigration does not exacerbate the unemployment situation, I think you can alleviate some of those fears.

The last point I want to make about the polls is that you have to understand what the polls are saying. Thirty to forty percent of the people have always had this negative feeling towards immigration. It's the swing group in the latest Decima polls that has moved from 38% to 52% or 54%. It's the swing group, it seems to me, that we must address our concerns to. When you look to that swing group, most of their answers to ``why'' are economic answers. They say immigrants are a net draw on the treasury or they're using our safety net, etc.

So my reading of the evidence is that economics really matters a lot for the swing group, and it's not only my reading. It is true in the United States and other countries that economic conditions really affect the lack of popularity of immigrants. So I think it's a key issue rather than not a key issue.

Mr. Hanger: How much does the rapid growth of the major cities due to immigration cost residents of those cities?

Prof. DeVoretz: We don't know the answer to that. We will. There's a large cities project being undertaken world-wide, which includes Canada, and some of these fine, young scholars - and I won't emphasize this, because mostly it's their work, not mine - will be participating in it.

One of the biggest costs of urbanization or having a large number of immigrants in urban areas is surprisingly not on the school system or not on the sewer system; it's on wages. But there's a feeling that there's a large impact of the influx of semi-skilled and unskilled immigrants on the wage structure in urban communities. Well, we'll just leave it at that. That's the one that seems scientifically to be the largest cost to the urbanization of immigrants.

Mr. Hanger: Thank you.

Mr. Assadourian: I have one quick point. I made this point last week, but I'll make it again. I was going through your book and, in summary, you always refer to Canadian born and immigrants. It seems to me that you classify even those who came before 1960 or 1970 as immigrants.

I would suggest, in the future, if it's possible, to make it Canadian born and new Canadians. I am not an immigrant; I'm a new Canadian.

Prof. DeVoretz: Your suggestion is well taken, sir. Unfortunately, it's Statistics Canada that provides us with the definition.

Mr. Assadourian: We've got to change them, too.

Prof. DeVoretz: Maybe we can suggest that to higher powers, but I take that directly from Statistics Canada, sir.

Mr. Assadourian: Thank you.

.1200

The Chairman: Can I just take you to the main point - the levels?

I understand the 50-50. Why not 150,000 annually instead of 200,000 and change, or why not 300,000 annually instead of 200,000?

Let's start with the lower number first. If we come out with a policy that says we're only going to allow 150,000 immigrants, what are the economic problems with that right off the bat?

Prof. DeVoretz: Well, it would be good news, perhaps, for central Canada and disastrous news for Vancouver. We've already seen some of the impact. Housing prices are falling in Vancouver. There have been unheard-of phenomena in the last four to six months.

The Chairman: Maybe the housing -

Prof. DeVoretz: Investment is drying up in Vancouver.

When you reduce the numbers country-wide, there are regional impacts. It may be beneficial for certain regions in central Canada, because of the mixture they receive out of the 150,000, but it definitely will be harmful, sir, to Vancouver and the greater metropolitan area.

The Chairman: Can you take me through this? It's not that I doubt your words, but I need to explain this to some of my neighbours. Telling them that housing prices are dropping in Vancouver won't satisfy them. What would be some of the others?

Prof. DeVoretz: In addition to Vancouver?

The Chairman: What would be some of the negative effects if we cut our immigration level to 150,000?

Prof. DeVoretz: For one thing, in the long run - that is, 10 to 12 or more years - the surplus that's being generated by immigrants to the budget simply will not be there. This reoccurring subsidy that we have from the foreign born will not appear. It's substantial if you multiply $35,000 to $40,000 by a million people over five years. It's a substantial transfer to the budget.

The second thing that all Canadians feel by having an active immigration policy, no matter in what region, is the level of competition. The level of competition in terms of trade, education, and general business attitudes by having a vibrant and large immigration program that emphasizes skills and investors is really to make us much more competitive both internally and.... We can see that by the revival of the textile industry in or about your region. That industry was dead 15 years ago, 12 years ago. Recent immigrants have really resuscitated that. So in certain sectors, immigrants have provided benefits, even during the restructuring in Ontario.

But there is long-term benefit of tax payments and short-term benefit of job creation in some of the older industries. But the major thing is competition, making it much more competitive for trade.

The Chairman: The levels that you've recommended, are they more or less constant assuming a 2% to 3% economic growth annually, or would you change them up or down?

Prof. DeVoretz: Currently, we have what's called a tap on, tap off policy. Either somebody's squeaky wheel gets squeaked or unemployment rates rise and we turn off the tap. I'm totally against that.

I think it's necessary to have a three-year moving average and stick with it. There are several economic reasons for that and some cultural reasons for it. Whatever the number, stick with it.

The economic reason is that it takes a long time to recruit people, to pursue an active recruitment, and to get the kind of people that perhaps we've been speaking about.

Secondly, immigrants tend to go where immigrants went in the past. You must allow that process to take hold. That's what we found out in British Columbia. The rise in Asian immigration is not sudden; it's been taking place over several years.

The third reason is that you have some room for assessing what's happening. You never quite know, for example, when you want to shut it down. You always do it after the fact. So it's very difficult to plan if you're doing short-term planning on unemployment rates. When it happens, the unemployment rate goes up. It's too late to shut down immigration. They're already in the pipeline. So a three-year moving average is fine for economics.

