Canada’s skills gap continues to widen, according to study

According to a new study from global recruiting firm Hays PLC, which surveyed the skills gap in 30 developed countries around the world, Canada ranks ninth for the severity of its skills shortage, and its score deteriorated in the past year.

Countries such as Japan, the United States, Germany and Sweden top the list in skilled worker shortage.

Study shows that Canada ranks 9th in the developed world in shortage of skilled workers

The report highlights two key findings

First, the state and the efficiency of a labour market in any particular country is not necessarily driven by the state of the economy in that point in time. Rather, the data suggests through the index that the efficiency of the labour market is driven by more structural factors. That said, the governments can introduce reforms to improve those structural factors, regardless of where they are in the economic cycle.

The second key finding that the index illustrates is that there is a very strong link between the efficiency of an educational system and the ability of that economy to produce the talent that the nation’s industries require both today and in the future. Making sure that business and the educational systems are in sync to produce sufficient numbers of the right quality graduates in the right areas for future talent. That’s the fundamental part of what drives the efficiency in any particular market.

As the global economy recovers and as the Canadian work force continues to age, without a change in policy, the situation in Canada and other developed countries will likely get worse. Canada is falling behind in implementing enough changes to meet the demand for highly skilled migration.

How to improve the skilled worker shortage and avoid disaster in the future

As according to Alistair Cox, the chief executive of Hays PLC, there are three areas where business and the governments can work together to strengthen these labour markets and reduce these inefficiencies that we see in some of these economies:

The first is for the government to foster a business environment of flexibilities, where businesses can build the work force they need for the future. This can be achieved through flexible working arrangements and skilled immigration.

The second method is to make sure that the educational system in an economy are really tuned into what businesses are going to need in the future in terms of the number of right skills.

The third is for businesses to look at their own policy in terms of attracting and retaining staff. Not just younger staff but also retaining and retraining older staff within their own work force.

Immigration Canada making changes

It’s not yet known how effective it will be, however, Canada is working on some changes in the system that are expected to be implemented in late 2014. Last year, Immigration Canada and the provinces, reached an agreement on the future of Canadian immigration system. The system will give the provinces a central role in immigrant selection. This new system will be based on a model called Expression of Interest (EOI).

The EOI model is an immigrant selection process which requires those seeking to immigrate to first file a simplified application, with immigration authorities. From that pool of applicants, the most promising candidates, based on the immigration department’s selection criteria, are then selected, and invited to submit a full application which includes documentation to prove their claimed qualifications.

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Canadian Economist Calls for Employment-Based Immigration Selection Process

A new report by SFU Professor of Economics (Emeritus) and Fraser Institute senior fellow Herbert Grubel calls for a total overhaul of Canada’s immigration selection process (Simon Fraser University)

A new report by Canadian economist and former Member of Parliament Herbert Grubel calls for Canada’s point-based immigration selection process to be completely replaced with one based on employment.

Grubel, who is a Fraser Institute senior fellow and a professor emeritus of economics with Simon Fraser University has been a longtime proponent of placing more limits on immigration, a position which he views as an extension of his fiscal conservatism.

The report contends that immigration costs Canadians $20 billion annually, as a result of immigrants paying less in taxes while using up just as much in government services as the native-born population.

While welcoming some of the recent changes made to the immigration selection process by former Immigration Minister Jason Kenney, Grubel argues that they do not go far enough, and proposes two major changes to Canadian immigration to make it more economically beneficial to native-born Canadians:

  • Elimination of parent and grandparent (PGP) sponsorship for new immigrants. The report notes that following the initial 10-year period when sponsors are financially responsibility for the costs of the social benefits received by their sponsored PGP, the percentage within this cohort that receives social assistance immediately increased from 3 percent to 20 percent.

    While welcoming the new 20-year sponsorship period that is to come into effect for the PGP sponsorship program, Grubel says that the enforcement of the sponsor’s responsibilities will be difficult, and it would be simpler to simply eliminate PGP sponsorship as a permanent residency program.

