Effects of business cycles on the labour market participation and employment
rate assimilation of immigrants
by Abdurrahman Aydemir
Family and Labour Studies Division
Analytical Studies Branch research paper series,
No. 203
Context
The labour market success of immigrants is the
subject of attention from media, policymakers, academics and the general public.
Most evidence points to a substantial deterioration in the labour market outcomes
of more recent immigrant arrival cohorts by focusing on entry earnings. Accounting
for the phase in the business cycle at the time of entry is essential since this
may affect the labour market prospects in the host country and help explain the
observed deterioration in labour market outcomes of recent immigrants.
Objectives
The
goal of this paper is to explore the role of macroeconomic conditions in determining
the labour market success of immigrants. This study simultaneously identifies
both the effects of macroeconomic conditions at the time of entry into the labour
market and at the time the survey was taken, while allowing for cohort effects.
A novel contribution of the study is the focus on labour force participation along
with employment outcomes of immigrants.
Findings
Immigrants arriving
during poor macroeconomic conditions experience increased disadvantages (relative
to Canadian-born) in terms of both labour force participation and the probability
of being employed than immigrants who arrive during more favourable conditions.
For example, the 1993-1996 immigrant cohort experienced a lower labour
force participation rate (-7.6 percentage points) and higher probability of being
unemployed (+8.6 percentage points) compared to the Canadian-born. Once controls
for macroeconomic conditions are included these numbers fall to -3.3 and +6.7
percentage points respectively.
The differences remaining between immigrant
cohorts in terms of labour force participation and the probability of being employed
after controlling for macro economic conditions may be due to other factors that
are not investigated in this study, such as increased difficulties in terms of
credentials or experience recognition or possibly increased discrimination (although
we have no evidence of that) during recessions as employers may become more stringent
during economic downturns.
Immigrants are more sensitive to macro conditions
than are Canadian-born, and their outcomes deteriorate disproportionately during
recessions such as in the early 90s.
Arriving during a recession does not
affect longer term employment outcomes for those who continue to engage in the
labour market (i.e., no economic scarring effect). However, future economic prospects
are reduced for those who stay out of the labour market for a number of years
after arrival.
Data source: Survey of Consumer Finances,
1979-1997.
Also available: Aydemir, Abdurrahman. 2003.
"Effects of Business Cycles on the Labour Market Participation and Employment
Rate Assimilation of Immigrants." In C. Beach, A. Green, and J. Reitz (eds.),
Canadian Immigration Policy for the 21 st Century. McGill-Queen's University
Press.
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