The other reason is non-economic, with a longer-term plan. Pressure groups come forward in this country - enormous pressure groups, I'm sure, to some members at this table, but also to myself. People call up and ask, why are you saying this or that? It should be higher or lower. I think if we go to a moving average over three to five years, it would reduce some of the irrelevant debate on side issues here, and we would have some idea of how to plan. The question, of course, is what's the number over three to five years?

The Chairman: Okay. Thank you.

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Mr. Hanger: Switzerland accepts very few immigrants. In fact I don't believe they have much of an immigration flow into the country at all. How are they doing?

Prof. DeVoretz: If you consider guest workers or foreign-born people working in the country as immigrants, then Switzerland has one of the highest rates of immigration in the world and they're doing quite well. If you choose to use a very strict definition, then they don't have many immigrants and they're doing quite well.

One thing we find scientifically is that there's absolutely no association whatsoever between levels of immigration and growth, to wit Japan. You cannot enter Japan as an immigrant; it's impossible. From my personal experience working in Norway, there's no such thing as a Norwegian immigrant in the country. They have the highest per capita income in the world right now.

There's no association; they're all over the map. However, some countries that traditionally receive immigrants do better with more immigrants than with fewer.

Mr. Hanger: The finance department issued a statement a short time ago indicating that due to high levels of immigration during this economic upsurge Canada is experiencing, unemployment never really changed to what it should have been. Would you accept that?

Prof. DeVoretz: I find it difficult to accept because of the following scientific fact. Between 1986 and 1991, 40% of the new jobs created in this country were created in Vancouver. The area received a large number of immigrants but also generated an inordinately large number of jobs.

On the other hand, I'm sure I could find areas in central Canada where the opposite held. Again, it's very difficult to generalize, sir, about the immigration process in this country. I'm not trying to hedge.

I think if you bring in a balanced group of immigrants, which fortuitously occurred in Vancouver, then you will not have these negative associations of unemployment.

Mr. Hanger: That was a statement from the finance department.

Prof. DeVoretz: I disagree with it, in short.

Mr. Hanger: You disagree with it?

Prof. DeVoretz: Yes.

Mr. Hanger: Is there any international correlation between immigration and a country's economic health?

Prof. DeVoretz: I think I'd have to go with the scientific evidence beforehand. This was in the Economic Council report of 1989-90 and in a lot of professional papers. The answer is no, there's no evidence.

But again I want to emphasize that it's not scientifically correct to group all countries together. The way I would phrase the question is: how does immigration affect traditional immigrant-receiving areas? There the evidence is mixed, sir. It depends on the policy.

It has not been economically beneficial to the United States, because only 6% of their immigrants are selected in any form. They have no policy control of even the 94% of the legal immigrants who enter their country. Therefore you get the kind of reaction you got in California.

In other countries, such as Australia, they have a much more strict policy than we do and I think they generate more benefits. But we should be flattered; they took our 1976 Immigration Act.

The Chairman: We use the terms ``economic immigrants'' and ``family class''. My understanding is if someone immigrates to Canada and they bring a spouse and kids, they're all considered economic immigrants, regardless of whether the spouse has economic skills. When you are assessing the skills, it's not that 50% of the people coming would actually be able to pass on the points system; it's the heads of those family units who pass. Is that correct?

.1210

Prof. DeVoretz: My suggestion is to increase the assessment beyond the primary applicant. Your characterization of the immigration statistics is exactly correct. The primary applicant is economically assessed, then the immediate dependants who come along with him are usually grouped in the tables as being economically assessed.

I'm not so worried about it, firstly because there's a strong correlation between the primary applicant's educational level and the dependants'. There's a lot of evidence outside of immigration that suggests strong household units provide strong economic input, whether you assess them or not, in many dimensions.

Secondly, rather than try to change the numbers around or confuse the issue, I'm suggesting that we look to the secondary applicant included in that number and give bonus points, if applicable, to ensure that when you meld them together, you really are getting some economic impact from the secondary applicant.

I've anticipated some of the concerns on the way the numbers are set out by asking that we assess them.

The Chairman: When you use the term ``bonus points'', I take it to mean that if someone heading up a household or family passes the threshold on their own, we don't need to look to their spouse's qualifications. What I'm hearing you say - and correct me if I'm wrong - is if they get close to the threshold and we want them, we might look to their spouse to see if we can throw some points in. Is that what you mean by ``bonus points''?

Prof. DeVoretz: Why I mean by ``bonus points'' is very clear. It's additive for the secondary person. You never subtract it. You never average it. So in both cases you'd be correct; you would add it in. If they're on the margin, the extra points would bring them in - absolutely.

But what happens if it turns out that you get 140 points because they both get 70? What does that mean? I'd move them up in the queue, sir.

So I would allow them to go over the threshold, and in addition, if they're both computer programmers, I would expedite them. It's more than just a fudge factor or a bonus. It's recognizing other dimensions.

The Chairman: Going back to my original question, your recommendation is roughly a 50-50 split between economic and family class. I take it, then, the family class is not measured at all on a points system and you don't have any difficulty with that.

