[Recorded by Electronic Apparatus]
Wednesday, May 17, 1995
.1534 
[English]
The Chairman: Order, please.
Let me begin by thanking Professor Marr for coming to the committee. As you may be aware, we're looking at the issue, generally, of the economic impact of the Canadian immigration policy, and more specifically at the book Diminishing Returns.
I'll turn it over to you to make a presentation and then ask the committee to ask any questions.
Professor William Marr (Faculty of Economics, Wilfred Laurier University): I have actually circulated a copy of my comments. Please bear with me while I read them, because I think that might be the best way to keep my ideas in some kind of systematic order rather than to try to ad lib it, so to speak, at least for the beginning.
.1535
I want to begin by thanking the committee for inviting me here today to talk in part about the research that Pierre Siklos and I did in Diminishing Returns. I'm going to mention a couple of other things as well. In total I will comment on three specific ideas.
Let me say a few things about the article that Pierre and I have in Diminishing Returns. In order to provide a context for it, researchers have been studying the relationship between immigration to Canada and the economy for at least the last two centuries, but the more formal modelling of that relationship dates only from the late 1960s.
Gordon Davies, who was then at the University of Western Ontario, and myself appear to be the first Canadian researchers to build a macroeconomic model of the Canadian economy to specifically address the question of what the overall effects to that economy would be if Canada's level of immigration were higher or in fact lower. Since the late 1960s there has been a growing literature that addresses that question, and in most cases one of the economic effects that is included is the overall Canadian unemployment rate. Similar types of research have also been ongoing for Australia and the United States.
Our study in the book Diminishing Returns is an addition to that literature. In other research, researchers have either used models with many sectors, each one a reflection of some aspect of the Canadian economy, and then simulated the effects of a change in immigration levels and composition, or constructed a so-called structural equation, which represents the causes of unemployment, to study the relationship between immigration and unemployment.
The approach in our paper is a third method, a more recently developed method, to examine the relation between the immigration rate and the unemployment rate. It uses time series methods. Essentially, the researcher argues that a relationship is likely to exist and then looks at the statistical relationship between present, past and future values of the immigration rate and the unemployment rate, trying to keep other macroeconomic factors that might affect immigration and unemployment constant.
In our study we investigate the influence of Canada's unemployment rate on the flow of immigrants defined as a rate and the effect immigration has on that unemployment rate.
What do we find? Using both annual data since 1926 and quarterly data since 1961, the immigration rate has had only a weak and quantitatively small effect on the overall unemployment rate. When we perform the experiment of increasing the immigration rate to higher levels, the effect on unemployment is very small, and in some cases the unemployment rate falls with a higher immigration rate. The sample period covered does not influence our conclusions, although previous research that Pierre and I undertook did find a structural break around 1978 and into the 1980s, which may have been related to the act and the regulations of 1976 and 1978 and the regulation of May 1982.
The second thing I would like to draw your attention to is some other research that Pierre and I have undertaken. I have brought along copies of one paper for your interest and information, and I think copies of that paper have been distributed.
Very recently, Citizenship and Immigration Canada has made available a new data set called the longitudinal immigration database. It contains immigration data, labour force data, and taxation data for immigrants who landed in Canada between 1980 and 1988 and filed an income tax return. There are data for about 403,000 of the approximately 1.1 million immigrants who landed in Canada in that time period.
These data also allow researchers to follow a cohort of immigrants through its first few years in Canada. For example, those who arrived in 1980 can be followed for the next eight years as they react to Canada's economy and other aspects of their new situation. We have used this data set to examine the claims of the foreign-born on the unemployment insurance system.
Among other things, we calculate the percentage of the immigrants in these cohorts who received unemployment insurance benefits. We find that on average about 21% or 22% of the foreign-born claim unemployment insurance benefits each year. There is not much difference between males and females.
.1540
How does this relate to the Canadian average usage of those benefits?
One problem with this data set is that it does not contain any Canadian-born reference group against whom the immigrants can be compared. Revenue Canada publishes some statistics that can be used for comparison. In the 1988 taxation year, 16.2% of all tax filers in Canada claimed some unemployment insurance benefits. All tax filers might not be the best or fairest comparison group, since the immigrants in the data set are new to Canada and are relatively young.
The Revenue Canada data show that of tax filers aged 20 to 24, 25.3% claimed some unemployment insurance benefits; of those aged 25 to 29, 26.7% claimed; and of those aged 30 to 34, 21.8% claimed. So the percentages for the foreign-born cohort are in line with those overall percentages.
The typical profile of unemployment insurance claims is the following: the percentage who claim benefits peaks about two years after landing in Canada and falls thereafter. In some cases the percentage falls to half of the numbers noted above. We also present claims by level of education, ability to speak English and/or French or, in fact, neither, and country of origin.
This is ongoing research. We are now examining the extent of claims for unemployment insurance benefits for the various classes of immigration: family, refugee, independent.
The third thing I would like to mention relates to the need to change the overall level of immigration to Canada each year.
In the late 1980s, and perhaps earlier, two reasons frequently were discussed for changing the level of immigration. First, since immigration flows might affect the overall macroeconomy, Canada needs to adjust those flows each year, or at least every few years. Secondly, the argument was put forward that immigration could be used to affect the total Canadian population and its structural features - for example, some aspects of the aging population could be reversed by higher immigration flows - and therefore those flows should be adjusted frequently.
I think the evidence on both of these arguments is now clear: immigration flows at the levels that are likely to be acceptable to Canadians have an insignificant effect on the overall Canadian economy and on Canada's population and its structure. Therefore Canadians could select a specific level of immigration inflow and stay with that level for the indefinite future. From the perspective of the overall economy or population of Canada, it would not matter very much if that level is 150,000, 200,000, or 250,000.
Let me add that there could still be a great deal of discussion about the composition of the immigration, including immigration policy, and the local effects of immigration need to be emphasized and studied.
I'd like to thank you once again for inviting me here. That's all I'll say by way of introduction.
The Chairman: Thank you very much.
[Translation]
Mrs. Gagnon (Québec): If you agree that immigration be regionalized, that more immigrants be sent to settle in the regions - and we know very well that when immigrants are sent to Quebec, they can integrate much more easily into the Quebec society - would you agree that we should avoid concentrating immigrants in the major cities, where the rate of unemployment may be higher? We all know that is it more difficult to settle in a major metropolis than in a small city.
[English]
Prof. Marr: Speaking first as an economist, economists don't like inefficiency, I guess, in labour markets or economies and therefore probably would not like to see, as, say, Sweden has done, immigrants being forced to live in certain sectors of the country, say, upon their arrival in Canada.
Sweden has, very interestingly, tried some policies whereby particularly refugees have been dispersed throughout the country by force for the first five years. It seems to me that might be a very inefficient use of their labour-market services, especially if there were not productive activities for those people to undertake in those areas.
.1545
I guess I would prefer to allow the foreign-born, like the Canadian-born, to, in a sense, select where they are going to live within the larger Canadian labour market. If we think the foreign-born are too concentrated in Montreal, Toronto and Vancouver, I don't think the solution is to tell these people they must live somewhere else. I think the solution might be to create something for these people to do in the other parts of the country that might be perceived as being less populated, and I think these people might naturally gravitate toward those areas.
The Canadian-born have also tended to gravitate toward Vancouver, Toronto and Montreal, not to the same extent as the foreign-born do, but over the last 35 or 40 years they have gravitated towards the same urban areas.
So I guess I wouldn't be in favour of forcing immigrants to go to certain parts of Canada.
[Translation]
Mrs. Gagnon: We know that the concentration of immigrants in Montreal is around 94% to 95%. Do you not think that this is too much, considering the regions where these people come from? For example, if they come more from rural areas, it will be more difficult for them to settle in a large metropolis. I think we should take into account the region of origin of immigrants. Not only do they have to integrate into a new culture, they have to integrate into a new geographical situation.
[English]
Prof. Marr: Yes, I agree. Let's say, for the sake of argument, that if the immigrants worked in agriculture or mining, or some other primary sector in their home country, and came to Canada and there were no jobs in agriculture or mining or forestry for these people...they're going to be living in an urban environment, especially in the short term, that in some sense they are not used to. That's going to make the adjustment quite difficult, particularly if they happen to be an early wave of immigrants from that particular country who don't have the networks to aid them in their initial four or five years in Canada.
I'm not sure whether you then want to, for example, adjust entry criteria to reflect that. Or is it better to allow those people to enter the country from agricultural backgrounds, for example, and provide services, perhaps even training services, when they're here?
[Translation]
Mrs. Gagnon: I have other questions to ask but I do not know what you want us to do, Mr. Chairman. I would like to ask another question on the relationship about employment and immigration. We are told that a good part of the Canadian population is opposed to the increase of immigration levels because of unemployment. However, you do not seem to think that there is any obvious link between unemployment and immigration. Are there indeed any predjudices against immigrants because of that?
[English]
Prof. Marr: Maybe we could think for a minute about the relationship between immigration and unemployment. Unemployment is a labour-market phenomenon. You think of a labour market that has a demand curve for labour and a supply curve of labour. Unemployment is essentially the difference between supply and demand. Unemployment is a situation where the supply of workers exceeds the demand.
