Tim Sargent’s recent Hub DeepDive into productivity is a great primer on how economists calculate productivity and how immigration affects it. But the article reminds us that by describing things with economic terms we can lose sight of what we really care about. Economic thinking that centres people over statistics might lead us to different conclusions.
Despite the piece’s title (“Who benefits from Canadian immigration? Hint: it’s not Canadian workers”), it’s not obvious that Canadian workers are hurt by higher immigration. Instead, immigration may have postponed a policy reckoning.
Sargent explains why temporary foreign workers might reduce labour productivity. Labour productivity is an average (value created per hour worked by all workers). Technically, overall productivity is brought down by all workers with fewer skills, experience, and connections (what economists call human capital). This is true for both temporary foreign workers and Canadian teenagers taking their first job.
We can get into trouble if we do what economists call “targeting an indicator.” Productivity is a valuable economic indicator because high productivity helps economies grow. Growing economies provide the things people need at prices they can afford. But it does not follow that forcing up average productivity automatically leads to growth.
Remember why productivity matters. Canada would not be better off if we boosted productivity by outlawing unskilled labour. The “productivity” measure would go up because the remaining workers would all have higher productivity—but we’d lose a tremendous amount of economic activity. We would all be poorer. We would get a temporary boost in the indicator at the cost of economic production.
No one is recommending that we eliminate unskilled labour. But worries about the effect of temporary foreign workers on labour productivity make similar assumptions.
Here’s one problem with those assumptions. With enough new workers, low productivity per worker can still add up to economic growth. The Globe and Mail’s Andrew Coyne has been shouting from the rooftops that Canada’s economy is barely growing. It is barely growing despite the added output from many more immigrant workers. Cutting new, low-productivity workers might technically boost productivity. But it would almost certainly do so at the expense of growth and maybe even make us poorer. Economic growth is needed not just to pay for social programs. Economic growth also produces the goods and services that we need from the private sector.
Productivity was already falling before immigration increased or the temporary foreign worker program expanded. Coyne points out that the productivity gap between Canada and the United States has been growing since the turn of the century. Increasing productivity by blocking low-skilled foreign workers isn’t going to fix this problem. Technical tinkering isn’t going to make up for the lost growth we can get from simply throwing workers at the problem.
Sargent also provides valuable context about immigrant productivity. He explains that new immigrants typically have lower productivity, but it rises as they become established. Once they have been in Canada for ten years, they are almost as productive as a native-born Canadian. This is important!