Prof. DeVoretz: Yes, I do have difficulty with that. The bigger issue is that the 50-50 split includes both the primary applicant and some form of assessment for the secondary adult applicant, not the children. I'd add those all up and divide by two to make sure it comes out to 50%.

The family class, which is the other 50%, is currently only assessed generally on familial affiliation and/or whether there's an ability to make the contractual undertaking they sign. Those are the two ingredients.

I think further ingredients should be added. I also think age and/or language training should move people up in the queue or expedite them - again, not exclude them, but move them up in the queue.

In addition, the question of the bond really takes care of the economic assessment. If we're incorrect in our rudimentary economic assessment of the contractual obligation of the family class in some measure, then the bond sort of covers it. That's our insurance.

I wouldn't want to add too many features, but because of their economic contribution, I definitely would expedite into this country younger people who are family members.

The Chairman: From the broad strokes, you don't have any difficulty with somebody sponsoring their family class. You're saying that's a positive factor in our immigration policy and we should keep it at 50-50.

You might discuss some things, such as how quickly to give somebody bonus points and getting them here more quickly if they have stronger economic attributes, but generally you're endorsing the family class as a mainstay of our immigration policy, whereas many people in the country have criticized it severely.

Prof. DeVoretz: I'm endorsing it very strongly with the proviso that a bond be put in place so that if we do make an egregious error, we correct for it immediately up front. Number two, my scientific evidence is pointing me to the fact that the family class contributes and is not a net draw. There's no evidence that they use pension scheme, as I mentioned.

.1215

On the positive side, I'm looking at families and the structure of families in Vancouver to see if female immigrants are more active in the labour force if Mom and Dad are there. Obviously they are; it just took me three months to figure it out on the computer. There is evidence that it's positive.

We are at fault for not having measured that before. It was one of the new issues. It lends into the case that the family class does make a positive economic contribution. Business investors coming to Vancouver always state that is the reason they choose Vancouver over Los Angeles.

The Chairman: Thank you.

Mr. Hanger: Is there any way to reconcile economic goals with our current refugee acceptance goals?

Prof. DeVoretz: All of my evidence includes refugees in the immigration bundle. It's very difficult, if not impossible, to separate them in the papers you have in front of you. I was chastized before for using Canadian-born and foreign-born, because that's the way it's reported. So refugees are also in this group that's giving us a positive, but smaller, contribution.

We have some specific evidence on refugees in the book, and there's some available elsewhere. First of all, refugees are the only people in the Greater Vancouver region who used welfare during this period; you're absolutely right. That's because they were mandated to. They couldn't take a job. If we looked now, we wouldn't see that.

If I try to address your question seriously with scientific information, the best I can do is look at Vietnamese people who arrived between 1978 and 1981, who were almost all refugees, and then ask how they performed economically. They performed right off the wall - marvellously. It was unbelievable.

That's only scanty scientific evidence for one group during one highly motivated period.

Mr. Hanger: I appreciate that.

Prof. DeVoretz: My last point is I don't think economists should be talking about refugee policy. I end my narrative by saying we don't have the equipment to talk about a lot of things, and I'd be very concerned if somebody said they did.

Mr. Hanger: An Asian investor or entrepreneur would certainly look at Canada as being a fairly attractive place, but would he really look at it as a place that would give him a good return on his dollar? Would he choose Canada to set up his business, which I would say would be rather limited in its scope, given the economy and certainly the debt that hangs over this country's head and that would hang over an investor or entrepreneur?

Prof. DeVoretz: In the book and elsewhere, I've asked exactly that question, prompted by interviews in the Seattle Times and so forth. Why do they come to Vancouver? I went to the data and found out that in British Columbia during this period you needed a $350,000 investment to enter under this program. We found out that the average investment is $2.2 million.

Mr. Hanger: In property or business ventures?

Prof. DeVoretz: As an economist, in the first field I just ask the amount of money that comes forward.

Mr. Hanger: Okay.

Prof. DeVoretz: My question was, are they just ``buying a ticket'' to come into our country and then putting their money elsewhere to earn the high rate of return? The answer is self-evident. On average, they're putting in sixfold or sevenfold more money than is required to ``get the ticket'', or to come in.

It's true that three Li Ka Shings bump up the average. There are some very large investors in large numbers who just come in at the $350,000. That's a problem with the design of the program, and it should be addressed.

But as to discouraging the business investor class of immigrants by allegedly high tax rates, there's no scientific evidence that we've been able to do that yet. I'm sure we could, but there's no evidence that this occurred during the period we studied, 1989 to 1992. I would have to say it's not a primary concern.

.1220

The other thing I should mention is that investors, when interviewed, often say they're getting more than just the return on their investment. Their Mom and Dad can come here to a relatively safe environment, which doesn't have some of the backlash that appears in other countries. So, again, economics doesn't rule the day.

Mr. Hanger: In your opinion, what would be the ideal Canadian population?

Prof. DeVoretz: I teach a course called ``The Economics of Demography'', and that's my final exam question, sir. Obviously it's a very appropriate question. I won't tell you what my students' exam answers are, but I will tell you they range all over, because they take in various concerns.

As an economist, the optimal population size of this country, I would say, is much larger that it currently is. In October 1994 The Economist went through and tried to answer this question, and they said 355 million people. They would get an F on my exam, sir.

