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The Deteriorating Economic Welfare of Immigrants and Possible Causes: Update 2005

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  • Picot, Garnett
  • Sweetman, Arthur

Abstract

This paper reviews the increase in the earnings gap between immigrants and Canadian-born over the past two decades, and the current explanations of this labour market deterioration among recent immigrants in particular. The paper also outlines the rising gap in low-income rates between immigrants and non-immigrants. Like previous research, the paper concludes that the earnings gap at entry has increased for immigrants entering Canada during the 1990s, as compared to those of the 1970s. Furthermore, the gap in the low-income rate has been increasing. The rate of low income has been rising among immigrants (particularly recent immigrants) during the 1990s, while falling among the Canadian-born. The rise in low-income rates among immigrants was widespread, affecting immigrants in all education groups, age groups, and from most source countries (except the "traditional source regions"). Immigrants with university degrees were not excluded from this rise in low-income rates, in spite of the discussion regarding the rising demand for more highly-skilled workers in Canada. As a result of both rising low-income rates among immigrants, and their increasing share of the population, in Canada's major cities virtually all of the increase in the city low-income rates during the 1990s was concentrated among the immigrant population. Also reviewed here are the explanations discussed in the literature for the deterioration of immigrant economic outcomes. Three major sources are identified as being empirically important, all of which follow from declining labour market outcomes. First, the change in the characteristics of immigrants (e.g., from different source regions, rising levels of educational attainment, etc.) appears to have accounted for about one-third of the increase in the earnings gap at entry (i.e., the gap between immigrants and comparable Canadian-born). Second, decreasing economic returns to foreign work experience appears to play an equally large role. Third, there has been a general decline in the labour market outcomes of all new entrants to the Canadian labour market, and when new immigrants arrive in Canada they, regardless of age, appear to face a similar phenomenon. Other possible explanations are also discussed. Importantly, one potential factor that does not appear to be behind the decline is a reduction in the economic return to education. Immigrants, on average, do have a somewhat lower return to education obtained prior to immigrating (although not to education obtained once in Canada), but this has not changed much over the past two decades.

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Bibliographic Info

Paper provided by Statistics Canada, Analytical Studies Branch in its series Analytical Studies Branch Research Paper Series with number 2005262e.

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Date of creation: 27 Jun 2005
Date of revision:
Handle: RePEc:stc:stcp3e:2005262e

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Web page: http://www.statcan.gc.ca
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Related research

Keywords: Ethnic diversity and immigration; Immigrants and non-permanent residents; Integration of newcomers; Labour; Labour market and income; Wages; salaries and other earnings;

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References

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  1. repec:fth:coluec:437 is not listed on IDEAS
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  3. David E. Bloom & Morley Gunderson, 1991. "An Analysis of the Earnings of Canadian Immigrants," NBER Chapters, in: Immigration, Trade and the Labor Market, pages 321-342 National Bureau of Economic Research, Inc.
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  9. Crossley, T.F. & McDonald, J.T. & Worswick, C., 1999. "Immigrant Benefit Receipt: Sensitivity to the Choice of Survey years and Model Specification," Papers 370, Australian National University - Department of Economics.
  10. Sweetman, Arthur, 2004. "Immigrant Source Country Educational Quality and Canadian Labour Market Outcomes," Analytical Studies Branch Research Paper Series 2004234e, Statistics Canada, Analytical Studies Branch.
  11. J.B. Burbidge & L. Magee & A.L. Robb, 2001. "The Education Premium in Canada and the United States," Social and Economic Dimensions of an Aging Population Research Papers 60, McMaster University.
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  20. Richard B. Freeman & Karen Needels, 1993. "Skill Differentials in Canada in an Era of Rising Labor Market Inequality," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 45-68 National Bureau of Economic Research, Inc.
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  22. Kevin M. Murphy & W. Craig Riddell & Paul M. Romer, 1998. "Wages, Skills, and Technology in the United States and Canada," NBER Working Papers 6638, National Bureau of Economic Research, Inc.
  23. Ana Ferrer & David A. Green & W. Craig Riddell, 2006. "The Effect of Literacy on Immigrant Earnings," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
  24. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, May.
  25. Ana Ferrer & W. Craig Riddell, 2008. "Education, credentials, and immigrant earnings," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 186-216, February.
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