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The Effect of Immigrant Selection and the IT Bust on the Entry Earnings of Immigrants
Abstract and Figures
Immigrant selection rules were altered in the early 1990s, resulting in a dramatic increase in the share of entering immigrants with a university degree and in the skilled economic class. These changes were very successfully implemented following significant deterioration in entry earnings during the 1980s. This paper asks whether these change in immigrant selection contributed positively to immigrant entry earnings during the 1990s. Moving to the 2000s, the paper asks whether, after almost two decades of deterioration, the entry earnings of immigrants improved early in the decade, and if not, why not. We find that through the 1990s, altering immigrant characteristics did little to improve earnings at the bottom of the earnings distribution, and hence poverty rates among entering immigrants. A rapidly increasing share of immigrants with university degrees and in the skilled class found themselves at the bottom of the earnings distribution. They were unable to convert their education and “skilled class†designation to higher earnings. This inability may be related to language, credentialism, education quality, or supply issues, as discussed in the paper. However, the changing charcateristics did increase earnings among immigrants at the middle and top of the earnings distribution. We also find that from 2000 to 2004 the entry earnings of immigrants renewed their slide, but for reasons that differed from the standard explanations of the earlier decline. Following a significant increase in the supply of entering immigrants intending to work in IT and engineering during the late 1990s and early 2000s, these immigrants were faced with the IT downturn. The result was declining entry earnings, concentrated largely among these workers.
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... Since the 1990s, any negative effect of the continuing small shift in source regions has likely been offset by the rapidly rising education levels among new immigrants. This resulted from new policy initiatives, adopted in the early 1990s, to select more highly educated immigrants (Picot and Hou 2009). ...
... The impact of supply and demand is clearly exemplified by the information technology (IT) boom in the late 1990s and its bust in the early 2000s. A number of studies (e.g., Hou 2013; Picot and Hou 2009) demonstrated that the decline in employment in the IT sector during the first half of the 2000s had a large impact on the earnings of recent immigrants. The reason behind this was that a disproportionately high share of recent immigrants was trained and employed in computer sciences and engineering. ...
... 1 More critically, the LFS started to collect information on immigration status in 2006, which is less desirable as a starting year than 2000 (the year for which income information was collected in the 2001 Census) to study the long-term trend in the gap in labour market outcomes between immigrants and Canadian-born workers. As a result of the 2001 IT bust, immigrants arriving in the early 2000s experienced a larger earnings gap relative to Canadian-born workers, as measured in 2005, than immigrants who arrived in the late 1990s, as measured in 2000 (Hou 2013;Picot and Hou 2009). The census data allow for the examination of the long-term trends between 2000 and 2015, the first and final years of which had similarly low national unemployment rates (6.8% in 2000 and 6.9% in 2015) and high employment rates (61.3% in both years). ...
Earlier studies have well documented the expanding earnings gap between new immigrant workers and their Canadian-born counterparts during the 1980s and 1990s. However, significant policy changes in immigration selection and settlement have been introduced since the early 2000s, and the employment rate and entry earnings among new immigrants have been improving in recent years. Little research has been undertaken to examine whether the earnings gap between new immigrant and Canadian-born workers has recently started to close. This paper compares the employment rate and the weekly earnings of immigrant and Canadian-born workers throughout the 2000s and 2010s. It is based on information from the censuses from 2001 to 2016 and information from the Labour Force Survey from 2015 to 2019. Analyses are conducted for new immigrants (in Canada for 1 to 5 years), recent immigrants (in Canada for 6 to 10 years) and long-term immigrants (in Canada for over 10 years). Over the 2000-to-2019 period, the employment rate for new and recent immigrant men grew faster than for Canadian-born men, and the relative employment position of new immigrant women also improved slightly. The earnings gap between immigrant workers and Canadian-born workers with similar sociodemographic characteristics widened between 2000 and 2015, with both years posting similar national unemployment rates. In the late 2010s, there was some improvement in the earnings gaps for immigrant men and women relative to their Canadian-born counterparts. This improvement may be related to the rising demand for labour during these years, since relative labour market outcomes for immigrants tend to improve during expansions and to deteriorate during contractions. It may also be related, in part, to the increased tendency to select economic immigrants from the pool of temporary foreign workers. This has been shown to improve both entry earnings and longer-term earnings.
... Much has been written about the deterioration and its causes (recent papers include Aydemir and Skuterud, 2005;Frenette and Morissette, 2005;Green and Worswick, 2010;Picot, 2008;Sweetman, 2010;Picot and Hou, 2009; for reviews see Picot andSweetman 2012, Reitz, 2007). The causes of the decline in entry earnings more or less agreed to in the literature include: ...