    Grubel proposes a transition period whereby all immigrants who became permanent residents before his proposed rule change maintain their right to sponsor their PGPs for permanent residency, while immigrants who arrive after lose this privilege. In this way, Grubel argues the elimination of the program can be done fairly, by allowing those who immigrated to Canada under the assumption that they would be able to sponsor their PGPs to retain this ability.

  • Replace point-based assessment method of selection with employment-based selection. Grubel suggests only skilled workers with pre-arranged employment should be admitted under the skilled worker program. He argues that employer decisions on who to hire provide better information on who has the skills to succeed in Canada than a bureaucratic process created by civil servants.

    He proposes however to keep the federal government involved in setting minimum standards and wages, to prevent employers from using immigration to secure low wage labourers that cost taxpayers more in the provision of social services than they pay in taxes.

    An employment-driven skilled worker program, the report suggests, would adjust the number of immigrants admitted according to economic conditions, where immigration would decline when jobs are scarce, and increase when jobs are plentiful. The number admitted per year would therefore match the needs of the Canadian economy better than a number selected through the political process.

Critique of report by the Broadbent Institute

The report’s proposal to dramatically overhaul the Canadian immigration selection process has, predictably, found critics. A recent article from Broadbent Institute fellow Patti Tamara Lenard challenges several of its claims.

Lenard argues that the report’s conclusion that immigrants impose a fiscal burden on other Canadians, which it draws from statistics showing recent immigrants have a lower average income and pay less in taxes than the average native-born Canadian, neglects the fact that immigrants are younger than the average Canadian when they arrive in Canada, and therefore is faulty.

The report’s analysis of immigrant income does not include only immigrants who just arrived in Canada however. The immigrant cohort used by Grubel’s comparison is individuals who arrived in Canada between 1986 and 2004, and the length of time they were in Canada ranged from 1 to 18 years.

While Lenard’s suggestion that the analysis compares younger immigrants to older native-born Canadians is not supported by the composition of the dataset used by the report, it is true that Grubel does not make an effort to control for age in his analysis, and therefore it could be an unaccounted factor in the income gap.

Lenard also disputes the report’s assumption that immigrants are as likely to use social programs as the rest of the Canadian population, citing a Swedish study that finds that Canadian immigrants use fewer social services than the general population. The report’s estimation on the cost of the social services used by Canadian immigrants is therefore too high she argues.

Lenard’s article in places makes some hasty and inaccurate criticisms of Grubel’s report. She claims for instance that the report states that “in 2011 over 50,000 [Parent and Grandparent] immigrants entered Canada”, but that the actual number was 14,000.

In actuality, the report cites Citizenship and Immigration Canada’s (CIC) own data projecting that over 50,000 PGPs will become permanent residents over 2012 AND 2013, a two year period, not in a single year, 2011.

Lenard also claims that the report “implies .. we should expect [PGP’s] health care costs to mimic those of Canadians aged over 65″, and that this is misleading, due to the fact that PGPs’ health care costs are covered by their sponsors for the first 10 years after their arrival. The content of the report does not support Lenard’s claim, as it clearly conveys the same point Lenard claims it neglected, and instead focuses on indications of high social assistance costs for PGPs once they turn 75 and are no longer the financial responsibility of their sponsors.

Gaps in data

While the Broadbent Institute’s review of Grubel’s report falls short in providing an informed critique of the report’s proposals and arguments, it does touch on the gaps in the data on the economic impact of Canadian immigration, and the heavy reliance on conjecture – which is more subject to the influence of ideology – in discussions on the optimal immigration selection process for Canada.

As a result of the many unknowns surrounding immigration and its impact, it will likely remain a contentious issue in Canada for years to come, until more data on the economic outcomes of Canadian immigrants is generated, and Canadians have a clearer picture of what programs work and which ones don’t.