With the important proviso, again, that 50% of the immigrants are economic, the way to answer that question is to ask how we can sustain a 1% growth rate in population in perpetuity. That's how I look at it. The historical growth rate of 1% in population serves the economy quite well. If we were producing children as my generation did, the immigration level would be quite low, but given the fact that we're well below the replacement rate - we're down to about 0.7% or 0.65% - we need a robust immigration level to maintain the 1%.

To answer your question, a 1% growth rate is the optimum growth rate, which would lead to about 50 million in 2036 by my calculations, with about half or more of the growth coming from immigration if we continue to reproduce at a very low rate as parents.

Mr. Hanger: The levels of immigration have fluctuated over the decades, and I guess the question I have is why is that so wrong? Why this insistence on a steady growth from this point on? It seems to generate more concerns than it solves. That's not to say there's anything wrong with high levels of immigration, but to maintain them is the other point in question.

Prof. DeVoretz: Your question is why tap on, tap off? Why do we turn it on and off, historically?

Mr. Hanger: Yes.

Prof. DeVoretz: It's because of the legislative power we have in this country versus other countries. It's because we believed we could forecast unemployment rates.

As Professor Green of Queen's says in the book, if we knew what the unemployment rate was going to be two years down the line, then obviously we could raise or lower immigration. That was the intellectual reason: we believed we could forecast unemployment and then change immigration levels. It was a combination of the political reason and this historical view that we could actually do that.

Most economists now would agree that economists cannot forecast unemployment rates. We aren't very good at forecasting, especially unemployment rates. So that would be a reason to move away from a tap on, tap off policy. We don't know what it's going to be.

On the other hand, you have to have some control, so the suggestion that's put forward in the profession as well as by me is to stick to a three-year average. Pick a number, and if unemployment goes up a little bit, don't panic, because by the time you make the adjustment, unemployment will probably have gone down.

We've just seen it. To use current history, we're reducing immigration and Ontario is roaring. Part of the evidence brought forward by economists in last summer's hearings was the high unemployment rate in Ontario. We missed it.

So I don't think a tap on, tap off policy is correct. I think a three- to five-year plan that's fixed and based on strong economics is a better one.

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The second reason to move away from the tap on, tap off method is the one I alluded to earlier: tremendous pressure from lobby groups to either raise or lower the number and a very strong sense of divisiveness in this country about the role of immigrants. You've got to allow, sir, immigrants to come here and make their contributions before you shut them off.

On the other hand, if you go to the extreme policy of the United States, where there's a fixed number every year, it allows no room to plan, and if the demand for immigrants rises or if the job openings appear, they come in illegally. U.S. immigration policy, with a very fixed mandate of the 1965 Immigration Act, revised in 1990, says that so many hundreds of thousands - I think it's 941,000 exactly - can come in this year, and when more arrive, they come in illegally. So in fact they don't have an immigration policy. There's no way of fluctuating a little bit up or a little bit down.

So to answer your question, modified tap on, tap off over three years....

Mr. Hanger: You say modified. That's your view, not to shut it and not to maintain high levels, but to have some adjustment.

Prof. DeVoretz: Yes, I think you should always be prepared to adjust, but do it over a medium run with some plan in mind. You can add up the previous number of economic immigrants who came to this country in 1991, 1992, and 1993, and then say, I have received 100 of these economic immigrants. That means in the next three years I will take 600 immigrants with my 50-50 rule.

Mr. Hanger: The provinces - and I've spoken to some legislators in the past - always had a concern about how Ottawa handled immigration. Their own concern in the provinces - you've made some mention of this - is that there should be some sort of input or agreement struck to assist their needs. But given the fact that immigration is such a political animal, those in the federal end would set the policy to, say, attract a number of immigrants from Asia, and maybe there was a need within one of the provinces in Canada to have individuals heavily into construction or labour. The last crop that came through were at retirement age, and their children never followed through in the same profession their parents did, but here was a need. Sometimes those within the Asian community, for instance, would not generate or move toward that type of profession.

So how do you address those situations here, if we're going to be setting immigration policy that would accommodate such a province?

Prof. DeVoretz: I strongly believe that provinces should have a say in the composition in total numbers. I think the procedure would be an adding-up phenomenon, in that over this three-year period it would allow you to interview potential employers, as well as provincial bureaucrats, to tell you where they think the short-run shortages appear in terms of both the geography - for British Columbia, whether it's Prince George or Vancouver - and what the occupations are. These numbers, when summed up across provinces, should give us an approximate total, country-wide, recognizing Quebec's special position here.

I think this information must be brought forward, and it takes time. That's why I'm much in favour of this three-year - I hesitate to call it planning, because I'm a market economist - information gathering. But I think one of the key points here is to allow private business to recruit during this period - to listen to them and give them slots during this period. They know better what's coming down the stream two years later than any economics professor, whether they're at Simon Fraser or not. So I think this is part of the planning procedure to get the numbers.

I would add the number of economic immigrants up and double them, because I'm in favour of allowing the family class to come in, as I said before. So my procedure, on the provincial level, is interview, get information, give some slots to private firms, add them up, double them, and report on November 1.

Mr. Hanger: Do you see any of that happening right now?

