Chronic Low Income and Low-income Dynamics Among Recent Immigrants
by Garnett Picot, Feng Hou and Simon Coulombe
Business and Labour Market Analysis Division
Analytical Studies Branch Research Paper Series, No. 294
Context
Host countries, such as Canada, look to the skills and initiative of immigrants to promote economic growth. Immigrants, in turn, look to the host country for opportunities to gainfully employ their skills and abilities. However, if immigrants are unable to convert their training to productive use, the expectations of both the host country and the arriving immigrants remain unmet. Immigrant contributions to the host country, which are central to the economic justification of relatively open immigration policies, may not be fully realized. In light of these considerations, there is considerable concern regarding the deteriorating economic outcomes among immigrants entering during the 1980s and 1990s.
Objective(s)
This paper focuses on three issues. First, did outcomes in family welfare (as measured by the low-income rate) improve after 2000, the last year for which data were previously available? Second, what can entry and exit rates tell us about the dynamics of low income among entering cohorts? Third, how common is "chronic" low income among entering immigrants, and how (if at all) did this change over the 1990s?
Findings
The study finds that low-income rates among recent immigrants deteriorated after 2000. These rates were higher than at any time during the 1990s (at around 3.0). However, this rise in low income was concentrated among immigrants who had entered very recently suggesting an increase in the short-term adjustment problem in the 2000s as compared to the 1990s. The downturn in the technology sector after 2000 might be a partial explanation, as the share of entering immigrants in information technology (IT) and engineering occupations rose dramatically over the 1990s.
Among immigrants entering Canada during the 1990s, most experienced low income at some time during their first decade in Canada (about 65%). Most of those entering low income did so in the first year in Canada. If immigrants escaped low income in their first year, the likelihood of entry in subsequent years fell dramatically to below 10%. However, as with the Canadian born, many spells of low income are short lived. In both the raw data and after conditioning on the characteristics of immigrants, poverty dynamics outcomes deteriorated for immigrants entering Canada after 2000-the probability of entry rose, and of exit fell.
In order to capture entry, exit and re-entry patterns in a single measure, a "chronic" low-income measure (in low income four of the first five years in Canada) was produced. About one-fifth of immigrants entering Canada during the 1990s found themselves in chronic low income, a rate about 2.5 times higher than among the Canadian born. The chronic low-income rate fell somewhat between the 1993 and 1999 entering cohorts. There were two possible reasons for the decline: the more favourable labour market-related characteristics of immigrants entering in the late 1990s, and improving economic conditions (business cycle). The former accounted for virtually none of the improvement, the latter for the majority.
Overall, the dramatic rise in educational attainment of entering immigrants and the shift to the skilled class immigrant had only a very small effect on poverty outcomes as measured by the probability of entry, exit and chronic rates. This is because by the early 2000s, skilled class entering immigrants were actually more likely to enter low income and be in chronic low income than their family class counterparts, and the small advantage that the university educated entering immigrants had over, say, the high school educated in the early 1990s had largely disappeared by 2000, as the number of highly educated rose. What did change, was the face of the chronically poor immigrant; by the late 1990s, one-half were in the skilled economic class, and 41% had degrees (up from 13% in the early 1990s).
Data source(s)
The paper is based on the Longitudinal Administrative Database (LAD) and the Longitudinal Immigration Database (IMDB) data.
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