I would argue that immigration affects both the demand for labour and the supply of labour. If you go back and look at the literature on immigration to Canada in the 1950s and 1960s, most of that emphasized the supply side. They said that when you bring in immigration you create a greater supply of workers and that this might cause unemployment. I think, though, you have to realize that bringing in more immigrants will also have an impact on the demand for labour.
.1550
One of the factors that influence the demand for labour is the demand for the products those workers are producing. If you have a larger population through immigration, making certain assumptions about the fact that the immigrants are productive and they can find jobs and make income, they will also have demands for goods and services. So immigration increases the supply of labour, but it also increases the demand for labour.
It's then an empirical question, in a sense, whether the unemployment rate's affected or not. My reading of all the macro-literature, using three different statistical methods, is that there is only a weak and perhaps non-existent relationship in the empirical world between immigration and unemployment. In other words, I haven't seen any convincing case yet that, for example, raising the immigration rate, within reasonable standards, will have a negative impact on the unemployment rate. It probably will leave it relatively unchanged.
Also, I think people sometimes forget that yes, we do have 200,000 people coming to Canada each year, but 60,000, 70,000, or 80,000 people leave Canada each year. So the net inflow is not the 200,000 or 220,000. It's something less than that. That's another factor that in a labour force of 13 million or 14 million makes 100,000, 120,000 individuals - not all of whom, by the way, are entering the labour force - maybe not very significant.
There could be a link, but the empirical results I have seen indicate it's not very strong. You cannot argue that, for example, raising immigration rates will raise the unemployment rate.
By the way, there are even studies that conclude that if you raise the immigration rate, the unemployment rate will fall.
[Translation]
Mrs. Gagnon: You say that the effect is not very significant. Can you quantify it? It may be minor but are we able to make estimates?
[English]
Prof. Marr: I don't know if I can give you any figures. I didn't bring any figures with me, in the sense of being able to say to you if we increased immigration from 200,000 to 250,000, for example, the unemployment rate would rise by half a percent. I wouldn't want to quote figures like that.
However, some studies have attempted to quantify those kinds of situations, and what they discover is that trying to keep everything else constant, such as fiscal policy, monetary policy, and that kind of thing, you get a very small increase in the unemployment rate, or perhaps no increase at all in the unemployment rate, if you increase immigration from, for example, 175,000 to 200,000.
Mrs. Bakopanos (Saint-Denis): I don't have a specific question. I have a few comments, perhaps.
I find your study very interesting, all in all. There was another study - you alluded to it earlier - by Mr. Robert Fairholm, who said in the long term the unemployment rate would increase if we increased the immigration levels; by 3.5%. What are your comments on his study?
Prof. Marr: Which study are you referring to?
Mrs. Bakopanos: Robert Fairholm, an economist with Data Resources Inc./McGraw-Hill. Have you seen that study?
Prof. Marr: No, I haven't.
Mrs. Bakopanos: It was done in the fall of 1993.
Prof. Marr: No, I haven't.
Mrs. Bakopanos: I'll go on, then, if that's the case.
Prof. Marr: That's certainly an outlier in terms of the studies I've seen. But I haven't seen that one.
Mrs. Bakopanos: Would you agree there are other factors, perhaps, that your study may not have taken into account? One of the other authors of Diminishing Returns made reference to the fact that a lot of immigrants who do come to this country don't end up occupying the occupations for which they have been trained in their own country. I think that's a factor that always has to be taken into account.
I also think the problem of regionalization of immigration is an important factor. Where there are high unemployment rates, as in large urban centres, I think the perception is - perhaps the data aren't there, but the perception is - that immigration levels do affect the unemployment rate. If you come into a high-unemployment city, you're obviously going to be part of the statistics in the long run.
Prof. Marr: You might be.
.1555
Mrs. Bakopanos: Another factor I think we have to take into account - I don't know if your study did, because I didn't have a chance to read it and I apologize for that - would be the fact that a lot of the arrived immigrants who have the resources end up creating their own jobs and therefore not being able to benefit by unemployment benefits, because if they're running their own business, they're not necessarily able to collect unemployment benefits. I think that might be a factor that should be looked at in order to counterbalance some of your studies.
I know, and I brought it up earlier, that there are a lot of newly arrived Canadians in my riding who open up their own business, and it's usually a family-run business - a husband and wife. I know they're not eligible for unemployment benefits, so that would not at all be part of the data.
Prof. Marr: Our study looking at unemployment insurance benefits is in the context of, I suppose, complaints that people often make - up until now having no information, no data - saying that the foreign-born utilize the unemployment insurance system to a far greater extent than do the Canadian-born. So we decided, with this new data set, to look at that particular issue, and we're starting to do that.
Your point is well taken. The self-employed are a group that needs to be studied in its own right. I think maybe there are some people starting to look at that now.
Again, it's been a data problem in the past. There has not been a lot of quantitative information - a lot of anecdotal information, but not quantitative information - on the self-employed. But now there's a little bit more coming out.
Mrs. Bakopanos: I want to applaud you, in fact, for doing away with some myths, and they are myths when we get down to the data and the statistics as far as....
Another factor that I often find - and, as I said, these are comments, basically, not a true question - is the fact that a lot of these newly arrived immigrants - and I'm not going to say a lot of them, because again the statistics are not available - do work in the black market sector too. So they would also not collect unemployment benefits.
Prof. Marr: No.
Mrs. Bakopanos: That would impede upon the data also, I feel -
Prof. Marr: Yes.
Mrs. Bakopanos: - if we could ever analyse it, of course. I don't know how. But that wouldn't be analysed.
I don't know whether you want to answer or can answer this. We do allow a lot of immigrants into Canada in social and humanitarian categories due to our international obligations. Those are really for non-economic considerations. Do you have any opinions as far as the different categories go? If we increased one category of immigrants, would that have a positive or a negative effect on your study?
Prof. Marr: There have been a few attempts to look at, for example, the level of income, or in a static sense - that is, one year - the unemployment rates associated with different classes of immigration.
What they tend to find out is that immigrants who are admitted in the independent group tend to have higher incomes on average than other immigrants. They tend to have lower unemployment rates on average than other immigrants.
Those in the family class, on average, tend to be in the middle, and the refugees tend to be at the other extreme.
Those are all ``on average'' kinds of statements. There are examples of refugee groups, such as those from southeast Asia in the 1980s, who were very successful and would laugh if they heard that their relative income status was low compared to the other two groups. But I'm talking about the average now, in that sense.
So, yes, our study, and the work I've done in other cases, deals with essentially keeping the composition of the flow constant and looking at the levels. If you change the composition of the flow, that would be a factor that should be taken into account if you were then going to make some conclusions about things like unemployment rates, use of services, impacts on incomes, and that kind of thing.
Again, though, I think you have to bear in mind, with respect to the total Canadian labour market...now, I like your point about local labour markets, and that's why I said at the end of my statement that we do have to study local labour markets.
Leaving that issue aside for the moment - putting it under the rug, so to speak - changing the composition is still dealing with relatively low numbers of people, compared to the total size of the Canadian labour force. I don't really believe changing the composition of the inflow is going to have any dramatic effect on things like average incomes of Canadians or average unemployment rates.
Mrs. Bakopanos: Thank you.
The Chairman: Maybe I'll ask a few questions of my own, with the group's permission.
.1600
Professor DeVoretz has argued that we should have basically 50% economic immigrants and 50% family class, and his rationale is that typically an economic immigrant wants to sponsor one relative at a later date. He says that if we're going to be competitive in attracting economic immigrants, then we have to allow them to bring their spouses or families over later.
Do you have an opinion on the 50-50 split?
Prof. Marr: I'm not a strong advocate of the 50-50 split. I've always advocated more of a balance between the three groups we currently admit: refugees, family class, and independents.
I think back to the recession of the 1980s, for example. I think it was a mistake in 1982 to tighten up the requirements on the independent group, because what happened, of course, was that the total flow became very skewed toward the family class. If the family class, in fact, are likely to make lower incomes on average, more likely to be unemployed, etc., then that also skewed at least the perception of what people thought immigrants were doing to the economy.
I guess I have always been in favour of emphasizing the independent class, the economic immigrant, because I think they are important as a group. But I'm not sure that I would say they should be half of the inflow. I'm not sure why I would think they shouldn't be half of the inflow, but....
They certainly will sponsor family class immigrants, and if we're going to be competitive, I agree with Don DeVoretz that we have to allow them to do that. Beyond that, I'm not sure why you would pick 50% for that group.
The Chairman: That was his reasoning. So you don't have an opinion one way or the other? Fifty percent isn't necessarily bad; it's not necessarily good.
Prof. Marr: It's just a number.
I could hear somebody saying, for example, ``Well, the independent group are clearly good economic citizens of Canada and better than immigrants on average. Why don't we simply allow that to grow to 80% or 90%, and that will, in fact, be our immigration flow?'' The answer is that we have different rationales for different classes of immigrants. Sometimes it's economics, sometimes it's family unification, and sometimes it's humanitarian. It seems to me to be very difficult to argue that some kind of number, such as 50%, is more appropriate than any other.