Prof. DeVoretz: I see some movement to that, yes, and I'm just an observer. Apparently, British Columbia, while the minister was there on April 20, received several suggestions, including remarks in the newspaper. But he did sign an agreement, albeit on settlement programs, with British Columbia. This is a major change. British Columbia has been holding out for a long time, and I think it's very positive to have this sort of adding-up phenomenon.

.1230

Mr. Hanger: Do you think there should be a series of agreements, such as the Quebec-Canada accord, right across the country, with each province?

Prof. DeVoretz: We couldn't have Quebec-Canada accords across the provinces the way it's written, but I think similar cooperation is appropriate, yes.

Mr. Hanger: You're of the opinion, though, it should be more nationally driven, rather than the specifics of the accord.

Prof. DeVoretz: I think it should be more provincially driven than the specifics of any accord. If I understand you, I think I would want to add up from individual provinces.

One important proviso under the charter is that once people arrive here, they can move anywhere they want. So a lot of this is wishful thinking -

Mr. Hanger: Exactly.

Prof. DeVoretz: - and we have to recognize that if Saskatchewan says it wants...that's unfair. If the prairies say they want a million people, they have to recognize that's unrealistic. If they let a million in, they would quickly leave. So there have to be some restrictions on this adding up.

Mr. Hanger: May I continue?

The Chairman: Keep going.

Do you have a plane to catch?

Prof. DeVoretz: No, sir. I have a class next Monday. - I shouldn't have said that.

Mr. Hanger: About the Quebec-Canada accord, it certainly has provisions all its own that really have no equal status anywhere else in the country. You're still saying, though, there should be a national immigration policy.

Prof. DeVoretz: Yes, I think somebody has to do the addition, sir. Somebody has to add up the total. Somebody has to add on the family reunification class, and somebody has to reconcile differences amongst provinces.

I'm saying, quite sincerely, if the data do not support 200,000 immigrants moving to province A, then someone has to say I'm sorry, that's unacceptable, the information is incorrect, private businesses are reporting they don't need anyone, so we will not.... I think you need a final judge in the situation; a strong final judge.

The Chairman: I have a couple of questions.

The 200,000-odd level: is that anchored ultimately in trying to get a 1% population growth?

Prof. DeVoretz: A population growth of 1% would require something closer to 300,000, sir. The 217,000 to 255,000 I have in the book is really predicated on information in the book, which is just economics.

The question on the floor about optimal population size was a little wider ranging. Sticking with that wider range, it all depends on the number of children we have in this country, and of course it continues to be well below the replacement rate. It's down to about 0.7% instead of 1.2%. So the numbers would be higher than are in the book to get the 1% population growth rate: around 300,000.

The Chairman: I thought you said the optimal population of a 1% annual growth each year was grounded in economics; that's justified in economic terms.

Prof. DeVoretz: Yes, but not inside the book, sir. There are other papers. The economic reasons are both in terms of fiscal...and I'll just give you an example.

We make a contract, an implicit contract in this country, that if taxpayers pay for my education, then I pay for the people behind me.

The Chairman: Right.

Prof. DeVoretz: That 1% helps us do that with some degree of leeway. So all these transfer programs we see are predicated on some small growth. That's number one.

Two, provided the ultimate population growth is well educated and so forth, population growth per se adds to GDP. When you get beyond 1% or 2% in the North American environment, there's no evidence to suggest that further population growth contributes. So a moderate population growth of 1% ensures the integrity of what are called ``inter-generational transfers'' on these public programs, and two, it contributes to economic growth.

Those are the economics of it. It's not in the book, but that's where I get it from, reading the literature. This requires an immigration level of close to 300,000, given our birth rate.

The Chairman: So could we argue then, provided we had the right quality of immigrants from an economic point of view, that we really should have numbers closer to 300,000? From what you just said, does that follow?

.1235

Prof. DeVoretz: That's what I would do, yes. Based almost exclusively on economic criteria, it would be closer to 300,000 than 215,000 or 217,000.

The Chairman: And you would maintain the 50-50 split?

Prof. DeVoretz: Of course, or even more so.

The Chairman: Even more which? Which side?

Prof. DeVoretz: More to economically assessed; slightly more, because I'm cautious; maybe 52% or 53%.

The Chairman: The 2% or 3%...I know they have big implications politically. But I am the MP for St. Thomas. Really, we are just talking about the margins. Whether it's 52-48 or 50-50 or 53-47, it doesn't seem to be that big a deal.

Prof. DeVoretz: It is, sir, in terms of the evidence we have in front of us. The small, marginal changes do have implications for the ability to transfer money to the treasury. That's why it's called ``diminishing returns''. There's evidence that when you move below 50% on the margin to 48%, 44%, the drop-off to the treasury is quite large. So I would say a minimum would be 50%; perhaps 1% or 2% more in case I'm incorrect.

The Chairman: But you're not saying it should be 55-45, because then we would discourage economic immigrants from coming here if we don't allow them to sponsor their families. Have I understood you correctly?

Prof. DeVoretz: Yes. We have evidence that the multiplier, the so-called number of people who are reunified after 17 to 20 years in this country, is about 1.2% per immigrant, which suggests a 50-50 split to me. That seems to be working, and around 50% seems to be correct.

