Immigrant levels and entry earnings

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Policy Briefs

Immigrant levels in Canada and immigrant entry earnings

Recent research shows that increased immigrant levels in Canada are associated with a decline in immigrant entry earnings.

In a 2014 paper published in Canadian Public Policy, Feng Hou and Garnett Picot analyzed data from the Longitudinal Immigration Database for 1982-2010.

They examined whether levels of immigration affect annual earnings of immigrants during their first two years in Canada, when controlling for macroeconomic conditions like unemployment rate and individual variables such as language ability.

Data showed that the larger an immigrant cohort, the lower the entry wages for members of that cohort. For instance, for immigrant men, a 10% increase in immigration level results in a 0.8% decline in their entry earnings. For immigrant women, this same increase leads to a 0.3% earnings decline. This result was generally consistent for immigrants of all education levels.

Hou’s and Picot’s results suggest that the large increase in immigration levels in Canada over the last thirty years has resulted in a roughly 9% decrease in average entry earnings of immigrant men, and a 3% decline in earnings for immigrant women.

Immigrants typically have little or no Canadian work experience and may have language and cultural issues affecting their job search. Since they are not perfect substitutes for domestic workers, they tend to compete with each other for work. An increase in immigration levels thus elevates competition and places downward pressure on their wages.

However, the effect of immigration level on earnings was weaker for immigrants with very high earnings. Hou and Picot suggest that this reflects the possibility that highly paid immigrants are less likely to compete with other immigrants arriving in the same cohort.

Since the 1980s there has been long-term decline in the entry earnings of immigrants to Canada. Reversing this decline has been a primary goal of Canada’s immigration policy over the past two decades. The government has focused on altering the characteristics of immigrants, including changing distribution by class, education, language skills, and occupation. Hou and Picot’s study suggests that immigration level is another factor that can influence entry earnings.

A summary of the study can be found at the Population Change and Lifecourse Cluster Policy Brief: Annual Levels of Immigration and Immigrant Entry Earnings in Canada.

For further information, please contact Feng Hou, Statistics Canada.

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