The Chairman: You mentioned that the levels are somewhat immaterial as long as they are fairly consistent year over year within a range. In the last campaign the Reform Party argued for levels of closer to 150,000 and the Liberals said closer to 250,000. Was that purely a political debate that really had no meaning in terms of economics?
Prof. Marr: When I say that in my remarks, I'm looking first at the macroeconomic evidence over the last 30 years, which has tried to decide whether changing the level will impact adversely or positively on the Canadian economy.
In my reading of all of that evidence - lots of reports and so on, although admittedly I have missed on what was mentioned here - the impact is small.
I can recall reading documents in the late 1980s that came out of Employment and Immigration Canada, if not out of the minister's office, that, secondly, talked about the population impact that immigration might have and said, ``With the aging population, for example, why don't we bring in young immigrants, people in their teens and their twenties? Maybe we could give even more points than we do now for people in that age group, and therefore change the age structure, in a sense reversing the aging process that is taking place.''
That's not disputed. We know that everybody gets one year older each year and we know who's alive, etc.
Not the work that I did, but work that was done by people like David Foot, Byron Spencer at McMaster, and Statistics Canada indicates that changing the level of immigration really doesn't have much impact on population, either total population or the structure of the population. If you want to change our population structure, have a pro-natalist policy in Canada. That will be far more efficient. It will raise the birth rate. That will have a large impact.
.1605
So given those two pieces of evidence, I would argue that there isn't a lot of economic claim or demographic claim for fiddling around with the levels. Therefore, you might need to fall back on other reasons, such as how many resources you want to put into the selection of immigrants, the processing of immigrants, to decide what the level is going to be.
That might be a perfectly good rationale for deciding that in a period of constraint it's going to be 150,000 and in a period of expansion it can be 200,000. The impact on the economy and the population is likely not going to be very different in those two cases.
Now, as two of you have mentioned, naturally I do have to raise the caveat that distribution is important.
The Chairman: Across the country?
Prof. Marr: Yes. Not much research has been done on that. That's a bit of a problem. Again, it's a data problem. It's difficult to get information at some national levels. You can get provincial information, and there I would certainly argue, of course, that you also have to bring migration into account. Once you start dealing with subnational units, you also have to remember that Canadians can move from province to province. They're not compelled to stay in British Columbia; they can move elsewhere. So you have to work that into your thinking somehow, too.
The Chairman: Mr. Assadourian.
Mr. Assadourian (Don Valley North): Thank you. I'm sorry I was a bit late.
On family reunification or family immigrants, would you give them extra points if they settle in a rural area or a small town rather than in a major metropolitan city like Vancouver, Montreal, or Toronto? If it's family sponsored, if I'm living in a small town and I've sponsored somebody from X, Y, Z country, I would expect that person to come and live with me. Once he starts life in a small town, it will be quite difficult having them move after, say, one year or two years. They put the rules there for that purpose. Would you give them extra points to immigrate to Canada?
Prof. Marr: Correct me if I'm wrong, but I don't think the family class gets points in the sense you mean. The assisted relatives do get points for having close relatives in Canada, and perhaps you could do that.
My premise is that you shouldn't be putting barriers in the way of people changing jobs once they get into Canada. I think it's inefficient if you put barriers in the way of somebody changing jobs, changing occupations, changing employers, or changing location.
My only concern about what you suggest would be a situation where in fact in those particular rural areas there really were no long-term jobs. Those people, be they family class or independents or refugees, should really be moving somewhere else where there are jobs. As long as you're not impeding that process, the process of an efficient allocation of labour across the Canadian economy, I guess I wouldn't object. I haven't thought about it in those terms, though.
I'm always suspicious about giving too many points for specific occupational groups. I think the paper by David Green in this volume does show that in terms of actual occupations, things like language ability and education are more important predictors than what your intended occupation was. I'd hate to do anything that would prevent people from entering other occupations, other industries, other jobs, once they got here.
Mr. Assadourian: All right. Thanks.
Mrs. Bakopanos: You may have more or less answered this, but I just want to perhaps get your opinion again.
I know your study ends in 1988, but do you believe the economic benefits of immigration are lower now?
Prof. Marr: The one I brought along today ends in 1988. We are looking forward to the day when that 1988 will become something more recent.
.1610
Right now, I think there are conjectures in the literature in Canada, Australia and in the United States that in some sense the quality of the immigration inflow has deteriorated over time. Particularly in the United States, people like George Borjas have spent a lot of time trying to demonstrate that is the case. Therefore, Borjas argues that in the United States the benefits today are less than they were back in the 1970s, for example.
I can't comment on the Canadian case. Borjas does compare Canada to the United States in one study, and he gives us higher marks in terms of not seeing this deterioration that he thinks is there in the United States. There's a lot of debate about whether it's actually taking place. He says that's because of the point system in Canada.
The other thing you must remember is that in the United States about two-thirds of their inflows are in the family class. It's much higher than in Canada. In other words, the independents are much lower in the United States. As you know, the independents are selected by the point system and therefore if we have a higher proportion of independents, it's likely that our ``quality deterioration'' might be less.
There haven't been many studies done in Canada.
Mrs. Bakopanos: What do you think we should do to boost the economic benefit? You've talked a little bit about the point system and a little bit about categories, although if I understood you, you're not quite sure we should be fiddling around with it.
Prof. Marr: In terms of the point system I would tend to give more points for things that I think influence the ability to find a job and to integrate, such as the ability to speak English or French or both, the educational level and the job experience. I would play down things like intended occupation and occupational group. I don't think that's terribly important in the overall mix of things, as long as - to repeat myself - you allow labour markets to be flexible, and you don't force people into jobs.
Mrs. Bakopanos: You don't agree with the Reform premise that in hard economic times we should lower immigration levels and in good economic times we should perhaps consider raising it. You do say that you want to keep them steady.
Prof. Marr: No. I would not make that an... I would try to eliminate that kind of bargaining - if bargaining is the right word - as an issue in Canadian immigration policy and maybe try to concentrate more on the things that I think are more important, such as the composition and the issues like distribution of immigrants in Canada. I would put more of an emphasis on them after they get here, rather than on getting them here. I suppose that's one way of putting it.
Mrs. Bakopanos: Are you saying that we should be concentrating some of our efforts in terms of settlement programs and integration?
Prof. Marr: Yes.
Mrs. Bakopanos: That would therefore be increasing the economic benefits along with...
Prof. Marr: Hopefully.
Mrs. Bakopanos: The faster they integrate, the faster they become part of the labour force and contribute economically.
Prof. Marr: That's right, yes.
Mrs. Bakopanos: As you know, we don't choose our refugees. That's part of our international obligations. But there have been some theories that we should perhaps consider not fulfilling those obligations - I hate to put it in those terms - and even theories of selecting more refugees abroad, inland, rather than having this open-door policy as far as the refugee category for immigration is concerned.
I think a lot of times the public's perception is that our total immigration is refugee immigration and that there is none from the other categories. I think that might explain some of the myths and the misinformation that do exist out there in society.
Do you have any answers in terms of whether we should be selecting in refugee camps overseas, rather than having this totally open-door policy in terms of the refugee category immigrants?
Prof. Marr: Are you suggesting a point system for refugees?
Mrs. Bakopanos: No, I'm not suggesting that. I think I want an economist's viewpoint on that.
.1615
Prof. Marr: There are certainly factors with any immigrant that are going to increase their chances of succeeding in Canada - for example, an ability to speak English and/or French.
Mrs. Bakopanos: I'll interrupt you there because there are some programs that the Quebec government has in place overseas for teaching French in camps.
Prof. Marr: Yes.
Mrs. Bakopanos: I was referring to things like that. We could do that and go along with the theory, as you said, the faster they integrate, the more economic benefit we will have.
Prof. Marr: I was just going to say that I guess there are basically two approaches. You can select on the basis of things like language ability. That's one way to do it and you could apply that to refugees. There's nothing to stop you from doing that. Or, of course, you could argue that on other grounds, not on economic grounds but on humanitarian grounds, that is not an acceptable thing to do. I guess then you have to be prepared to put resources into training, either before people get to Canada or after they get here, if that's going to be your approach towards the humanitarian program.
As an economist, and just playing an economist role here, of course I would say we should try to select on the basis of things that are likely to make people succeed in Canada, even for refugees, but as a person I might think that's not perhaps all you would want to consider in selecting certain groups. And that's why we have an independent class as well as a refugee class and a family class. That's why we don't have just an independent class. Some refugees would probably be able to get to Canada on the basis of the independent point system, if you know what I mean. They would have the education, the skills, and the background and that kind of thing and they would in fact not have to be refugees. But a lot wouldn't.
Mrs. Bakopanos: I agree with you. The thing is we do have a humanitarian and compassionate system.
Prof. Marr: Right. It's a good thing we're not all economists.
Mrs. Bakopanos: I didn't mean to imply that. Thank you.
The Chairman: Does anybody in the group have any more questions?
