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JDI Roundtable on Manufacturing Competitiveness in New Brunswick

Immigration alone cannot grow economy

Herb Emery

Will increasing the number of immigrants to New Brunswick cause the economy to grow? No. Will increasing the level of investment and labour demand cause more immigrants and GDP growth? Yes. The reason we know this is because in a recent research study we conducted at the New Brunswick Institute for Research, Data and Training at UNB, we looked at the labour market outcomes of New Brunswick residents who migrated to Alberta or Saskatchewan, and of those who subsequently returned to New Brunswick.

Return migrants and immigrants are both categories of residents attracted “from away” but return migrants have fewer issues with settlement and assimilation due to their prior experience and familiarity with New Brunswick than immigrants giving us a clearer signal of the impacts of migration on the regional economy.

New Brunswick experiences substantial outmigration of its residents and since 2003, Alberta and Saskatchewan have emerged as top destinations for New Brunswick outmigrants. New Brunswick also experiences sizeable return migration from Alberta and Saskatchewan with around half of the outmigrants returning within 10 years. The number of return migrants in a given year is larger than the number of immigrant permanent residents.

To determine whether immigration causes GDP growth we need to know if the lower incomes in the province are due to lower human capital and skills in the workforce of New Brunswick or due to the place in which the human capital and skills are employed.   

If immigration can cause economic growth then it must be the case that we would see that adding skilled and educated immigrants and interprovincial migrants to our labour force would result in higher wages and incomes in the province.  In other words, if the value of human capital is determined by the productivity of the individual then we should see New Brunswick residents who migrate to Alberta earned as little as they earned in New Brunswick. If a lack of labour demand due to factors like a lack of private sector investment explains the lower incomes in New Brunswick, then we would expect to see New Brunswick migrants earning much more while they are in the west than when they are working at home.

Using taxfiler data from Statistics Canada, we study the earnings of New Brunswick residents who moved to Alberta or Saskatchewan between 2003 and 2009 and then returned to New Brunswick by 2013 in comparison to New Brunswick residents who migrated at the same time but remained in the west and New Brunswick residents who never left the province.  

We find that while in Alberta or Saskatchewan, return migrants earnings were double what they were in New Brunswick prior to migration. After returning to New Brunswick, the migrant’s earnings returned to what they were prior to migration west. There was no earnings increase associated with their western work experience in the New Brunswick labour market. It is clear that the human capital and skills embodied in New Brunswick migrants are worth much more in the west than in New Brunswick. 

In other words, it’s not the person, it’s the place that explains the lower earnings and what differs between New Brunswick and Alberta and Saskatchewan is the higher demand for labour driven by private sector investment in the west.

The productivity of human capital in New Brunswick is determined by labour demand in New Brunswick. This runs counter to the expectation that often underlies population policies that increasing labour supply can cause growth of the economy but agrees with the OECD assessment that return migration return migration is a response to the  creation of opportunities arising from GDP growth in the home economy. Growth in population and GDP in New Brunswick is more likely to occur from strategies focused on promoting private sector investment and innovation.

Our results on the earnings impacts of return migration suggests that in the absence of a stimulus to labour demand, policies aimed at increasing marketable human capital and skills through education, training and work experience will not cause higher incomes of the individuals in New Brunswick. Policies aimed at increasing the number of return migrants or immigrants will not cause growth of the economy. What will increase GDP, immigration and return migration in New Brunswick are policies and institutions aimed at increasing labour demand through increased investment in capital stocks and technical progress.

Immigration is useful for backfilling labour market needs arising from retirements and outmigration of New Brunswickers. But this is immigration for churn not growth.

Herb Emery is a Brunswick News columnist and the Vaughan Chair in Regional Economics at the University of New Brunswick.

This article first appeared in Brunswick News publications – Nov. 11, 2017

The JDI Roundtable on Manufacturing Competitiveness in New Brunswick is an independent research program made possible through the generosity of J.D. Irving, Ltd. The funding supports arms-length research conducted at UNB.