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Immigration Boosting Canadian Housing Sector -Analysis

A house in Greater Vancouver, Canada. A report by the National Bank of Canada says the effects of immigration on demographics will keep housing prices in Canada from falling (Tony Fox, GFLD)

A new economic analysis credits immigration for keeping Canada’s housing sector growing amid a slowdown in the developed economies.

As reported by the Globe and Mail, a National Bank of Canada (NBC) report on the Canadian housing market finds that the so-called ‘household forming cohort’, which is the segment of the population aged 20-44, is growing much faster in Canada than in most developed countries.

Without the influx of 147,000 new Canadians aged 20-44 through immigration, the demographic would have seen a decline in 2012, according to NBC senior economist and report author, Matthieu Arseneau. The average growth rate of the 20-44 demographic was negative 0.3 percent last year among the rest of the developed economies, compared to the positive 1.1 percent growth rate seen in Canada.

Arseneau cites a high rate of employment among foreign born Canadian citizens, which is lower than only New Zealand and Norway’s, as a pull attracting foreigners to immigrate to Canada.

The report projects the growth in Canada’s 20-44 cohort will decrease after 2013, but will remain positive, and will exceed that of other developed countries. This demographic trend, Arseneau argues, will provide the country’s housing market with a comparative advantage over those in other developed countries, and reduce the likelihood of a crash in Canadian housing prices as predicted by some market watchers.

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Canada comes in top 5 among G20 in Entrepreneurship Ranking

Lack of regulatory barriers, availability of venture capital funding and a culture that embraces entrepreneurship placed Canada in the top quartile in the EY G20 Entrepreneurship Barometer 2013 (U.S. Department of State)

A new report by Ernst & Young places Canada’s entrepreneurial ecosystem in the top five among the G20 countries.

The G20 Entrepreneurship Barometer 2013 ranks a country’s entrepreneurial environment according to its score in five sub-categories: access to funding, entrepreneurship culture, tax and regulation, education and training, and coordinated support between government, academic institutions and the private sector.

The formulation of the ratings relies on business environment indicators, like number of new businesses started per year, data collected in a survey of more than 1,500 entrepreneurs across the G20 countries, the insights gained in interviews with entrepreneurs, academics and experts, and a qualitative analysis of government initiatives to encourage and assist entrepreneurship.

Canada came fourth in the access to funding category, thanks largely to per capita venture capital funding that is second only to the U.S. It ranked third in entrepreneurship culture, behind the U.S. and South Korea, as interviewees had a generally positive opinion of the country’s attitude toward entrepreneurship and its acceptance of failure (more accepting than other countries).

In the tax and regulation category, which scores countries by the ease of complying with regulations when starting and running a business, and the number of special tax incentives for entrepreneurs, the country came second, after Saudi Arabia, for its simple business registration process, lack of labour laws allowing for a flexible labour market, and an abundance of tax subsidies for small and medium sized enterprises.

While the G20 Entrepreneurship Barometer is one of many possible ways of determining the quality of an entrepreneurial ecosystem, and has not been shown to predict for entrepreneurial success, Canada’s strong showing will at the very least help boost its image globally as a centre of innovation and a country that’s open for business.

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Montreal Tops List of Best Cities for International Students

Cultural attractions like the iconic Montreal Museum of Fine Arts helped give Montreal the top spot in the ‘social experience’ sub-index of the Sea Turtle Index

An index commissioned by the Bank of Communications (BoCom), one of the largest banks in China, places Montreal, Canada as the best city in the world for international students.

Other Canadian cities that ranked well include Toronto (4th) and Vancouver (15th).

