Immigrants’ net direct fiscal contribution: How does it change over their lifetime?

Abstract

AbstractLife‐cycle direct public fiscal contributions and transfers are studied using longitudinal income tax data from 1982 to 2016 and administrative files for immigrants landed in Canada from 1980 to 2016. Relative to a comparison group comprising the Canadian‐born and immigrants landed before 1980, immigrants since 1980 have a lower average net direct fiscal contribution (NDFC) during their working years due to their lower taxes and social security contributions but a higher average NDFC after 65 years of age because of reduced public pension eligibility and entitlement. Immigrants who landed at younger than 19 years old have much higher direct fiscal contributions than other age‐at‐arrival groups and reach their peak of contributions around 10 years earlier in life than other age‐at‐arrival groups. Immigrants whose age at arrival is above 65 have a less negative average NDFC than other age‐at‐arrival groups over the above‐65 life cycle. These life‐cycle age𠄁at‐arrival trajectories are stable for immigrants in different landing cohorts. We apply the life‐cycle estimates to project the present discounted value of lifetime NDFCs for immigrants who landed in 2016. For each landing age group, refugees and family class immigrants have negative or zero average present values of life‐cycle NDFCs, much below that of economic immigrants.