Explaining the deteriorating entry earnings of Canada's immigrant
cohorts: 1966-2000
by Abdurrahman Aydemir and Mikal Skuterud
Family and Labour Studies Division
Analytical Studies Branch research paper series, No. 225
Context
A number of Canadian studies document a substantial deterioration in
the entry earnings of more recent Canadian immigrant cohorts through
1970s, 1980s and first half of the 1990s. In an effort to explain this
deterioration, a follow-up literature is now building that is focused
on possible causes. These studies use a variety of different data sources,
definitions of earnings and empirical specifications, making it difficult
to assess how much of the overall deterioration in immigrant entry earnings
can be attributed to each explanation.
Objectives
This paper contributes to the literature by estimating a more flexible
empirical specification which nests all of the existing explanations,
including changes in the country of origin composition of more recent
cohorts, changes in the returns to foreign credentials and foreign experience,
the scarring effects of entering Canada at different points in the economic
cycle, and the effect of more general labour market trends that have
similarly affected immigrants and recent Canadian-born labour market
entrants. Furthermore, we update the existing literature by using the
most recent Canadian Census data which gives us two complete decades
of repeated cross-sections to document and explain log-term changes
in immigrant cohort earnings and assimilation profiles.
Findings
Our results indicate that no more than one-third of the deterioration
can be explained by compositional shifts in the knowledge of an official
language, mother tongue and region of origin of recent immigrant cohorts.
We also find little or no evidence that declining returns to foreign
education are responsible. Roughly one-third of the deterioration appears
to be due to a persistent decline in the returns to foreign labour market
experience which has occurred almost exclusively among immigrants originating
from non-traditional source countries.
We are able to explain two-thirds of the overall decline in the entry
earnings of Canada's most recent immigrants without any reference
to entry labour market conditions. When we also account for entry conditions,
our results suggest that Canada's immigrants who arrived in the
1995-1999 period would otherwise be enjoying entry earnings that were
significantly higher than the entry earnings of the 1965-1969 cohort.
Data sources: Census Data, 1981-2001.
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