With an increase in the number of immigrant workers comes productivity growth for Canadian businesses.
This is the conclusion drawn in a recent Statistics Canada study that assessed the impact of immigration on company-level productivity outcomes.
The report titled “Immigration and Firm Productivity: Evidence from the Canadian Employer-Employee Dynamics Database” is based on data that tracks individual firms over time and assesses the effect of immigration on their overall productivity levels, worker wages, and business profits.
On average, between the years 2000 and 2015, immigrants who arrived in Canada after 1980 accounted for 13.5 per cent of workers in firms with 20 or more employees. The share of immigrants employed in a company can fluctuate quite a bit, generally ranging from an increase of 15 percentage points to a decrease of 15 percentage points, according to statistics presented in the study.
There is a positive association between the increase in the proportion of immigrant workers and business productivity growth, just as immigration tends to have a positive effect on workers’ wages and business profits, according to the findings.
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The effect of immigration on productivity increased with the length of the period used to measure changes. The longer the period, the greater the effect of immigration on productivity. For example, over a one-year period, the positive impact of the increase in the number of immigrant workers on business productivity was small; in contrast, over five or ten years, the positive effect of immigration on productivity increased.
On a statistical level, a 10-percentage point increase in the proportion of immigrants was associated with a 1.9 per cent increase in business productivity which Statistics Canada said was “small.” On the other hand, for individual businesses that experienced a large increase in the proportion of immigrant workers, “the contribution could be substantial.”
The impact on business productivity was more significant for low-skilled or less-educated immigrants than for highly skilled or university-educated immigrant workers, with the differences being particularly notable in technology-intensive and knowledge-based industries.
What explains the positive effect of immigration on productivity and the differences between different types of immigrants and different industrial sectors?
“The positive effect of immigration on productivity is consistent with the proposition that immigrants are complementary to native-born workers in skills and firms increase job/task specialization to take advantage of comparative advantages of immigrants and native-born workers,” the study says.
In other words, the complementary nature of immigrant worker skills with those of native workers may be an essential element in increasing labour productivity in technological or knowledge-based industries with high degrees of a division of labour and job specialization.
In these industries, for instance, less-educated immigrants may work in jobs that are often different from, but complementary to, those of domestic-born high-tech or knowledge-intensive workers. This can ultimately provide companies with “more opportunities for specialization and productivity growth.”
The same trend was observed, although less significantly, for highly skilled immigrants, who may act as important drivers of productivity within a company, as they have the potential to increase the degree of specialization of their firms, expand the use of new technologies, and stimulate innovation.
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