Created by the Economist Intelligence Unit (EIU) with design input from BoCom management, the Sea Turtle Index (a name referring to Chinese students who study abroad only to return, like sea turtles, to their country of origin) ranks foreign student destinations according to five sub-indices:

  • Educational returns: the international value of the education provided in the city relative to its cost
  • Financial returns: the openness of the investment environment to foreign nationals and the amount of volatility risk that could effect investment returns
  • Real estate returns: the return on investment in the local real estate market
  • Work experience: the local job market for foreign students and graduates in terms of availability of jobs, wages and low-taxes
  • Social experience: the city’s level of culture, worldliness and multi-culturalism

Of the 80 cities included in the index, Montreal came in 6th place in the ‘educational returns’ sub-index, behind only Cambridge (1st), Oxford (2nd), London (3rd), Seoul (4th), and Beijing (5th).

Montreal benefited from having comparatively affordable universities and cost of living while providing high quality tertiary education. Vancouver and Toronto also had their score helped by their low cost of living, although not as much as Montreal which was found to be a more affordable place to live.

None of the American cities included in the study made the top 10 in the educational returns category, despite several being home to some of the best educational institutions in the world. The poor showing was largely due to the high cost of tuition for their undergraduate programs.

Some cities, including Singapore, Hong Kong and New York, saw their educational returns ranking pushed down due to a high cost of living.

The EIU included a ‘financial returns’ sub-index owing to the fact that the parents of international students and often international students themselves like to make investments in the city where the students live.

None of the North American cities included in the study made the top 30 in this sub-index, due in Canada to relatively high taxes and in the United States to excessive “money laundering regulations and terrorism legislation” stifling financial freedom.

Hong Kong placed first in this ranking, followed by Auckland, New Zealand (2nd) and Santiago, Chile (3rd), which benefited from having comparatively few regulations on finance and banking that restrict international capital flows.

Three Canadian cities made the top 30 in the ‘real-estate returns’ sub-index: Toronto (4th), Montreal (12th), and Vancouver (13th), while Hong Kong took the top spot thanks to its hot real estate market.

Canadian cities did well due to a combination of well-performing real-estate markets and avoidance of the boom-busts that affected many other world cities in the period leading up to and following the global mortgage crisis.

Canada’s openness to foreign investment also helped push its cities above those in countries with real-estate markets that have seen substantial gains in recent years but which have more restrictions on foreign property ownership, like Shanghai, Bangkok, Mumbai and Seoul.

Immigration rules benefit Canada

Canadian cities took the top five spots in the work experience sub-index due to immigration laws that allow foreign students, upon completion of their study programs, to obtain post-graduate work permits that are valid for durations equaling the length of their study in Canada.

This contrasts with the U.S. where international students have few options to stay and work in the United States upon completing their studies.

Edmonton’s combination of a hot labour market and low provincial taxes gave it an edge over its Canadian counterparts and earned it the top spot in the ranking, followed by Hamilton (2nd), Toronto (3rd), Vancouver (4th) and Montreal (5th).

Montreal managed to also share the top spot in the ‘social experience’ sub-index with London, England, thanks to its low rates of violent crime, high cultural diversity and its world renowned cultural attractions.

Canada’s high levels of multiculturalism and low crime rates helped three other Canadian cities: Toronto, Vancouver and Edmonton, make the top 30 in this ranking.

As incomes in China rapidly grow, parents in the country’s large and education-minded population are increasingly able to afford a foreign university education for their children.

Therefore the good showing of Canadian cities in the Sea Turtle Index, which caters mostly to Chinese students seeking to study abroad, portends well for Canadian efforts to make the country a top destination for international students.

With the federal government having committed itself to making it easier for international students to stay and work in Canada and become permanent residents through programs like the Canadian Experience Class, Canada’s appeal to international students could increase even more in coming years.

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Canada Has The Best Reputation In The World According To New Survey

Canadians at a parade in Vancouver. Canada has ranked first in the world in the last three RepTrak global surveys on country reputations (CICS News)

A new study on national reputations, called RepTrak, finds Canada has the best reputation of any country in the world. It’s the third year in a row that Canada has taken the top stop in the annual survey.