If you were advising Minister Marchi on this immigration policy - I don't know if you're familiar with the levels and the plan that came out last fall - would you have any comments if you were sitting here?
Prof. Marr: I suppose I'd only reiterate what I have already said, and that is I would not spend a lot of time on the issue of whether we should raise or lower the levels. I would select the number. I'm an economic historian as well. That doesn't relate directly to this, but I am. Why don't we just simply take the average of the last 30 years and pick that as a number for the time being and say we're going to go with that? Let's say it's 200,000, just for the sake of argument.
Then I think at that point we might want to dwell in more detail than I think we have in the past with issues like the one you said Don DeVoretz raised; that is, what should the composition within that 200,000 be? We might perhaps for the first time have some useful discussion on what that indeed might be. They wouldn't be easy discussions, but they would be ones that I think in the long term might be more fruitful, particularly if research is correct that says that different classes do have different outcomes in the economy. The overall effect washes out, but there are still, it seems to me, significant differences among the three major immigration classes.
The Chairman: So whether it was 200,000, or 1% of the population, or just kind of whatever sells politically...?
Prof. Marr: As I said before, you'd have to perhaps use some other rationale. One might well simply be the amount of resources the Canadian government is willing to devote to administration, and that's not insignificant. That's an interesting issue. I've always been struck by the fact that a person does have to get, generally speaking, to an immigration office in a foreign country to come to Canada, and so there's clearly a decision about how many resources are put into certain areas. So that's a constraint, obviously.
The Chairman: Right. Do you have a comment on the $975?
Prof. Marr: The $975?
The Chairman: The landing fee.
Prof. Marr: I have some comments on it. It's not related to anything I've done.
The Chairman: That's all right. If Mr. Nunez was here, he would ask you, so I'll ask you for him.
.1620
Prof. Marr: On the one hand this, on the other hand that, I suppose. Ever since people started talking about taxation - and let's face it, this is what something like that is; it's a form of taxation - there have been two bases on which you can exact a tax. One is the benefit principle. That is, those who receive the benefits from revenues that are derived from a particular tax should pay the tax. In this particular case, perhaps the Canadian government can demonstrate that the $975 or whatever is going to be directly used to provide services for immigrants once they come to Canada. You could then rationalize the tax on that particular basis.
The other principle of taxation is ability to pay. As we all know, near the end of April every year, when we fill out tax returns, part of the tax you pay is based on your income. It's based on your ability to pay. I think historically that's how we've financed immigration services, to a large extent. We've said we're going to finance those out of general tax revenues based on income in one form or another.
My reading of the economic research says on average the foreign-born are quite productive in Canada. They do get jobs. They do make income. They do pay taxes. Not my studies but other studies - there's one in here by Ather Akbari and he's done some other stuff - seem to indicate the benefits from immigrants exceed the costs of immigrants within the assumptions of their model. So I guess my own personal preference would have been not to have introduced that tax but in fact to have a little more positive an attitude and to argue that general tax revenues, including the additional taxes the foreign-born will pay, would have paid for the services that will need to be provided.
But I can also understand the benefit principle. We do have other taxes in Canada that are based on the benefit principle. Municipal taxes, for example, are largely based on that. Education taxes are largely based on that. But as we all know, there's a lot of discussion now about education taxes and whether that money is being spent on providing the services. I think it will be up to the Canadian government to demonstrate, in the long term, anyway - and I hope they will - that the $975 per person is going directly into providing services for the foreign-born in Canada, particularly in their first three or four years here.
The Chairman: Fair enough. I'm not privy to what goes on in cabinet, but my sense was that the immigration department was facing cuts as part of a general downsizing, and to save their settlement....
Prof. Marr: That's the benefit principle, isn't it? The money will then go into English as a second language programs, job training programs, and this kind of thing, yes. I think it's much more acceptable if it then is shown over the next ten years that this is where the money has in fact gone. It would be less acceptable if it has gone into other kinds of activities or general revenue.
The Chairman: Right.
Mr. Kevin Kerr (Committee Researcher): One point that hasn't been touched on is that earlier work you've done seems to suggest you did find some period-specific effects of immigration on unemployment, but in your most recent works you weren't able to find anything along those lines. Could you offer some kind of comment on why this is the case?
Prof. Marr: We're still thinking about that, and I can't give you any definitive answer on why that is the case. In the earlier work where we did find a structural break, 1978, before versus after, we did look at a shorter period, so that may have clouded the results to some extent. I have to be careful that we're not comparing different periods.
I was surprised in the Diminishing Returns study when we didn't find a structural break either in 1978 or in 1982-1986, that sort of period, because the regulation in 1982 was very dramatic. It had a very dramatic impact on the independent class and the total inflow of immigration.
I really can't venture right now any statement that would satisfy you about why we didn't find it in the present study and why we did find it in the earlier study. It may have been a slightly different time.
.1625
Mr. Kerr: One other unrelated point. You mentioned that the distribution of whatever level the government decides to choose across the country is an important issue. Have you given any thought to how immigration could be more evenly distributed across the country without impeding the functioning of the labour market?
Prof. Marr: I suppose the almost trite answer is that if you don't like the current distribution, then you have to create things for people to do in areas where they're not presently going, either Canadian-born or foreign-born.
As I said in response to your question earlier, I know that the foreign-born perhaps are more concentrated than the Canadian-born, but if you look at the migration of the Canadian-born over the last 50 years, for example, it's not very different from where you see the foreign-born concentrating. This is exactly what I would predict on a benefit-cost principle of why people move to one area versus another.
You have to create employment within Canada if you're going to see the foreign-born move to Sudbury or Sault Ste. Marie or Thunder Bay, as opposed to Toronto, Hamilton, or Windsor.
Mr. Kerr: Wouldn't the same incentives to move to these areas exist within the domestic-born population as well?
Prof. Marr: Definitely, and they're not moving to those areas either.
Mr. Kerr: So you might not have any influence on the overall distribution.
Prof. Marr: That's right, but I don't think you're helping the foreign-born or the Canadian economy by trying to force new immigrants to live in parts of the country to which Canadian-born people are not moving. All you're going to do is create additional settlement costs and maybe in the long term....
I mentioned the example of Sweden. In many cases the refugees had to go to northern Sweden for five years. Lo and behold, what they observed after the five years was a great gravitation toward Stockholm - surprise, surprise - where the long-term jobs were, for example, and also where cultural things were and other things about living. It's not just about making money; it's also living.
All I'm saying is that I think the foreign-born would also move to where jobs are being created, but you have to create them there, and that's hard. I'm not saying that's easy.
That's not an immigration issue; that's a Canadian development issue.
Ms Margaret Young (Committee Researcher): Mr. Marr, you were asked, if the minister were sitting here, what advice you might wish to give him. You responded by saying: giving more points or changing the point system. So you would advantage those factors that lead to quick economic integration, and you gave some examples.
Prof. Marr: Correct.
Ms Young: You spoke about the regional distribution across the country, but, as you've just talked about, that's a very difficult distinction.
There's an expression: ``If it ain't broke, don't fix it''. Am I right in thinking that you don't think there's anything major that is ``broke'' in the system?
Also, you were reluctant to endorse Professor DeVoretz's suggestion of a 50-50 split. How would you come down on a question of, does anything pressingly need to be done? Is it ``broke''?
Prof. Marr: I think that from an aggregate economic point of view, nothing needs to be fixed. That doesn't mean that there aren't local situations in Canada, for whatever reason, that I'm simply not aware of. But that's because I don't have information; that's not to say they're not there. For example, there might be pockets of unemployment amongst the foreign-born.
Studies done by people such as Don DeVoretz have looked at industry-specific relationships between immigration and the substitution of Canadian-born and foreign-born workers. If I remember correctly, he did find that there were some industries where there was a high concentration of low-skilled workers where there was competition between the Canadian-born and the foreign-born. That could cause problems if a lot of foreign-born were concentrated in that geographical area.
.1630
To repeat, at the aggregate level, which is what my study deals with, I don't see that there's anything that needs to be fixed there in terms of levels.
To repeat myself, certain classes of immigrants appear to do better economically than others. Is that a problem? It's a problem from an economist's point of view, but again immigration policy is very multidimensional.
Once again, in the long term, I don't even think there's much of a problem there. I think perhaps there's more of an adjustment period among, for example, family class immigrants or refugees, but the long-term evidence is that the adjustment takes place. On average they earn higher incomes and are less likely to be unemployed.
We were talking briefly earlier, before we started the formal discussion, about the short term versus the long term. I think it is important to keep in mind the short term versus the long term. It's also important to keep in mind that when people talk about more immigration raising unemployment, that's usually in the context of not doing anything with respect to other policies such as English as a second language, resettlement, or anything like that. It's keeping everything else constant, and there's no necessity to do that in the real Canadian economy. You could put more resources into ESL, for example.
The Chairman: Have any questions flowed from our researchers? No.
I think that just about wraps it up. Again, on behalf of the committee, thank you very much for coming. We appreciate your work. It's an important issue and I suspect the panel strikes the nail on the head when it says it's a myth that immigrants take away jobs from Canadians and are a drain on our economy. Your work is very helpful. Thank you.