The Chairman: Run that by me again, just a little slower.

Prof. DeVoretz: There's a chapter in the book, and there's other independent evidence, that between 1971 and 1986, if an immigrant entered this country, the average number of sponsorships would be approximately one.

The Chairman: Right. Okay.

Prof. DeVoretz: So that suggests a 50-50 split, one person, one additional person. That's where I get the number from.

The Chairman: Okay.

Mr. Hanger: At present, Canada is accepting about 15% independent immigrants. When you speak of your higher numbers, 50%, you're not just looking at those specifically assessed, but you're including family, I would suggest.

Prof. DeVoretz: The answer to that is yes, for the reasons I gave before. The immediate relatives are often included in the number. It is not 15%. It ends up at 27% or 30% -

The Chairman: Children and spouses.

Prof. DeVoretz: - and that's how I added up....

My rationale from the evidence is that, first, the spouses that come along often but not always do have characteristics similar to those of the primary applicant. Second, we do have children involved. I don't know how you would deal with them other than by adding them in. But there's evidence to suggest that children of immigrants outperform everyone else. So I'm quite happy in putting them in there in the economically assessed group.

So I do, yes.

Mr. Hanger: Just for clarification on family class, what is your definition of family class?

Prof. DeVoretz: Mine is more or less the current one, which would be not the immediate family household members, not the minor dependants plus spouse, but everyone else. The family class would include for me assisted relatives and/or parents and/or grandparents, although I have a little more flexibility on assisted relatives, because they are somewhat points assessed. But when I speak of the family class, I mean assisted relatives and/or grandparents and parents.

Mr. Hanger: You say when immigration levels fall you limit the family class to some multiple of the independent intake the previous year. How would that work?

Prof. DeVoretz: How it works is as follows, sir. Every three-year plan, I would want to have 50% of the migrants in the economic class. So how do I arrive at that? I look at how many economic migrants we had in the previous two or three years. I add them up and divide by three.

For example, if we had 100 in 1990, 100 in 1991, and 100 in 1992, that tells me on average in those three years we had 100. I would just double the intake in 1994, 1995, 1996: 200, 200, and 200. I would always base the future number on the immediate past of the number of economic immigrants, and then just double it.

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Mr. Hanger: So family class to you does not include immediate dependents?

Prof. DeVoretz: Getting back to the earlier question, no. I put them together for the reasons I gave, because they economically performed well.

The Chairman: We'll come back to you, Art. Do you mind?

Mr. Hanger: Sure, go ahead.

The Chairman: You've spoken of the need to economically assess the family class - and I'm getting confused by some of the terminology here. You've advised that some 60% of the current family class are composed of spouses and dependent children. Are you confining your proposal to parents and grandparents?

Prof. DeVoretz: My definition of the family class, sir, is assisted relatives, parents and grandparents. They are not the immediate spouse of the assessed relative nor the minor children of them. So when I come up with 50-50, I put that group in the economically assessed for the reasons I gave.

The Chairman: So if a man emigrates here and he brings his wife with him, she's part of the economic class under the current definition, and if some other man emigrates, spends five years here and then goes back to his home country and then marries somebody and sponsors her, she becomes a family class member. That's what the term means now, correct, the way it's normally used? Does it matter?

Prof. DeVoretz: I'm wondering whether it matters. You have a case of differences in timing here. Maybe I'm getting a little fuzzy upstairs. My remarks are in regard to the primary applicants who, when they make their application, include dependents or not in that total number. In any other situation I would tend to put them in the family class. If you have a fiancée whom you sponsor later, I would tend to look at that as a separate issue, as a family class, for obvious reasons.

So I think what you're doing is making me appreciate the need to hone this down. At this point, I would say unequivocally that the primary applicant, spouse and minor children constitute one ingredient in the economic class. The other one is the business investors.

The Chairman: Right. I have a final question on this point to make sure I'm clear. When you said give bonus points to family members, you're not suggesting that if a parent or grandparent can't meet certain criteria, like speaking English or whatever, we refuse them. I think you were just suggesting that they wouldn't come over as quickly as somebody else who might have bonus points. Do I have that correct?

Prof. DeVoretz: Yes, you do.

The Chairman: Let me go back to a broader point, the 300,000 number. Are you suggesting that we should be aiming at an immigration policy that maybe five or six years or three, four or five years down the road is designed so that we have the mix right and then we can justify a higher level that would keep our population growing by 1%?

Prof. DeVoretz: Yes.

The Chairman: We would take that out into the community and say that this is how we justify it so we wouldn't have the backlash against what historically would be a high level of immigration?

Prof. DeVoretz: Yes.

Mr. Hanger: You're talking about scientific evidence, and, again, in your statement here, it illustrates that the economic returns to Canada from immigration are still positive in the 1990s, but they're diminishing from what they were in earlier periods. Is there anything else to support...? Is that just your scientific evidence, or are there any other essays in this book that reflect the same thing?

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Prof. DeVoretz: I would say that every essay in that book reflects small- or medium-sized positive benefits, with the exception of one important essay, and that's the essay on the trade effects of immigrants. There the evidence is that he can't find any evidence of any relationship, but each one of the essays would either be small- or medium-sized benefits in 1991 and 1992.