RepTrak, which is conducted by the Reputation Institute, surveyed more than 27,000 people from G8 countries to create its rankings. Explaining the results, the Reputation Institute’s Fernando Prado said Canada had done an effective job of communicating its strengths:

“Canada’s results confirm that it is only possible to maintain a strong reputation in the long-term when a country has the ability to transmit its leadership globally in each of the three key criteria: an effective government, an advanced economy, and an appealing environment.”

“A country’s reputation is its personal calling card,” said the President and CEO of the Canadian Tourism Commission (CTC), Michele McKenzie.

She added, “We’re not just inviting the world to visit us; we’re capitalizing on our positive reputation to open new doors and create new opportunities for Canada, such as the impact of the business events travel sector on our economy.”

The different components of reputation measured in the survey were levels of trust, esteem, admiration and respect, and perceptions of 16 attributes of a country, including whether it is a safe place to visit, a beautiful country, has friendly and welcoming residents, has progressive social and economic policies, and is run by an effective government.

Canada scored 76.6 out of 100, followed by Sweden (76.5), Switzerland (76.3), Australia (76.1), and Norway (74.1). The lowest scoring countries were Russia (36.7), Nigeria (34.0), Pakistan (28.8), Iran (22.6), and Iraq (21.2).

This survey found many non-G8 countries had improving reputations, led by Singapore, Taiwan, Peru, Brazil, South Korea, Poland and the Ukraine, which as a group saw an average increase of 5.3 points in their reputation score from 2009 to 2013, which helped them gain ground against the five top countries, which had a smaller 3.5 point increase in their score over the same time frame.

The Reputation Institute says the survey shows a correlation between country reputations and the economic situation of countries, which explains the faster rate of improvement in the reputation of developing countries.

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Canada Top Country for Immigrant Businesses – Financial Post

Canada tops the list of countries to start a business according to a new article in the Financial Post (Martin Cajzer)

An article featured in last Friday’s Financial Post makes the case for Canada being one of the best countries in the world for immigrants to start a business.

Among the factors that make Canada such a welcoming place for immigrant entrepreneurs are its business friendly environment and immigration program, says author Chris Riddell:

The World Bank labelled Canada the best place in the G-7 to start a business, and thanks to an open immigration policy, a comparatively easy one to enter. Add a strong banking system, growing job market, and high standard of living, and it’s no wonder it tops immigrant entrepreneurs’ list.

For many, the government’s Start-Up Visa launched in April is making Canada an even more appealing place.

For business people considering Canada as a destination for immigration, there are three points to consider:

  • The per capita income of new immigrants is well below the Canadian average, with the gap growing since the early 1970s despite the average level of education of recent immigrants increasing in the intervening time. The longer an immigrant is in Canada, the closer their income tends to be to the Canadian average.

  • Immigrants and first-generation Canadians make up a sizeable percentage of Canada’s millionaires, at 48 percent.

  • The average income of immigrants who are admitted into Canada through the business class immigration programs is slightly below that of immigrants admitted through the Federal Skilled Worker Program (FSWP), despite the former group having had to meet stringent capital and business experience requirements.

Taken together, it suggests that:

1) immigrants who arrive through economic class non-business immigration programs, like the FSWP, are likely not at a significant disadvantage compared to their business class counterparts in their chance of creating a successful business, that

2) immigrants are likely more entrepreneurial than the general population, and that

3) many immigrant business people fail for the few that succeed.

Matt Man, a successful immigrant businessman profiled for Riddell’s article, advises immigrants who are starting their business to try to get as much face-time as possible to improve their chance of success:

“Face to face can always make up for some of what I lost due to my accent or the way I’m communicating.”

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Ontario Government Objects to New Federal Job Grant Program

The new Canada Job Program will provide up to $15,000 per person for the training needed to qualify for a job. The Ontario government says the funding cuts required pay for the new program threaten other programs that vulnerable workers rely on (Tomas Castelazo)

The provincial government of Ontario says the diversion of federal funds from existing employment and training programs to the new Canada Job Grant program would threaten vulnerable workers including youth and new immigrants.