... Among men, these immigrants saw their entry-level earnings fall by 37% between the 2000 and the 2004 entering cohorts. Other groups registered some decline, but much less --around 11% fall in earnings(Picot and Hou, 2009). 5 A discussion of temporary worker programs -often hailed as the solution to the short-run labour shortages -is beyond the scope of this paper. ...
When considering immigration levels and the characteristics of the selection process for economic immigrants, the findings in a number of areas of immigration research should be considered. This article outlines the available research in a number of such research areas, including the effect of immigration on: GDP per capita, domestic wages, the fiscal balance, and skill and labour shortages. The paper also reviews research on the economic outcomes of immigrants in Canada, the ability of immigration to solve the upcoming "dependency ratio" problem, and evidence on immigration and social cohesion in Canada.
... First, since the 1980s, the relative earnings of immigrants have been falling and the number of immigrants living in poverty has been rising (see Picot and Sweetman 2005;Reitz 2007;Picot, Hou, and Coulombe 2007;Picot and Hou 2009;Hou and Picot 2010). Second, the 2008-09 recession might have worsened this situation significantly by making jobs harder to obtain and retain (Cross 2011 Immigrants to Canada enter under different programs or admission categories corresponding to the several objectives of immigration: providing labour market skills to help the economy grow and prosper, contributing to family welfare through family reunification, and offering refugees a safe haven and new opportunities. ...
... Several recent papers also find that the earnings outcomes of newly arrived immigrants are affected significantly by the economic conditions and policy environment prevailing in Canada when they landed, and that these effects can persist for some years; see McDonald and Worswick (1998); Aydemir (2003); Beach, Green, and Worswick (2008); Picot and Hou (2009); and Green and Worswick (2010a,b). ...
Given that skills-assessed economic immigrants have had consistently higher earnings than other classes of immigrants, Canada should reverse the decline in the proportion of immigrants admitted in the skilled worker category. Les immigrants économiques admis à titre de travailleurs qualifiés ont un revenu constamment plus élevé que les immigrants d'autres catégories ; le Canada devrait donc privilégier l'arrivée de ces travailleurs qualifiés afin d'inverser la tendance à la baisse de leur taux d'admission.
... Au Canada, le revenu des immigrants récents est significativement plus bas que celui des immigrants établis au pays depuis plus de 15 ans (Causa et Jean 2007). Les études économiques confirment toutes que les cohortes plus récentes d'immigrants s'intègrent plus difficilement au marché de l'emploi canadien qu'auparavant (Aydemir et Skuterud 2005;Ferrer, Green et Riddell 2004;Green et Worswick 2012;Hou et Picot 2014;Picot et Hou 2009;Picot, Hou et Coulombe 2008;Schaafsma et Sweetman 2001;Skuterud 2011;Sweetman 2004). Le revenu et le taux d'emploi des immigrants sont effectivement moins élevés et le temps nécessaire pour rejoindre le niveau des personnes nées au Canada est de plus en plus long. ...
Immigrants account for nearly a quarter of the Canadian working-age population and, given the aging of the population, this proportion is set to grow. Yet the immigrants’ integration into the Canadian labour market remains difficult, despite their high-level education. Several factors are brought forward to explain these difficulties: non-recognition of degrees and experience, unequal value of credentials, low official language proficiency, discrimination, etc. This paper points out a less frequently emphasised factor that could partly explain the immigrants’ difficulties to integrate into the labour market: the literacy skills. Using the OECD’s survey data on adult skills (PIAAC), the authors compare the literacy skills of the immigrants and the Canadian-born population. This study focuses on active participants in the labour market aged between 25 and 54 years old. Results suggest that the higher level of overqualification observed among immigrants could partly be explained by their lower literacy skill level.
Résumé
Près du quart de la population canadienne en âge de travailler est issue de l’immigration et, compte tenu du vieillissement démographique, cette proportion est appelée à croître. Malgré leur niveau de scolarité élevé, les immigrants éprouvent de la difficulté à s’intégrer sur le marché du travail. Plusieurs facteurs sont mis de l’avant pour expliquer ces difficultés : non-reconnaissance des diplômes et de l’expérience, valeur inégale des diplômes, faible maîtrise des langues officielles, discrimination, etc. Cet article porte sur un facteur peu souvent évoqué : le niveau de compétence en littératie. À l’aide des données du volet canadien du Programme pour l’évaluation internationale des compétences des adultes de 2012 (PEICA), les auteurs dressent un portrait comparatif de la situation en ce qui concerne le niveau de compétence en littératie des immigrants et des Canadiens de naissance en posant un regard particulier sur les individus âgés entre 25 et 54 ans actifs sur le marché du travail. Les résultats suggèrent qu’une partie de la surqualification plus élevée observée chez les immigrants que chez les natifs du Canada pourrait s’expliquer par leur plus faible niveau de littératie.