Mr. Hanger: I have one other question; I know my time is running out and undoubtedly the committee's too.

The Chairman: There are only two of us here. Take as much time as you want.

Mr. Hanger: Our guest is probably getting pretty tired too.

Right now, the average age of the immigrant population is not very different from that of the population of the country. A lot of it probably stems from the family class. If you're going to look at the benefits that are provided by a younger population to deal with such matters as pensions - since you did bring the pension aspect up - the only way we're going to really adjust that significantly from what I can see is no family class at all beyond parents, young parents and dependent children.

Prof. DeVoretz: The average age of the foreign-born population, according to the 1991 census, is around 43 or 44 -

Mr. Hanger: Yes, and the average age of the Canadian population, I believe, is close.

Prof. DeVoretz: - which means that they replicate the Canadian population.

My suggestion in the book, and here today, was to move people who were younger up in the queue in the family class. That's one way of addressing that.

The second point is that evidence from the book suggests that even if their average age is 43, they are not a net draw on the pensions, even given the fact that they arrive here. One of these is due to the legal reasons of the rule of ten. One of the pension programs requires you to work here ten years continuously, whether you're Canadian-born or not, to take available.... My mind's a little fuzzy on which one. But there are certain eligibility requirements that will prohibit some of the foreign-born from collecting if they come in after age 55, because they won't be able to work ten years.

But also, I think the most important finding is that according to Statistics Canada information, when you control for everything, the foreign-born outsave and have a larger net worth than the Canadian-born. Why are they doing this? Because they are putting some of this aside to use during their pension years - the evidence is there - as well as transferring it to their kids.

So I'm not as concerned about the economic impact of the family class aging the population as some people are. Nonetheless, everything else being equal, I'd like the immigrant population to be younger. You're exactly right. You get a longer pay-off from it.

The Chairman: Can I tap your brain to get a little history lesson. What policies would we have had to have and when would we have had to have them if you had written a book called Expanding Returns instead of Diminishing Returns?

Prof. DeVoretz: If I change the title to Growing Returns?

The Chairman: In other words, when did we mess up or get it wrong and to what degree?

Prof. DeVoretz: Yes, that's exactly what I'm thinking of: where did we turn around? I think one of the mistakes occurred in the mid-1980s, 1984-85, in which the tap was turned off for all immigrants except the family class members. So during that period, if you look at these lower numbers of 80,000 or 85,000, they were quite a bit smaller. Almost all of them were in the family class. This brings forward in a lagged effect a large number of people who were just in the family class who don't contribute as much to the treasury. So the historical lesson, the turning point, is around that period.

Where did it start? It started with the dramatic policy change in 1976 and the changing regulations in that policy, which extended the definition of family class plus put into place regulations that prohibited immigration if there was any unemployment in a particular occupation.

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So I would say it starts in 1976 with various regulations put into place, but, bang, it hits during the teeth of the 1981-1983 recession. This is revealed in the evidence in the 1991 census.

Things, however, will change by 2001 if we correct some of the regulations in the policy and remember never to go well beyond 50% in the family class again.

The Chairman: I'm trying to remember the table. There was one year when we allowed only 81,000 people. That was in the early 1980s, wasn't it?

Prof. DeVoretz: I believe 1981 was a higher figure, sir. I think we're talking about 1984-85, when we see the strict contraction. In fact, I'm almost sure it's down below 100,000. It was down or around 100,000 throughout the mid-1980s. It's only after 1988 that we get the increase.

The Chairman: After 1988, did we start to correct it? I know the numbers went way up, but did we get the mix better?

Prof. DeVoretz: In one region, yes, sir. I think it was fortuitous. I don't think it was a conscious policy to say one region would then get mostly business investors...and points assessed with their spouses coming into the region. It was just fortuitous.

The Chairman: And in the other four or so regions we have had the wrong mix right through until recently.

Prof. DeVoretz: From an economic point of view, yes, sir. That's why I can't write a book called Increasing Returns for this period.

Mr. Hanger: I am looking at page 26 of your book here. You talk about incentives such as language training to encourage immigrants to move to areas of the country that are growing economically. How would you make this work?

Prof. DeVoretz: I would provide incentives, sir. I would not in any way penalize anyone. Incentives would be in the form of settlement programs being more accessible in rural areas. Language training, which I mention, is absolutely crucial, being more readily available in non-major metropolitan areas; for example, in British Columbia: Kelowna. But perhaps in central Ontario and some of the regions outside of Metro Toronto I would give incentives to tell people if they move there they could take advantage...or use the programs more readily.

I initially might even give bonus points, but not very many bonus points, because of the problem that people move. I don't want people to be falsely attracted to move to a rural area in the expectation they'll stay there.

So mainly incentives in the form of settlement services. No tax breaks - I don't believe in that for that - and perhaps some bonus points. I await my next student's PhD dissertation to tell me that if people move to smaller regions, they stay there. If that's true, then I'd give bonus points.

Mr. Hanger: But doesn't that happen right now under the present provincial needs? If there's an area in the province that has a specific labour need, aren't there incentives under the present system?

Prof. DeVoretz: There are economic incentives. As yet, we don't know if they maintain those people in the areas for a long period of time. For example, we know when we did a special study of Vietnamese immigrants many of them were moved into semi-rural areas in the so-called Fraser Valley. Subsequently, in the 1991 census, they appeared in Metro Vancouver. That's part of the aging process. Many of them came there young.