Prof. Marr: Good. Thank you.
The Chairman: I have to leave. I'm going to ask Mr. Assadourian to chair the meeting.
The Vice-Chairman (Mr. Assadourian): Thank you very much. This is the first time I've had the opportunity to chair this meeting. So if I make any errors in judgment, please don't blame me; blame the clerk here.
First, I would like to thank you both for coming here. This is the second part of our hearing today. Please introduce yourselves briefly and then if you have a statement, we'll go to that statement. We will then ask questions if members have any to ask. Go ahead.
Mr. Robert Moorhouse (Legal Consultant and Government Liaison, International Entrepreneurs (IEC) Canada Inc.): Thank you, Mr. Chairman. First I would like to thank the subcommittee for hearing our submission on short notice. I got in touch with Christine last week upon hearing of your subcommittee and we were able to pull together a submission for you and are glad that you are able to hear it.
My name is Robert Moorhouse. I work with a group called International Entrepreneurs Canada. With me is Adriano Arrizza. Mr. Arrizza is president of First Canadian Investors Data Bank Inc., an associated company with International Entrepreneurs. Mr. Arrizza is also the chair and director of the Scotia Investors Group of Funds and practises as a chartered accountant in Montreal.
.1635
My background is that I hold a law degree from Dalhousie University and I work with International Entrepeneurs in Halifax through its Halifax office. I also work with a group called Larex Management, which does the management of the immigrant investor funds.
What we're going to do is outline four points for you that we feel should be addressed.
One deals with immigration officers and the issue of discretion. Another, focusing particularly on the Middle East, concerns problems with visa offices and getting applicants out of various visa offices. Then we'll take a look at compliance and enforcement issues, both on the immigration consultant level and on the applicants' level. Finally, we'll be touching on the immigration consultants and their role in the immigration process.
Before we touch on those points, Mr. Arrizza will outline for you what International Entrepeneurs does, so you can put our submission in context.
Mr. Adriano Arrizza (President, First Canadian Investors Data Bank Inc.): I joined International Entrepeneurs in 1988. At that time International had been in operation for close to eight years and mostly doing immigration consulting out of Quebec.
In 1988 and prior to 1988, International Entrepreneurs was processing approximately 300 to 400 families in the business category of entrepreneurs and investors per year.
Subsequent to that, a subsidiary company was started in Nova Scotia. Since then it has processed well over 600 files. Of these, 324 families have already landed in Nova Scotia. Of those 324 families, 294 are entrepreneurs and approximately 30 are investors.
The important point to note here is that investors have, as you know, the choice to end up anywhere else in Canada. I think it's only through the marketing efforts of International Entrepreneurs that Nova Scotia has had such a high retention rate. These rates are unlike the retention rates in Quebec during the earlier years.
International Entrepreneurs has brought close to 809 adults over the age of 18 and approximately 651 children into Nova Scotia. They have physically landed and are living in Nova Scotia at this time.
Fairly close track is kept of the activities of these families. We monitor exactly where they stand. Out of these people, 60 have purchased homes, and the other ones are obviously still in the rental stage. One hundred and four businesses have been started in Nova Scotia. These range in size. One person is a contractor who has over 50 employees; others are self-employed.
We tried to pull some numbers to see exactly what the total benefit to the province is from having these immigrants come to Nova Scotia. On exhibit A, which I believe has been handed out, we did some rough calculations, some of which are actual.
For example, there are a total of seven syndications that have been started in Nova Scotia. These have brought $15.5 million, which has been invested, to the province of Nova Scotia. These are actual funds that went into the syndications and have been invested in various projects in Nova Scotia that have been approved by the province.
In addition to that, we have some records on file that show exactly how much money these individuals have brought to the country. In the next section you'll see that the entrepreneurs have, strictly in bank accounts at two banks in Nova Scotia - although many of the other banks are used as well - close to $70 million.
In addition we tried to compute the initial investment that a family makes in Nova Scotia when it first settles. We estimated the investment when first settling to be about $25,000, between automobiles, vehicles, furniture and fixtures - something in that area - which adds another $8.1 million.
.1640
For the 104 businesses that were started, we assumed that an average of $50,000 investment has been made, which is fairly conservative, to add an additional $5.2 million to the economy. Then we computed the homes that were purchased at an average price of $100,000, for a total of $36 million that has been generated into the economy of Nova Scotia. We did a survey amongst our own investors to see what the average net worth of an entrepreneur and of an investor is. Taking the conservative side, we came to $700,000 average net worth for an investor and $300,000 for an entrepreneur. If we compute how much net worth has been brought into the province from the applications, you will see that it's close to $110 million.
For the families still in process, that would add an additional $90 million into the economy, for a total of approximately $200 million from the files that are in process or have been processed so far.
The objective of this was merely to show that the individuals normally have a lot of faith in their consultants and can generally be directed to almost any province that the consultant does business in. During the years 1980 to 1988 Quebec seemed to be the province of primary destination, I think because it was seen as a province to which it was easy to get immigration, which is purely a misconception.
As time went on, Quebec's demands for French-speaking applicants or immigrants became stronger and stronger, to a point where international entrepreneurs felt they could not generate the numbers they were looking for with the criteria they wanted.
At that point in time, a decision was made to expand into Nova Scotia. Today more than 95% of the cases are in Nova Scotia, which indicates to us that with marketing the investors will go where it is most beneficial for them to go economically.
At this point I'll turn the floor over to Bob for discussion of the immigration officers and their discretion.
Mr. Moorhouse: In our opinion, the immigration process, while primarily administered by government representatives, is made up of individuals who've been asked to apply various laws at various levels. We still expect that the immigration officers are going to apply the laws fairly, dispassionately, and honestly, and that's the premise under which our organization and many others operate. That's the base line that we expect when we go overseas.
The federal government's approach to the independent program has worked. In fact, it has worked very well, to the point where the independent category has eaten into the business class applications over the past number of years. This is primarily because the independent is more clear, it's better defined, and there's less discretion left in the hands of the immigration officers in the various visa missions around the world. That helps explain the resulting decrease in the business categories. Moreover, the amount of money that independent category applicants require to establish themselves in Canada is less than what would be required for a business applicant.
Generally speaking, an independent category applicant lands with anywhere between $5,000 and $10,000. In order to be successful as entrepreneurial candidates you have to have sufficient money to start up a business and employ others and also provide for your family. A businessperson would sooner apply under the independent class than under any of the business categories, if they choose to apply at all, because the process is more standardized and there's less discretion.
.1645
The applicants under the business programs often feel discriminated against as a class generally when they see how easy it is for independent immigrants to come to live in Canada without any conditions, with a minimal amount of capital, and no regular reporting to or meetings with immigration officers after landing.
In our opinion, Canada needs more venture capital and more risk takers. In many cases the independent class immigrants are in direct competition with Canada's labour force. In order for us to be able to employ more people we need to increase the pool of capital. Our group has provided a large base of capital for an area that, generally speaking, doesn't get a lot of support from the banks. I'm speaking specifically in the maritime region.
Banks aren't lending money to small businesses the way they once did, even though government pressure has been put to bear upon them. It has become obvious to us that governments can't force banks to loan money to small businesses, and if you want to see growth in the small business sector, the business class category of the immigration program is one way of doing that and doing it effectively.
In our opinion, the current process for admission under Canada's various business-immigration programs needs to be further standardized in order to take away the excessive amount of discretion some immigration officers exercise.
I took the liberty of pulling a few letters from our files from different immigration officers who have written and refused some of our candidates. I am going to read you a couple of paragraphs from different letters. One of our applicants came from Cairo, Egypt and was looking to set up a business. The immigration officer wrote back stating:
- In my opinion you do not meet the definition of an entrepreneur because have you failed to
convince me that you have the ability to establish, purchase or make a substantial investment in
a business or commercial venture of economic significance in Canada. Further, it is felt you do
not have the ability to manage such a business or venture on a day-to-day basis.
- ...your proposed business in Canada would provide only minimal employment opportunities
for Canadian citizens or residents.
If you think back to your own knowledge of small businesses here in Canada, we would actually be setting a higher standard for the business category applicants. For first time businesses that are started up here in Nova Scotia or in Ontario, people don't have any experience whatsoever. So we're holding our applicants to higher standards across the board.
The other letter I thought would be appropriate is also from Egypt. This immigration officer writes that, in his opinion, the applicant does not meet the definition of entrepreneur because, although he has some experience in the field of supermarkets, he does not feel the applicant's funds would be adequate to successfully establish both a business and his family in Canada.
That presumption suggests that the applicant's business will fail and the applicant will be unable to provide for his family and therefore they will be a burden on our social services. In this case, the applicant proved to the immigration officer that he had over 32,000 Kuwaiti dinars, which is approximately $132,000 in bank accounts. Because he was unable to submit other bank forms due to time constraints, he was unable to prove he had an additional $75,000, although he did make mention of it, as well as the fact that he had $170,000 U.S. in property holdings and stocks. The immigration officer chose not to consider that because of the fluctuations in the market and decided to discount it entirely.