en We assess the current state of knowledge in the economics of immigration and consider how economic theories of knowledge can be used to further the goal of developing a just immigration policy. In the process, we highlight the contributions of economists working in Canada and Canadian economists internationally in furthering our understanding of this important research area. We identify research gaps such as the need for more research on the underlying causes of the poor returns to foreign work experience for immigrants from non‐traditional source countries and the effect of immigrants on stimulating innovation. More research is also needed on the implications of temporary foreign worker (TFW) programs and the growing importance of employers in immigrant selection systems.
Résumé
fr La recherche canadienne en économie de l’immigration à travers la lentille des théories de la justice. On jauge l’état présent des connaissances en économie de l’immigration, et on examine comment les théories économiques de la connaissance peuvent être utiles dans la poursuite d’un objectif qui serait de mettre en place une politique d’immigration juste. Dans ce processus, on souligne les contributions des économistes travaillant au Canada à notre compréhension de ce chantier de recherche. On identifie certaines zones d’ombre comme la recherche pour comprendre les causes sous‐jacentes aux pauvres rendements de l’expérience de travail des immigrants en provenance des pays qui ne sont pas des sources d’immigration traditionnelles, et celle pour comprendre les effets des immigrants sur la stimulation de l’innovation. Il faudra aussi davantage de recherches sur les implications des programmes pour attirer et accueillir les travailleurs étrangers temporairement, et sur l’importance croissante des employeurs dans les systèmes de sélection d’immigrants.
This article examines the trends in the economic advantage that highly educated immigrants hold over less educated immigrants in Canada, focusing on the differences between short-run and longer-run outcomes. Using data from the Longitudinal Immigration Database covering the period from the 1980s to the 2000s, this study finds that the relative entry earnings advantage that higher education provides to new immigrants has decreased dramatically over the last 30 years. However, university-educated immigrants had a much steeper earnings trajectory than immigrants with trades or a high school education. The earnings advantage among highly educated immigrants increases significantly with time spent in Canada. This pattern is observed for virtually all immigrant classes and arrival cohorts. The results suggest that short-run economic outcomes of immigrants are not good predictors of longer-run results, at least by educational attainment. The implications of these findings for immigration selection policy are discussed in the conclusion.
The earnings and occupational task requirements of immigrants to Canada are analyzed. The growing education levels of immigrants in the 1990s have not led to a large improvement in earnings as one might expect if growing computerization and the resulting technological change was leading to a rising return to non-routine cognitive skills and a greater wage return to university education. Controlling for education, we find a pronounced cross-arrival cohort decline in earnings that coincided with cross-cohort declines in cognitive occupational task requirements and cross-cohort increases in manual occupational task requirements. The immigrant earnings outcomes had only a small effect on overall Canadian earnings inequality. Changement technique, tâches occupationnelles, et résultats déclinants pour les immigrants : Implications pour l’inégalité des gains et des revenus au Canada. Les auteurs analysent les gains et les prérequis des tâches occupationnelles des immigrants. Les niveaux d’éducation croissants des immigrants dans les années 1990 n’ont pas entraîné une grande amélioration dans les gains comme on aurait pu s’y attendre, si l’informatisation accrue et les changements techniques qui s’ensuivent ont entraîné un rendement croissant sur des habiletés cognitives non-routinières et un rendement salarial plus grand sur l’éducation universitaire. Normalisant pour le niveau d’éducation, on découvre un déclin entre cohortes dans les gains qui coïncide avec un déclin dans ce que réclament les tâches en termes d’habiletés cognitives, et un accroissement de ce que réclament les occupations manuelles. L’effet de ces changements sur les gains des immigrants n’a eu qu’un faible impact sur l’inégalité des gains au Canada.
This paper compares employment match rates for immigrants educated in a regulated profession with those of their Canadian-born and -educated counterparts. In particular, it examines Statistics Canada data for 2006 and 2011, analyzing trends and provincial comparisons over the five years following the implementation of Ontario's fair access legislation. Overall, the findings support a continued role for fair access legislation to hold regulators accountable, stronger engagement with employers to promote immigrant hiring and retention, specialized advisement and training for alternative careers, and thoughtfully designed pre-arrival initiatives that reduce time away from professional practice without increasing barriers to immigration. © Canadian Public Policy / Analyse de politiques, August / août 2015.
