Changing Immigrant Characteristics and Entry Earnings: StatCan Study

Key takeaway of this study: Canadian work experience makes the largest difference in short-term (less than 2 years) economic outcomes, and provides an evidence-base for policy changes that reward it (e.g., Express Entry points). In the longer-term, education and age are more significant (View):

Immigration selection policies changed significantly during the 1990s and 2000s, at least in part to improve immigrant entry earnings. After the decline in both relative (to the Canadian-born) and absolute entry earnings during the 1980s and early 1990s, there was a strong desire to improve the economic outcomes of immigrants shortly after their landing. Changes in selection policies and other factors altered immigrants’ characteristics across a number of dimensions, including demographics, source region, work experience and geographic distributions. This paper examines whether immigrants’ earnings immediately after their landing improved as a result of these changes and, if so, which characteristics contributed the most to this improvement.

Among all new immigrants, abstracting from economic cyclical variation, entry earnings—defined as earnings in the first two full years after landing—remained more or less constant throughout the 1990s and 2000s. The situation was very similar for principal applicants (PAs) in the economic class. During the 1990s, rising educational attainment at landing and the increasing share of immigrants in the economic class increased entry earnings. During the 2000s, a much more complex period in terms of immigrant selection, the factors that positively influenced immigrant entry earnings included changing distribution by immigration class, notably the rise of the Provincial Nominee Program (PNP); changing source region; and, for immigrant women, rising educational attainment at landing. These factors were offset by less favourable economic conditions in destination cities and regions in the late 2000s.

However, one factor dominated all others: the rise in the share of new immigrants who had Canadian work experience, often in high-paying jobs, prior to obtaining permanent residency. Changes in this factor tended to increase entry earnings during the 2000s far more than any other variable studied. The increase in pre-landing Canadian work experience accounted for most of the positive effect of the rise of the PNP on entry earnings during the 2000s, since the increase in work experience was heavily concentrated among provincial nominees. Furthermore, differences in pre-landing Canadian work experience between provincial nominees (with more Canadian work experience) and skilled workers (SWs) (with less) accounted for virtually all of the entry earnings advantage that the provincial nominees held over the SWs during the 2000s. While other factors, such as differences in geographic distribution (more settled in the West), educational attainment at landing, unemployment in the destination regions and cities, and source region, contributed, either in a small positive or negative manner, to the entry earnings differences between provincial nominees and SWs, their contribution paled in comparison with the pre-landing Canadian work experience factor. Once adjusted for differences in pre-landing Canadian work experience, entry earnings were virtually identical between provincial nominees and SWs. These conclusions were found for all new immigrants, as well as for PAs in the economic class, and were evident for both men and women.

It is likely that the pre-landing Canadian work experience variable used here captures at least three effects. First is the effect of Canadian work experience on earnings early in immigrants’ working life after landing. Employers appear to be more willing to remunerate such experience relative to foreign work experience. Second, this variable may also reflect a selection effect. When immigrants are selected from the pool of temporary foreign workers, they come with information regarding how well they performed in their jobs in Canada. If an employer seeks to change the status of temporary foreign workers to a permanent one, it is likely because they have done well in their jobs. Hence, much of the effect on entry earnings could be because of this selection process. Third, during the 2000s, many of the workers on temporary visas who attained permanent status worked in high-paying jobs.

Source: Changing Immigrant Characteristics and Entry Earnings

About Andrew
Andrew blogs and tweets public policy issues, particularly the relationship between the political and bureaucratic levels, citizenship and multiculturalism. His latest book, Policy Arrogance or Innocent Bias, recounts his experience as a senior public servant in this area.

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