When you're dealing with discretions such as these in immigration officers and different visa offices, you often find that the application of the regulations is a little uneven.
In our opinion, the entrepreneurial candidates who meet the qualifications of the program should be given a chance to prove themselves and establish a business in Canada. Immigration officers should not be the ones who sit in judgment over them and the likelihood of their success. If they have the money and are willing to take a chance on Canada, we should be willing to take a chance on them as well.
As I have alluded to before, the high failure rate for all new business start-ups should be acknowledged for being what it is. There's no reason why immigrants should be held to a higher standard than Canadians when it comes to establishing new businesses.
.1650
Information from the Federal Business Development Bank suggests that over 80% of all new businesses fail. So if you're assuming that's the same number of businesses that would fail for immigrants who are landing here who have less contacts and less understanding of the way things operate in Canada, but are still willing to take a chance on us, I think perhaps we should be willing to take that leap of faith and say they have the money, they've proven their interest, intent and ability to operate a business, bring their families here and create some economic spin-off. We should be trying to help them as well.
The regulations surrounding professionals in the entrepreneurial program also need to be reconsidered. We have a number of applicants in the medical professions, business executives, as well as managers who are being refused entry to Canada under this program because it's felt that they do not have enough experience in managing and operating businesses specifically. For example, I would think managing a medical office is very much like managing a business, with overhead, deadlines and staffing requirements.
The terms and conditions the applicants will be facing as entrepreneurs should also be clearly explained to them during the interview process. They should also be signed in the visa offices and not at the point of entry. It would also be appropriate if it were made clearer at the interview process that the terms and conditions bind the whole family as well as the applicant, rather than telling them when they arrive at the port of entry and are signing the documentation.
On the issue of business plans that are required under the entrepreneurial program, we feel they should not be required because all they really do is suggest the imagination of the applicant's counsel or adviser.
We have one last quote from one of our applicants from Saudi Arabia who was refused by an immigration officer in Riyadh. The immigration officer wrote:
- Your business plan as put forth is remarkable only in its vagueness. This, coupled with the small
amount of disposable cash, raises strong doubts in my mind as to your ability to start and run a
commercial venture in Canada....
- As we discussed, I will withhold a final decision to permit you to submit a more detailed
business plan. This should include, at a minimum, a full and proper market survey, a rationale
for a proposed/projected market share, a cash-flow analysis for the first two years of operation
and a break-even projections.
If you arrive in Halifax, Yarmouth or someplace in Cape Breton and realize that for whatever reason you're unable to open the manufacturing business or contracting business you had planned, but you know you still have two years to meet your terms and conditions, you're going to do something else. It seems a little foolish to be encouraging applicants to spend more money on proposals they are not going to be bound to.
No other immigration category requires more than the applicants demonstrating their intentions to carry out their plans, and nowhere in the original 1978 regulations does the legislation contemplate that applicants be followed up upon their arrival in Canada to see if they've pursued their stated intentions.
It's very clear under subsection 19(1) of the Immigration Act that if applicants fail, removal proceedings against them can be commenced. What Canada needs right now is more highly skilled immigrants with marketable and entrepreneurial skills, not federal clairvoyants who sit in their visa offices determining who might be successful and who might not be.
Immigration officers have been out of touch in many cases as a result of being outside the country for too long, causing their knowledge of the economic realities of Canada to become suspect.
.1655
This is reinforced even in the immigration manual, IS-5. In appendix M, the manual states that:
- Immigration officers are not financial or business specialists and may have difficulty in trying
to understand complex financial statements and documents.
Now Mr. Arrizza will be discussing the issues around the Middle East visa offices and leadership.
Mr. Arrizza: We have selected the Middle East only as an example. Our information indicates that this is equally applicable in other areas and parts of the world.
I believe you have been supplied a sheet with the total number of applications by the various Canadian embassies across the Middle East and northern Africa, including Paris and London. I'd like to start by just pointing out some issues that have come up in the past and that are supported by the actual statistics contained in those numbers.
The Damascus office, just like the Riyadh office, was turned around in recent years. We set out to see why this was the case.
In late 1993, William Farrell was brought in to replace Mr. David Clark in Damascus. While the number of applications moving through the office has not returned to the former levels, in large part because of the peace process in Lebanon, the office is now more efficient, it is perceived as being fair, and it has much less of a backlog than it ever did before. In 1992 and 1993 files out of Damascus were taking approximately eighteen months for processing, while today they're taking between six and nine months.
On the other hand, the Cairo office has seen a dramatic drop in applications, and at the same time it has witnessed an equally dramatic increase in application withdrawals. The statistics that have been provided for you on the page will clearly indicate to you that between 1991 and 1994 the number of applications through the Cairo office went from 266 to 48. The applications actually dropped from 1991 to 1994 by a total of 82%. If we compare other embassies in the same area, we see there has been a decrease as well, but a very insignificant one.
This by itself was compared to see how it compared with other offices. But another disturbing fact in the Cairo office was that Cairo at the same time had a much higher percentage of file withdrawals from the office. This is a general tendency. When an immigration embassy is not working overseas, applicants will generally withdraw their files and transfer them to another Canadian embassy, to the point where it will render that office completely inoperable.
The Vice-Chairman (Mr. Assadourian): Before we go any further, would it be okay with you to focus on consultants, first, and secondly on Diminishing Returns, so we can focus on our agenda? We would appreciate that.
Mr. Arrizza: Yes, I'm leading into that. What we're trying to show is that the Canadian embassies abroad... there's a difference in the processing and in the perception of fairness among the different embassies. So what happens is that it shifts manpower and resources, because files are simply not going to an office any more, and another embassy, which is performing well today, as soon as word gets around, will get all the files sent to that office, and then it completely bogs down to two and three years, as we've seen in the past. This creates a major problem for applicants, who feel they're as qualified as another applicant, yet they got refused, and it obviously creates problems for consultants in dealing with this type of situation, because they're on the front line with the consultants.
We feel the discretion that has been allowed to the Canadian visa officers... if it's not properly monitored and controlled, they have a tendency to run away with the processes they have. That's why we focused strictly on Damascus and Cairo as well as Riyadh.
.1700
Riyadh, on the other hand, had a complete turnaround in a period of four years. It was taking three years to process a file and today it's taking eight months. It's simply because of a change in the total leadership of the office in that particular country.
We believe that the individuals in Ottawa responsible for these particular territories should be visiting these areas in order to ensure that there is a consistency being applied in the principles and directives in each of the Canadian embassies overseas. The only way to do this is have some type of evaluation system whereby the officers' performance and competence are monitored on an ongoing basis to determine how many files are processed and the level of quality of the candidates.
Backlogs are usually a good sign of an office not functioning well. At the same time, with offices that deliver files in eight to nine months...in no more than six to seven months that office will be clogged again because all the files will be transferred to that particular office.
The Vice-Chairman (Mr. Assadourian): Excuse me, would you wrap up because we have to go to the questions now. Thank you.
Mr. Moorhouse: There are a couple of other points perhaps we should mention to fully wrap up.
In our opinion the entrepreneurial applicants should be posting bonds with the province they've applied to, which will be repaid when the entrepreneur makes an offer to purchase the business or the residence in that province. If the business is not set up in that province, the bond itself is lost to the province. This we made clear to the applicant at the time of the interview or prior to their final disposition. If they don't set up a business anywhere, the applicant is still subject to the removal orders.
The immigrant investor program has become a liability in its present form because of Quebec's bilateral agreement with the federal government. This agreement puts other provinces at a distinct marketing disadvantage since Quebec's program indirectly guarantees investor funds fully, and usually with a double A credit rating. We don't believe the purpose of the immigrant investor program, when it was set up, was to benefit banks and consultants. It was meant to benefit different regions, to create economic growth in those regions.
We believe that all forms of guarantees should be cancelled, making the immigrant investor funds true venture capital and equity funds. Also, since most brokerage houses are controlled by banks, the banks are getting two sets of fees out of Quebec - one from the brokerage fee and one from the financing of the deal. Again, this puts more capital in the hands of large financial institutions - the very same group the federal government has been asking to put out small business loans for years.
Citizenship and Immigration should attempt to do what it can to level the playing field between Quebec and the other provinces so that they are no less competitive than Quebec, simply because they don't have a separate bilateral agreement with the federal government. The latter has shown a reluctance in recent years to commence new bilateral negotiations with interested provinces such as British Columbia and Nova Scotia.
Since you want to move on the questions, we have two final points for you to consider.
Since over 75% of all files are initiated by immigration consultants of the different embassies, we feel that the role of the immigration consultant is very important to the successful operation of the whole program. Given these numbers, it becomes questionable whether overseas missions could really do their jobs effectively without the assistance and existence of immigration consultants.
We feel that a mandatory registration system should be established for those persons who represent others in the immigration process for a fee, reward, or any other form of compensation, and that consultants themselves be made to post an insurance bond with the federal government in order to ensure that they comply with federal and provincial regulations.
