Study: The Effect of Literacy on Immigrant Earnings

The study The Effect of Literacy on Immigrant Earnings, released today, uses data from the 1998 Ontario Adult Literacy Survey to explore how official language literacy and numeracy skills influence the labour market outcomes of immigrants to Ontario.

The target population of the survey consisted of immigrants aged 16 to 69, living in six census metropolitan areas: Toronto, Hamilton, Ottawa, Kitchener, London and St. Catharines–Niagara. Together, these areas accounted for more than 80% of the province's immigrants.

This analysis, which builds on findings from the 1994 International Adult Literacy and Skills Survey (IALS), reveals that literacy and numeracy skills exert a significant influence on a range of individual labour market outcomes.

This influence includes the probability of being in the labour force, the probability of being employed, the probability of being unemployed, the stability and duration of employment and, most importantly, upon the wage rates paid to workers. Without exception, higher average skill levels are associated with better average labour market outcomes.

The current study has three main findings. First, literacy skills among immigrants differ from those of Canadian-born people. The analysis clearly shows that the average literacy and numeracy of immigrants are significantly below the averages of non-immigrants with equivalent educational credentials and other observable characteristics.

This finding may offer a partial explanation for the decline in the relative labour market success of immigrants to Canada over the past decade.

Secondly, there is no evidence that immigrants receive a lower return to the types of skills measured in literacy tests than otherwise equivalent Canadian-born workers.

In other words, Canadian labour markets appear to reward the literacy and numeracy of immigrants to Canada in exactly the same way that they do non-immigrants. A 100-point increase in literacy score yielded the same return to both groups.

The study found that the lower wage return to a university education acquired by immigrants before migration disappears when their literacy skill level is taken into account.

The findings suggest that if immigrants had the same average literacy scores as non-immigrants, the earnings differential would narrow by 20%. This change would eliminate just over one-half of the earnings disadvantage among immigrant workers who were university educated.

The study also suggests that Canadian employers place little value on foreign work experience, with highly educated immigrants realizing markedly lower returns for foreign experience.

In the case of less educated immigrants, the impact of raising immigrant literacy levels to those of non-immigrants would be slightly larger than would be realized if wage returns to foreign experience for less educated workers were increased to non-immigrant levels.

In the case of educated immigrants, the impact of raising immigrant literacy levels to those of non-immigrants is only about one quarter of the effect that would be realized if wage returns to foreign experience were increased to non-immigrant levels.

Thus, while literacy deficiencies among immigrants appear to have an important impact on differentials in earnings, they do not explain much of the impact of low returns to foreign experience for the highly educated.

Definitions, data sources and methods: survey numbers, including related surveys, 4406 and 4433.

The study The Effect of Literacy on Immigrant Earnings, no. 12 (89-552-MIE2004012, free) is now available online. From the Our products and services page, under Browse our Internet publications, choose Free, then Education. This study is also available in paper version (89-552-MPE2004012, $11).

For more information, contact Client Services (1-800-307-3382 or 613-951-7608; fax: 613-951-9040; TTY: 1-800-363-7629; educationstats@statcan.gc.ca). To enquire about the concepts, methods or data quality of this release, contact Scott Murray (613-951-9035, scott.murray@statcan.gc.ca) Culture, Tourism and the Centre for Education Statistics.