Canada's immigration system is currently undergoing significant change driven by several goals that include (1) a desire to improve the economic outcomes of entering immigrants; (2) an attempt to better respond to short-term regional labor market shortages often associated with commodity booms, and (3) a desire to shift immigration away from the three largest cities to other regions of the country. These goals reflect the implementation of new immigration programs in the 2000s. The paper discusses the recent changes to Canadian immigration policy, examines preliminary evaluations of the new programs and discusses potential future issues emanating from the changes.
We investigate the sources of declines in entry earnings for Canadian immigrants in the 1980s, 1990s and early 2000s. We find that these declines are not unique to immigrants: native born new entrants also faced declines in entry earnings. Differencing immigrant entry earnings relative to those of native born workers entering the labour market at the same time provides a means of removing the effects of changes in the Canadian economy that are not specific to immigrants. After doing this, we find that substantial declines in returns to foreign experience play an important role in declines in entry earnings across immigrant cohorts. The declining return to foreign experience is strongly related to shifts in the source country composition of immigration. In the end, we can account for 74% of the decline in entry earnings between the 1980-82 immigrant cohort and the 2000-02 cohort with a combination of general new entrant effects (39%), shifts in the source country composition (16%), and flattening of the foreign experience profile (24%). The substantial increase in the 1990s in the points allocated to immigrant applicants with university education actually worked in the opposite direction meaning that immigrant entry earnings would have been even lower in the absence of the resulting shift in educational composition (equivalent to 5% of the decline in entry earnings). We are grateful to Elizabeth Ruddick and the Strategic Policy, Planning and Research Branch of CIC for their support of this project at its initial stages and for many useful conversations about the data and immigration in general. We also wish to thank for helpful comments. All remaining errors and omissions are our own.
The pay structure for Canada's workers has changed over the past decade. Pay rates have risen in Alberta, especially since 2004. In Ontario and Quebec, earnings in manufacturing have not fallen substantially, despite sharp decreases in employment. Even after the turbulence of the 2001 to 2004 period, average earnings in the CT sector ended up rising 12% in real terms. Along with changes in trade patterns and technology use, demographic trends have also influenced labour market conditions and earnings. This article examines the evolution of earnings in Canada from 1997 to 2007.
This paper examines two issues: (1) poverty dynamics among successive cohorts of entering immigrants to Canada, and (2) whether rising educational attainment and increasing share in the “skilled” class since the early 1990s has resulted in improvements in poverty entry, exit, and chronic poverty. The entry to poverty is very high during the first year in Canada, but low in subsequent years. The dramatic move toward more labor-market friendly characteristics of entering immigrants had only a very small effect on poverty outcomes, in part because the relative advantage of holding a degree diminished, and “skilled economic” class immigrants were more likely to enter poverty than their “family” class counterparts.
We examine the impact of literacy on immigrant earnings and the sources of lower returns to education and experience among immigrants. We find that the native-born literacy distribution dominates that for immigrants. However, the two groups obtain similar returns to literacy skills, contrary to discrimination-based explanations for immigrant—native-born earnings differentials. Among the university-educated, literacy differences account for about two-thirds of the earnings gap. However, low returns to foreign experience have a larger impact on this differential. Among the less educated, literacy differences and differences in the returns to experience have similar effects on the earnings differential.
Using census data covering the 1980 to 2000 period, we examine what outcomes would be necessary for cohorts of recent immigrants to achieve earnings parity with Canadian-born workers. Our results show that today's recent immigrants would have to experience a drastic rise of their relative age-earnings profile in the near future for their earnings to converge with their Canadian-born counterparts. The reason is simple: the greater relative earnings growth experienced by cohorts of recent immigrants has only partially offset the drastic deterioration in their relative earnings at entry.
This research examines how institutional changes associated with the emergence of a “knowledge economy”—specifically the expansion of education and the changing labor market structure —shaped employment experiences of newly arriving immigrants to Canada over the period 1970–1995. Census data on successive cohorts of immigrant men and women (from microdata files for 1981, 1986, 1991, and 1996) show a progressive trend toward lower rates of labor force participation and lower levels of earnings relative to the native-born population, both overall and for most specific origins groups. These trends are only partly attributable to business cycle fluctuations in labor demand. The present article examines the impact of selected educational and labor market changes on successive cohorts of immigrants, using intertemporal substitution methodology. The analysis finds that (1) increased native-born education levels infringe upon the traditional immigrant education advantage, outpacing effects of increased immigrant skill selectivity; (2) increased returns to education among native-born workers do not apply to immigrants; and (3) other institutional obstacles to immigrant success also exist. The declining relative value of immigrant education may be due to the location-specific nature of credential validation processes. Directions for further research and policy analysis are suggested.