Since it would be an insurance bond, it would be up to the insurance company to do the due diligence work on the consultant, rather than the government. However, if the consultant did violate the governmental regulations, or if there were a dissatisfied applicant, they could both make claims to the bond.
.1705
Finally, a national registry of fund managers for immigrant investor funds should be established for these different groups who have successfully operated funds in the past, in order to fast-track future applications.
Since the registry would be voluntary, there would be no requirement that anyone join, but it would in fact speed up the approval process for managers with established track records and offer potential immigrants a choice before committing their funds and energies.
This would also ensure that first-time fund managers would not be shut out of the process, but they would have to go through the regular process currently in place to get a proposal processed.
That, in brief, is our opening statement. We had prepared a longer one, but if you wish to move on to the questions now, we'd be happy to entertain them.
The Vice-Chairman (Mr. Assadourian): I'd rather do that because we have to go to vote in half an hour or so.
Mrs. Gagnon, do you want to lead the questions?
[Translation]
Mrs. Gagnon: There are only a few members left to ask you questions. I hope I won't have to keep you for half and hour. You seem rather enthusiastic about the economic benefits of investor immigrants. Could you tell me how many successful businesses foreign investors create in Canada each year?
Mr. Arrizza: We can only talk of businesses established by international companies. In 1988, in Halifax, two years to two years and a half were needed to finalize a project. In 1990-1991, 104 families settled in Nova Scotia.
Mrs. Gagnon: But you don't have any figures for the whole of Canada? For example, how many businesses have been set up by foreign investors and have proven successful in the long run?
Mr. Arrizza: We don't have such data. The figures we have come from our clients, from companies that help immigrants who settle here. As far as the other consultants are concerned, we have no idea. However, one thing should be mentioned. Out of 360 families which settled in Nova Scotia, 304 have remained there.
Mrs. Gagnon: Mr. Moorhouse, you stated that some candidates have been rejected by immigration officers because, according to you, the requests had not been processed in a proper manner. Can you tell us in what sector of the economy those people intended to settle? It might be interesting to know if their request had been rejected because the project did not fit with the type of economic development in some regions of Canada.
[English]
Mr. Moorhouse: It depends on the visa office, the sort of discretion that's given to an immigration officer. They take a look at the files and they assess based on the stated requirements for the entrepreneurial category.
Essentially their criteria is that they be able to establish or acquire a business, to operate it on an ongoing and continuing basis, and to create employment for one other Canadian or landed resident.
I would hazard a guess that the applicants who were rejected from the Cairo office or the Riyadh office in the three examples I gave you would most likely have gotten through a different visa office at a different time.
In fact, we were certain that there were no problems with any of these applications. The one fellow that I mentioned who had the Kuwaiti dinar, who had a large amount of money, was interested in supermarkets and was planning on establishing a supermarket retail operation in the Maritimes. The reason his application was rejected was not because that was not sustainable in Nova Scotia, but rather because the immigration officer felt there was a natural presumption his business would fail and that the applicant would be unable to support his family and would become a drain on the social services of that province.
.1710
The discretion is very broad when it's left to the immigration officers at that level, and a number of candidates qualified for the business categories are being rejected because of this discretion.
What we propose and recommend is that the discretion be narrowed and that the rules become more standardized so the decision-making process won't rest in the visa office but, rather, immigrant entrepreneurs will be given the chance to take their opportunities in the province they wish to settle in and to post a bond in that province. If they fail to meet their obligations, then the bond is turned over to the province. If they meet their obligations and they are released from the terms and conditions, then the money is returned.
If they have enough faith to come to Canada and they have shown on the paper and in their bank accounts that they have the net worth to do so, and they have a desire and the necessary experience, then they shouldn't be denied that opportunity, especially considering the economic spin-offs that we've already demonstrated to the province of Nova Scotia from our group alone. We're talking about $200 million over a period of seven years, and that's rather dramatic for a province that is economically handicapped and doesn't get a lot of new cash coming in from the financial institutions.
[Translation]
Mrs. Gagnon: I would like to ask Mr. Arrizza a final question. You said that you offered this service in Quebec, in the past, but you were not able to continue after passage of the French Language Act, since immigrants did not want to learn French.
Mr. Arrizza: The Quebec Department of Immigration established two conditions. It wanted more French-speaking candidates whereas most of ours were Chinese and Arabs who did not speak French. The system became too rigid for us to be able to adapt to it. For example, during the summer of 1988, we brought 15 Chinese to Montreal for interviews with the Department of Cultural Affairs. The department could not organize any meetings with those persons. It demanded that we provide a month in advance the complete file on each of those persons, and it wanted to interview them a week after having set a date.
This type of behaviour is not effective in a free-market. It was not possible to have the candidates come to Montreal on short notice. Of course, candidates come here mainly in the summer, because their children are not at school. Our candidates came to visit Quebec and Montreal, and you know that there are many Chinese living today in Brossard, outside Montreal. However, at that time it became very difficult to obtain an appointment with the department and the conditions became too rigid.
I will give you another example. We had accepted some candidates for Quebec, and immigration officers had gone through the interviews and the candidates had been accepted as investors. However, while the files were still in Hong Kong, the immigration officer in the local office changed the designation of the file from investor to entrepreneur. The fees had to be reimbursed. The company that wanted those people to come concluded that the government did not want them anymore. We were unable to operate with the rules established by the government.
At the present time, there are a lot fewer candidates for immigration to Quebec. Our company used to deal with 400 families every year, 35% of which were Chinese. The others came from Pakistan, India and the Middle East.
.1715
[English]
The Vice-Chairman (Mr. Assadourian): I have a question for you. Assume I am a business person from the Middle East - Cairo, Damascus, Sudan - and I have $500,000. I want to come to Canada. What do I do? Do I phone you or do I write you a letter?
Mr. Arrizza: It doesn't quite happen that way. I think that's probably the biggest misconception we Canadians have. These people are in their country. You normally have to go to them. You normally advertise in the area you will be visiting there and you offer services for investment and migration to Canada. Then you get to meet the person. Sometimes you meet him for a period of three years. There are certain clients I am aware of who were met five years ago and only decided this year to actually do it.
The Vice-Chairman (Mr. Assadourian): Let me ask my other question.
You went to Cairo. You put your advertisement in the newspaper. You say you are a consultant who can help bring them over to Canada. How do you go about charging them? What is your formula to charge them?
Mr. Arrizza: All files are either $3,500 or $6,500 U.S.
The Vice-Chairman (Mr. Assadourian): Per person, $3,500? Per application?
Mr. Arrizza: Per application, per family.
The $6,500 is a full-service contract, which means you assist the client right up until the time he settles in Canada, including helping him find an apartment, locate a home, helping him put his kids in school, helping him with everything up to getting the hydro on line and getting the telephone.
The limited service program just assists him up until the time he submits an application and a federal file number is granted to him. I should point out that, since you're asking me this question, of the $6,500, $2,000 rests with the office overseas.
You cannot just go into a city, stay in a hotel, put in your advertisement and your name and then just leave. It doesn't work. You have to have a permanent place there that someone can call the next day because he forgot to ask a question. He can direct the question to that office. So you need an office in each of the major cities you're dealing with.
The Vice-Chairman (Mr. Assadourian): Are you telling me you have offices in Cairo, Damascus, Riyadh, Dubai, London and Paris?
Mr. Arrizza: Yes, we have affiliated offices in Cairo and in all of those countries.
The Vice-Chairman (Mr. Assadourian): Let's say I paid you $3,500 in Cairo and I changed my mind halfway, I dropped out or I withdrew my application.
Mr. Arrizza: Our contract has a full refund policy, subject to medical and security. In other words, if the candidate is refused for any reason other than medical or security, he is refunded the entire amount, including the original deposit.
The Vice-Chairman (Mr. Assadourian): In other words, you guarantee visa or admission to this -
Mr. Arrizza: No. We don't guarantee. We evaluate the candidate to see if he qualifies. If in our opinion he qualifies, we are prepared that if he gets refused the funds are reimbursed. It's the same thing in any other business. If you don't get the service, if you don't get the application, you don't do it.
If the candidate, for example, lied on his application, he is not refunded. If the candidate withdraws his application, he is not refunded. If the client did not inform the proper people of a medical problem, he is not refunded. If the candidate has a security clearance problem and he did not identify it originally, he is not refunded. So it's only in very few situations that the refunds apply.
The Vice-Chairman (Mr. Assadourian): Do you help those clients to get security clearance from, say, the Cairo police or the Damascus police?
Mr. Arrizza: No. Normally, they are requested to go to their nearest police station where they reside, whether it be in Cairo or whether they be elsewhere, because most of the time you have their children studying in the United States or London, England, and you have to get security clearances in those countries as well.
The Vice-Chairman (Mr. Assadourian): After you find them to be qualified business immigrants to the country, what is your success rate among those who you think are qualified?
Mr. Arrizza: To starting a business?
The Vice-Chairman (Mr. Assadourian): No, to come in.
Mr. Moorhouse: What do you refer to when you ask about success?