The Canada Job Grant program will spend $300 million in federal funds per year and will require matching funds from provinces and territories.

The program will provide grants of up to $15,000 per eligible individual to upgrade their skills for a new job. Employers will apply for the grants on behalf of unemployed and underemployed Canadians that they seek to hire for a job, and will contribute one-third of the grant money.

The Ontario government says that the $194 million in federal funding it currently receives supports many of its employment and training initiatives, including literacy and apprenticeship programs, and a reduction of this transfer to pay for the Canada Job Grant would hurt vulnerable Ontarians.

The federal government says that the new grants program will help 130,000 Canadians become trained for jobs every year, and that paying for it by reducing federal funding for other employment and training programs is necessary for its goal of controlling spending and balancing the budget.

The government is currently seeking the input of the provinces on ways to improve the job grants program.

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48% of Canadian Millionaires From Immigrant Families

A new survey on Canadian millionaires finds that 48 percent are new Canadians and 68 percent are self-made (Government of Canada)

A new survey by BMO Harris Private Banking finds that nearly half of Canadian millionaires are either immigrants or have at least one parents born outside of the country.

The findings suggest a high degree of entrepreneurialism among the Canadian immigrant population, and contrasts with the theme of a recent special contribution to the Vancouver Sun that argues immigrants cost the Canadian $20 billion annually.

The survey further found that 68 percent of immigrant and first-generation millionaires report being self-made – about equal to the 67 percent rate among all Canadian millionaires surveyed.

The province of British Columbia has the highest proportion of millionaires belonging to immigrant families, at 68 percent, while the rate in every other province is below 50 percent.

The BMO Harris Private Banking survey was conducted online by Pollara between March 28th and April 11th, 2013, using a sample of 305 Canadian adults with a net worth of over 1 million dollars.

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Vancouver Sun: Immigration Costs Canada $20 Billion a Year

Protesters in the U.S. calling for amnesty for undocumented workers. Simon Fraser University Professor Herbert Grubel says immigrants reduce wages for the native-born population while increasing employer incomes

In a special to the Vancouver Sun on Tuesday, a Simon Fraser University professor of economics, Herbert Grubel, argues that immigration costs Canadians up to $20 billion a year when all the costs and benefits are tallied.

Grubel, who is also a senior research fellow at the Fraser Institute, goes through some of recent findings on the economic effects of immigration from studies in various countries to come to his estimate.

The first is an American study which found that immigrants have increased the annual national income of the U.S. by $1.6 trillion, while receiving $1.565 trillion in labour compensation, with the remaining $35 billion going to natural-born Americans.

Extrapolating these findings to Canada, Grubel estimates the “immigration effect” results in $3.5 billion in increased income in Canada.

Another conclusion of the American study, says Grubel, is that immigration has resulted in a shift in income from workers to employers, with employer earnings seeing a $43.5 billion increase and worker earnings decreasing by $40 billion.

This redistribution of income, argues Grubel, results in calls on the government to increase taxes on employers and increase subsidies for workers, which harms incentives that promote productivity, which could cost the Canadian economy more than the $3.5 billion worth of benefits that the immigration effect provides.

In addition to the costs linked to the effects of immigration on employer-employee income shares, Grubel cites a study he helped conduct at the Fraser Institute that found that recent immigrants also increase the annual fiscal burden by $20 billion, because they pay half as much in taxes as native-born Canadians, while receiving the same government benefits.

Grubel says a recent French study has similar findings, with both studies assessing a per recent-immigrant fiscal burden that amounts to approximately 1 percent of GDP for Canada’s immigration population size.

Other supposed benefits of immigration are non-existent or negative according to Grubel. For example he says that the boost immigration gives to tax funds available for education and Social Security is offset by the increased costs it burdens these programs with.

Grubel concludes that Canada should reduce immigration and only admit those with a high enough income earning and tax paying potential to increase the average income of native-born Canadians.

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