So I don't know whether a policy for incentives will hold them there in the long run, but I'd be willing to try it. I don't want any money to do it. But in particular, settlement programs...if you guarantee then a spot in the English language program, I'm sure you're going to give people an incentive to move there.

Mr. Hanger: But isn't that working right now? The provinces still have incentives in the mere fact that they're providing jobs for people with certain skills. It's already happening. What more incentive...?

Prof. DeVoretz: But therefore I would suggest it's not working, sir, because most of the immigrants still are going to Metro Toronto or Metro Vancouver.

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If we are concerned with some of the other non-economic issues that were mentioned here, e.g., about carrying capacity, then as long as we're not using money to give incentives, as long as we're not violating the charter, guaranteeing a spot in the English language if you move to Kelowna, Barrie or some other place is entirely appropriate to get them there in the first place. I don't know how long you can keep them there, sir.

Mr. Hanger: Yes, but that's my question. What other incentive could you provide? Could you give me an example? What other incentives could you provide other than providing a job and saying, okay, here's an opportunity to make a livelihood, as opposed to going over to this other major centre? Certainly you may feel more comfortable with those of your same culture, but you may end up on welfare.

Prof. DeVoretz: I wouldn't want to provide too many more incentives for two reasons, sir. First, I don't want government money spent on it, and second, I try to be pointed about making it language-related.

If you provide English and/or French where appropriate, that's the sticking power. That's what keeps people there. I have no scientific evidence, so I didn't want to mention that explicitly. Preliminary evidence suggests you don't have to do very much more than ensure that they can speak the dominant language in the area where they're residing, and they'll stay there. You don't have to give further incentives.

The Chairman: I'll just talk to you for a few minutes about.... Are you familiar with the columnist, Diane Francis?

Prof. DeVoretz: I'm aware of her, yes.

The Chairman: She occasionally writes on our immigration policy.

Prof. DeVoretz: Yes.

The Chairman: One thing she said was that she's quite critical of allowing grandparents into the country. They cause an excess demand on our health care system and it costs a lot of money. Is there a quick rebuttal to that point?

Prof. DeVoretz: Yes, not to be flippant, sir, I think it's in chapter 5. There's a very strong rebuttal in Shamsuddin's paper on pensions. The reason he gives is very intellectually sound. The older you come here, the less likely you're to be eligible for some of our plans because you must work 10 years and a day.

The Chairman: What about health care though?

Prof. DeVoretz: Health care is a different issue. That's an entirely different issue.

The Chairman: That was her main point. They're going to cost the health care system hundreds of thousands of dollars, and we shouldn't let these old people in.

A voice: Millions.

The Chairman: Millions? That's correct.

Prof. DeVoretz: David Foot is the expert on this and I'm referring to his work at the University of Toronto. As I read his work, he does not indicate that it's going to be millions or hundreds of millions of dollars.

When we've discussed this, it's very clear that the representative family paying these extra tax benefits over their lifetime will more than pay for these older family class members coming in. To make myself clear, those statistics in the book do include health care costs.

We have a number in there that does recognize health care costs for everyone, old or young. If we look at the group as a whole, these inordinately old people may be having a special impact on health care, but if you sum it up all together, the group is still paying more into the treasury than it's using for health and everything else.

So, now that I think of it, I would say that in fact she's dead wrong. If you look at everyone, she's absolutely wrong.

The Chairman: And your argument would be that we need to allow people to bring their grandparents in as part of making Canada an attractive place, to get the right mix?

Prof. DeVoretz: Partly, and partly because evidence is beginning to come forward from people, the authors in this book, that they provide useful services. They release younger children to work in the labour force because they provide day care.

The Chairman: Art, do you want to...? I can give you a few more minutes to think, if you wish.

Mr. Hanger: I would have more questions, but my time has run out.

The Chairman: Let me make one final point, just on process. The department is coming forward with a critique of some of the chapters we're focusing on. If we were to send you that evidence, I'm just wondering whether we could get your response.

Prof. DeVoretz: I'm teaching this summer. I'm not hedging; I'll tell you what my schedule is. I start, as I say, a week from today. It's a full teaching schedule in the summer. I certainly would make that my number two priority. I don't mean to be facetious.

The Chairman: No.

Prof. DeVoretz: My number one priority is teaching, and I certainly would go through it -

The Chairman: Great.

Prof. DeVoretz: - and have other authors go through it as my number two priority.

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The Chairman: So we can set up a dialogue?

Prof. DeVoretz: Of course, recognizing my teaching schedule.

The Chairman: They've also said they're interested in facilitating research by academics. Has that been your experience with them? They want to be as helpful as they can to people like you.

Prof. DeVoretz: Yes, I consider access to the numbers they collect much more crucial than money. Since 1987 they've been excellent on that, given confidentiality restrictions.

Nobody has money any more, so I base it on numbers, and the answer is yes, they have been very helpful.

The Chairman: Do you want to make any closing comments?

Prof. DeVoretz: No, but thank you very much for having me.

The Chairman: We appreciate you coming. Thanks very much.

We're adjourned.