.1720
The Vice-Chairman (Mr. Assadourian): If you interviewed 100 people in Riyadh or Cairo - in this case we're discussing Cairo - and in your estimate 50 were qualified, and they made their deposit to you and you took it and you came back here -
Mr. Arrizza: I should put forward -
The Vice-Chairman (Mr. Assadourian): Let me finish the question, sir.
Out of 50, how many are successful immigrants who come to this country?
Mr. Arrizza: In other words, they get a Canadian visa.
The Vice-Chairman (Mr. Assadourian): Yes.
Mr. Arrizza: It varies from embassy to embassy, as I mentioned before. We mentioned the embassies because there have been cases where applicants have been refused in one embassy but then they have been resubmitted in another embassy and have got through.
The success rate after we evaluate the candidate is in the area of 90% to 95%.
The Vice-Chairman (Mr. Assadourian): If someone comes to you and says, ``I want to buy the small package, for $3,500 U.S.'', but the case drags on for some reason - say it went from embassy to embassy - do you charge them extra?
Mr. Arrizza: No. It's always the same fee. As a matter of fact, I think you're aware that during the Gulf War, for example, all the files that were in Kuwait in the Canadian embassy were destroyed. The Canadian government had them destroyed before they left. All those files were replaced. All the candidates were resubmitted, at no additional cost, to various embassies that were operating at the time. That's the client base.
You have to understand that a consultant who is a long-term player in this market has no interest in charging twice or taking advantage of their clients, because the bulk of their clients come from a referral system. It's a network. The advertising merely informs people that you're going to be there at that time. It's the network of the people you've brought and the people who are left that brings your client base, and that's how you succeed in this business.
Mr. Moorhouse: You should be aware that there are many different types of immigration consultants. We are the largest immigration consultant group in the Maritimes, and I would hazard a guess that perhaps we are still one of the largest ones operating out of Quebec.
We have built our company on the basis of a strong reputation. We've based it on the fact that we are loyal to our applicants and that we trust them and they trust us. There's no other way in which you could operate as an immigration consultant and be in the business for over 15 years and still have as many applications put through successfully as we have. The fact that we have $200 million of net worth in one province attests to that.
You might be hearing other people refer, through their submissions, to immigration consultants, but they're not all alike. As not all politicians are alike, so not all consultants are alike. There are different fee schedules. There are different packages.
We should probably put on the record, as well, that not all immigration consultants are honest. They don't have the contacts. They operate out of hotel lobbies in the Middle East. They don't have on-the-ground support people. They're not professionals. They don't have the contacts with the government and the embassies.
They'll take their money. The independent class that you were speaking about earlier is a boon for an immigration consultant, because all they have to do is fill in a form and submit the application to the embassy and an applicant in Yemen or Amman would think,``Wow, I've got service. Here's your cheque for $5,000'' - when in fact they could have done that by themselves.
We don't just fill out a form for them. We consult with them and we evaluate their applications. If they go for the full-service contract, which again is something unusual from us as compared to those of other consultants, we go with them right through to landing. We take them to Canada. We help them to explore their business opportunities.
So you must keep in mind that not all immigration consultants are the same.
The Vice-Chairman (Mr. Assadourian): I agree with you. That's what this hearing is all about.
How many people work for your company?
Mr. Moorhouse: Out of Canada or internationally?
The Vice-Chairman (Mr. Assadourian): In total.
Mr. Arrizza: In Montreal there are five. In Halifax there are six. Overseas, although these individuals are not employees of the company, they are people who work exclusively with our company. They are people who have their own offices and supply their own expenses, but they share in part of the fee that is charged in each and every file. They are normally the ones who get the fee before the company in Montreal.
The Vice-Chairman (Mr. Assadourian): Let's go back for a minute. If this person comes to Nova Scotia, he has invested funds to get there. How do you operate that Nova Scotia fund?
.1725
Mr. Moorhouse: The Nova Scotia fund is approved both by the federal government and by the provincial government. Once that's been established, they have read the offering memorandum overseas and they have qualified under the rules and regulations. Then they land here. In Nova Scotia, the requirement now is that they put $250,000 into a registered immigrant investor fund.
Mr. Arrizza: Sorry, I may have misunderstood your question. Are you speaking about investors or about entrepreneurs, and are you talking about the point in time that they reach Canada?
The Vice-Chairman (Mr. Assadourian): Yes.
Mr. Arrizza: Are we talking about investors or entrepreneurs?
The Vice-Chairman (Mr. Assadourian): Entrepreneurs.
Mr. Moorhouse: That's different from what I was speaking of.
Mr. Arrizza: The entrepreneurs, as you know, have a condition on their visa that they have to start a business within two years after landing. Once they land in Canada, generally what happens is they go back overseas for a period of six or seven months, once we know, because they still have to settle their affairs. Probably more than likely their furniture is not coming at the same time. Generally, now more than ever, that happens because the time limit they give you to land is six months on your visa.
Prior to a few years ago, it used to be one year, so you used to be able to arrange it at that time. They try to land so that it does not inconvenience their children's studies. Sometimes they'll come and land, but their children are still in school. So they'll come back in the summer to fully land.
Then he has a condition on the visa. On the entrepreneur side, they generally look for businesses or something to do for close to a year before they start anything. In Nova Scotia, as we mentioned, we have on record 104 businesses that have started and that are operating.
One of our clients is one of the biggest developers in Nova Scotia of residential homes. He came three years ago, one of the first clients to land. They seem to have found a niche a lot better in Nova Scotia than in a province like Quebec. They seem to be able to find something they can do in that particular area.
Generally they don't start with investments of $500,000. They generally start with an investment of $25,000, to $50,000, to $100,000.
The Vice-Chairman (Mr. Assadourian): Thank you.
Ms Young: I have some questions about consultants. I believe you mentioned that 75% of business files handled abroad were assisted by or -
Mr. Moorhouse: Generated by.
Ms Young: - generated by consultants. Is there a percentage of that 75% of consultants that would operate exclusively offshore, in your experience, or do they all have a home base in Canada?
Mr. Arrizza: Most of the consultants that work in the Middle East have a home base in Canada, from my knowledge of the consultants in especially Montreal and Halifax. I find that consultants in, for example, Pakistan, consultants in Taiwan and Hong Kong, don't necessarily have a home base here in Canada. They merely use an attorney, or they use someone's office, to carry on the business. Generally, it's offshore.
Ms Young: You mentioned that it's your view that there should be mandatory licensing of consultants. Did I understand correctly? In your opinion, who would do the licensing?
Mr. Arrizza: We would prefer that the government do the licensing even if -
Ms Young: The federal government?
Mr. Arrizza: - the federal government - even if it's just a matter of putting on record who is operating in that particular industry so that there's a registry system.
After that point, standards can be established to see which companies should get the ratings. I think if certain infractions are made by certain consultants, it should be a public record after that point.
Ms Young: We have heard, and we will be hearing, the view that this kind of comprehensive licensing you're speaking of perhaps moving to down the road would not be constitutional to the federal government. Have you an opinion on that?
Mr. Arrizza: Are you saying that it may not be charter-proof?
Ms Young: No, it might not be constitutional vis-à-vis the division of powers, given that the regulation of professions and trades is normally a provincial matter.
Mr. Moorhouse: There is another option, I suppose. You could also have the licensing happen at the provincial level, but if you do, the provincial registries would have to be willing and able to share their information on an ongoing basis.
It could be suggested as well that the tie-ins of the federal powers in the immigration area in the business program also affect the provinces in their ability to do trade and commerce - certain aspects of trade and commerce - and civil rights and property rights. There is a possibility, too, that you could have the registry done at the provincial level and have the information flow up to a federal clearing-house, where you can make your actual inquiries.
.1730
Ms Young: From a briefing the committee received recently from departmental officials, the committee has received the impression, at least, that the federal government is reluctant to enter upon a licensing system itself, but that it might be exploring avenues of licensing by private organizations. The one, of course, that does exist now is OPIC, the Organization of Professional Immigration Consultants.
How would you react to a proposal to accomplish licensing by that kind of route?
Mr. Arrizza: I can only reply that Quebec has attempted in the past to have an organization or association of immigration consultants. Although it stayed in operation for almost two years, it never really was able to agree on any major issue that was brought forward. There was always dissension within its members. It could not even schedule a meeting to go to see the minister.
You need funds in order to finance these organizations. For the smaller consultants, a $100-a-year fee was too much for them. The larger consultants had no problem paying $5,000 a year, but at least fund the association properly so it can be properly managed and put forward its views to the various departments.
I believe it will not work only because the people will not agree on a system, unless you have a set of rules that are clearly identified and that it is mandatory they abide by. If it's not mandatory, it is just going to fall apart.
The Vice-Chairman (Mr. Assadourian): I think we have to wrap it up, because they are calling us for a vote now. It means we are going to have to go.
Thank you very much for your presentation, and I hope in the future we will have a chance to work together again. We want to find out what is going on in the business and if there is any way we can help. That was the intent of the subcommittee.
Again, thank you very much. You did a good job.
Mr. Arrizza: Thank you for the opportunity.
The Vice-Chairman (Mr. Assadourian): The meeting is adjourned.