Will 1970s Economic Theory Kill Atlantic Canada’s Economic Rebound?
David Campbell is a Moncton-based economic development consultant and co-host of the Huddle podcast, Insights. The following piece was originally published on his blog, It’s the Economy, Stupid!, on Substack.
I just listened to someone described as a top labour economist in Canada arguing that we should not increase immigration levels in Canada. It was a podcast featuring Mikal Skuterud, a labour economist at the University of Waterloo.
He made several fairly disjointed arguments but his main thesis was a standard labour economist argument: moving from a “highly skilled” immigration focus to one that is more broad-based will depress wages and stifle productivity. He argued we should limit low-skilled immigration and force industries to focus on productivity to drive up wages.
There were some fairly strange moments. He argued for highly skilled immigration and then decried the fact that so many high-skilled immigrants were working in low-skilled industries. At one point, he said that all his labour economist friends felt the same way: moving from an immigrant rate of 0.4 percent/population to something higher will hurt Canada and the economy.
There was no mention in the hour-long podcast about the demographic shift as Baby Boomers retire. There was no mention of provincial and regional labour markets. There was only a high-level argument that could have been lifted right out of a 1970s textbook.
So, here is my fear.
A national political party decides to listen to these labour economists and restricts immigration to 0.4 percent and to “highly skilled” immigrants. What happens next? The politicians hope it leads to a stronger and more productive economy. In reality, we go back to a world where the MTV (Montreal, Toronto, and Vancouver) regions receive almost all the immigrants and throttle the economy in much of the rest of Canada.
You and I know that in a world where inward migration is restricted MTV will benefit – and MHC (Moncton, Halifax, and Charlottetown) will get left behind.
I don’t think this is a tiny risk; I think the risk rises by the day. Once the politicians make it policy, you start seeing wider arguments being made: political advertisements on your Twitter stream saying that immigrants are taking our jobs, committing crimes, increasing health care wait times, and eroding our culture.
We need to enlist as many labour economists as we can around a vision for a reasonable immigration strategy. A strategy based on a realistic assessment of labour market demand across Canada that will support modest levels of real GDP growth (around two-to-three percent).
Yes, it should go without saying that we need to boost productivity, but this has to be part of a broader strategy to grow provincial economies, not a blunt instrument that throttles regional economies with the hope that the last companies standing will be highly productive and pay high wages. That sounds like a de facto “Northern Canada” strategy for Atlantic Canada.
As for this myth of the highly skilled immigration model, the truth is that MTV used immigrants to meet labour market demand across the spectrum. As shown in the following chart, immigrants accounted for 50 percent of the Toronto CMA workforce in 2016; for many lower-wage industries the share was much higher than that.
Sure, there were a lot of highly skilled immigrants settling in Toronto, but there were just as many lower-skilled people. This is an advantage that the MTV region continues to have over smaller urban centres in Canada and that is why we are seeing more flexible programs, such as the AIP.
Just as an aside, look at clothing manufacturing. There were close to 7,000 people in Toronto working in that sector in 2016 – that’s seven times as many as in all of Atlantic Canada. Guess what the immigration rate in that sector was in Atlantic Canada: nine percent. That’s compared to 82 percent in Toronto.
Am I suggesting we want to revive the textile sector in Atlantic Canada? No. I am saying that Canada’s largest urban centres have thrived by having an immigration and international student pipeline that addressed workforce demand across the spectrum. That PET bottle manufacturing plant that shut down in Moncton (paying $24/hour wages) and moved to Brampton (paying $17/hour wages) is another example. Now, plastic bottles filled with pop are sent all the way from Toronto on trucks. Let that sink in. That is what could happen to every trade-exposed sector in our region without a strong workforce development strategy.
How do we get a little more nuance out of our labour economists? They run macroeconomic models that spit out conclusions based on the past and then apply them to the future?
I have one more point about this specific labour economist. He made a point of emphasizing several times that he was an immigrant. He told multiple stories of the challenges of immigrants in his frame of reference. This just proves that academics are humans and shaped by the world around them. He is basing his position on his understanding of immigration in Toronto. Moncton and Halifax and Charlottetown are not Toronto. Maybe we need to unleash an army of labour economists studying at Dal or UPEI or UNB? The problem is their profs likely studied under the same group of labour economists referenced above.
Keep an eye on this one, folks. Any big social or economic change starts in academia before spilling out onto the streets – just the way we want it – but in this case for me the gamble is not worth the risk.
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