Citizenship and the Economic Assimilation of Canadian Immigrants

One of the people I know at StatsCan flagged this recent IADB analysis of the impact of citizenship on earnings to me (the benchmark study, Dan DeVoretz’s The Economic Causes and Consequences of Canadian Citizenship, dates from 2005).

The paper assesses the impact of the increased citizenship residency requirements under the previous Conservative government (from three to four years) on earnings and concludes that a positive causal relationship between citizenship and earnings exists.

Presumably, the return to the previous requirements would show an improvement in earnings given one less year needed to become a citizen.

One can further extrapolate by considering the impact of the 2020 shutdown of the citizenship program and its only partial restoration (54,000 new citizens April 2020 to February 2021 compared to 238,000 for the same period 2019-20).

In other words, the government’s fixation on immigration targets at the expense of citizenship may harm the earnings of those whose citizenship has been delayed:

At the beginning of this paper, we asked whether citizenship acquisition improves migrants’ economic assimilation in Canada. Our empirical analysis shows evidence suggesting that other factors being equal, naturalized citizens earn higher wages than their non-naturalized counterparts (approximately 11 percent more). 

That under the Act, some migrants had to wait one additional year to claim citizenship, while others did not, was a “naturally” occurring sorting process. The enactment of the Act put exogenous variation into the likelihood of becoming a citizen that allowed us to simulate random assignment conditions as it would have happened in a randomized controlled experiment. We provide evidence of citizenship’s causal effects on economic assimilation with a clean identification strategy that ties an immigration policy to the behavioral responses of immigrants affected by it. 

Within that causal inference framework, we found that those immigrants able to acquire citizenship after living for three years in Canada were better positioned in the labor market than those who had to delay their citizenship applications an additional year because of the policy change. In the short term, both earning capacities and the likelihood of landing a job with deserved “job quality’’ were negatively affected by the Act. Our results also suggest that, because of those baseline differences in hourly wages induced by changes in the migration policy, the longer-term wage growth trajectory differs across the two groups, favoring naturalized migrants. 

Our results indicate that, on efficiency grounds, delaying citizenship acquisition can be costly for society: An initial 11 percent difference in earnings can result in a substantial portion of the migrant population being permanently below the threshold where tax contributions are above welfare transfers. On equity grounds, naturalization policy should provide a predictable and stable plan with clear and stable rules for all migrants. We have shown that society pays the price when policymakers manipulate elements of migration policy to favor their political clientele. Providing stable perceptions of fairness around migration policy may benefit members of society, beyond migrants. Suppose the objective is to compete efficiently with developed countries to attract the world’s most talented human capital. In that case, establishing an evidence-based time for naturalization eligibility, and committing to its stability through time, is a priority. 

Our analysis suggests that firms value the clear signal of migrants’ commitment that citizenship reveals. This signaling might be particularly important for those firms that heavily invest in their employees’ human capital because their associated risk of losing those investments is inversely proportional to that commitment. Lack of citizenship might have impacted hiring decisions and the timing and likelihood of promotions, with longer-term implications for wage growth. When migrants lack citizenship beyond a specific time threshold, they appear to become systematically disconnected from opportunities in the labor market for gaining access to well- paid, stable jobs and those characterized by steep growth in wages.

Source: https://publications.iadb.org/publications/english/document/Citizenship-and-the-Economic-Assimilation-of-Canadian-Immigrants.pdf

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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