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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the full publication.
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