Immigration isn't an elixir of youth
National Post
Wed 27 Sep 2006
Page: A19
Section:
Issues & Ideas
Byline: Yvan Guillemette and William Robson

Source: National Post

Canada's large baby boom and subsequent baby bust,
combined with impressive improvements in life expectancy, mean that Canadian
society is aging rapidly. Because immigrants are, on average, younger than the
resident population, analysts often suggest that immigration might slow this
aging down -- a kind of elixir of youth. However, this superficially attractive
idea does not survive an encounter with the actual numbers involved.

Projections based on current fertility rates, current immigration levels and
moderately rising life expectancy show the ratio of the population typically
considered to be past working age (age 65 and over) to the population of
traditional working-age individuals (18-64) -- the "dependency ratio" -- rising
at an unprecedented rate. Over the past 35 years, the ratio rose modestly: from
less than 15% in 1970 to 20% in 2005. Over the next 35 years, it will more than
double, surpassing 40% before 2040.

This is a troubling scenario. Such a large rise in the share of the
population that is drawing pensions relative to the number of workers
contributing and paying taxes will put stress on pension programs. Older people
also tend to use the government-financed health-care system more than younger
people, but tend to pay less tax to finance it.

Immigration looks like one potential solution to this challenge for the
simple reason that immigrants are, on average, younger than the already resident
population. The share of immigrants 20-39 is nearly twice as large as the share
of the resident population of that age, while the reverse is true for people
over 40. Surely, then, increasing immigration from its current level of about
0.7% of the population (or about 230,000 newcomers) each year to, say, the 1%
level (325,000 newcomers) proposed by some politicians, would help keep Canada
young?

The answer is no. Our analysis shows that even if we applied ethically
dubious age restrictions on newcomers, immigration will not appreciably slow the
coming shift in the dependancy ratio.

In a recent C.D. Howe Institute study, we used a detailed Canadian
demographic model to project the impact of various levels of immigration on the
dependency ratio over the next 50 years. We first looked at a scenario whereby
immigration with the current age structure rises to 1% of the population. The
result: The dependency ratio still almost doubles over the next 35 years.

This disappointing result led us to try a policy of selecting younger
immigrants in much larger numbers. Partly because the many young children such a
policy would bring in would take many years to reach working age, however, this
scenario was no more effective in slowing the rise in the dependency ratio.

The stubbornness of the projected rise in the dependency ratio then led us to
come at the question from the other end. What combination of age filter and
level of immigration would prevent the dependency ratio from rising above its
current level of 20%?

The answers are extreme. The number of young people Canada would need to
attract is preposterously large, not only in relation to the country's
absorptive capacity, but possibly even in relation to the number of potentially
available immigrants.

If the age-structure of immigration does not change, for example, stabilizing
the old-age dependency ratio at 20% would require that Canada annually immigrate
2.5% of its population by 2010 (750,000 new immigrants per year), 4.4% of the
population by 2012 and 4.7% by 2020 -- at which point, Canada's population would
be 56.6-million and 2.6-million immigrants would arrive every year.

Suppose, by contrast, that Canada could, through some kind of dark magic,
restrict immigration only to people age 20-24. The annual inflow of people in
their early 20s would equal almost half the resident population of that age at
the start -- which would have a devastating impact on young people's wages. It
would also require Canada to attract more than the total number of people of
that age known to move into all the developed countries in the world combined.

If Canadians wish to avoid many of the economic and fiscal consequences of an
aging society, they must look for another solution besides immigration. Policies
that encourage longer working life are particularly attractive alternatives.
Even a modest and gradual change in the normal work and retirement pattern --
such as raising the normal age of retirement from 65 to 70 over the next 20
years -- would do more to reduce the old-age dependency ratio than even extreme
changes to immigration policy.

Whatever immigration's benefits to Canada's economy and society, and to
immigrants themselves, immigration cannot relieve Canada of the challenges of an
aging population.

- Yvan Guillemette and William Robson are,
respectively, policy analyst and president and CEO at the C.D. Howe Institute. Their
new immigration study is available at www.cdhowe.org.

Edition: National
Story Type: Opinion
Length:
794 words