Why have immigrant entry earnings fluctuated widely in recent years? The role of immigration selection and labour-market conditions

In recent years, the entry earnings of newly admitted immigrants to Canada have exhibited substantial year-to-year fluctuations. Notably, first-year average earnings increased by 21% for the 2020 admission cohort relative to the previous cohort and by 11% for the 2021 cohort, followed by a 13% decline for the 2022 cohort—despite a continued modest rise in the median wages of all Canadian workers. This article examines the extent to which these fluctuations reflect changes in immigration selection and broader labour-market conditions. Using data from the Longitudinal Immigration Database, the analysis focuses on admission cohorts from 2015 to 2022 and measures earnings (annual wages or salaries) in immigrants’ first full calendar year after admission. Regression and decomposition analyses are used to assess the relative contributions of sociodemographic characteristics—including pre-admission Canadian earnings, immigration class, education, language ability and region of birth—and labour-market conditions, such as industry of employment, provincial unemployment rates and annual earnings of young Canadian-born workers by province. The results show that rapid changes in cohort composition, particularly a large decline in the share of immigrants with pre-admission Canadian earnings, explain most of the sharp decline in entry earnings for the 2022 cohort. Changes in labour-market conditions account for a larger share of the yearly change for earlier cohorts. Once these factors are accounted for, year-to-year fluctuations in entry earnings largely disappear, with steady growth across cohorts, except for a decline related to the COVID-19 pandemic among the 2019 cohort. These findings highlight the central role of two-step immigration pathways, changes in immigration selection and labour-market conditions in shaping the early economic outcomes of immigrants admitted from 2015 to 2022.