2 Pathways of economic incorporation of immigrants and minorities

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Massive migration has historically been associated with the emergence of ethnic enclaves and ethnic economies in North American cities. Ethnic enclaves, such as Toronto's Jewish neighbourhoods, 'little Italys' and 'Chinatowns' in the first half of the 20th century represented refuges where new immigrants could escape from the foreign environment. More importantly, within ethnic enclaves were located economic opportunities that some new immigrants had difficulties finding elsewhere (Murdie and Teixeira 2003). In this sense, the recent rise in the number of clustered neighbourhoods with a strong presence of visible minorities and ethnic businesses in Canada's large urban areas is not unique.

What is unique, however, is the changing structural forces that affect the socioeconomic integration of visible minority groups. Two historical conditions facilitated the socioeconomic assimilation of earlier European immigrant groups (Massey 1995, Waters and Jiménez 2005). One is a long hiatus over the period from the 1930s to the 1960s, when the large-scale European immigration subsided. This hiatus gave the receiving society a 'breathing space' to absorb and accommodate a large influx of immigrants through generational succession, social mobility and intermarriage (Massey 1995, 643). The other condition was the sustained economic expansion from the end of the Second World War until the 1970s that provided opportunities for new immigrant groups to rapidly improve their economic status.

The above two historical conditions no longer prevail for today's visible minority groups. Continuous immigration will replenish visible minority populations with a steady supply of new arrivals from abroad. The language, culture and ways of life that are typically associated with a minority group will likely be augmented by newcomers (Massey 1995). Moreover, successive waves of immigrants experience mounting barriers to full inclusion within the mainstream of economic activities. The labour market performance of new immigrants deteriorated through the 1980s and 1990s, despite the improved macroeconomic condition in the late 1990s and the increases in educational attainment of immigrants (Picot, Hou and Coulombe 2007). It took 10 to 15 years for new arrivals to narrow their initial earnings gaps with the domestic born for those who immigrated before the 1980s. However, through the 1980s and 1990s the size of the initial earnings gap widened considerably, raising questions about whether immigrants would ever 'catch up' to their domestic-born counterparts within their work life (Frenette and Morissette 2005). The deterioration in new immigrants' labour market outcomes is related to a wide range of factors, including changes in immigrants' source regions, host-country language proficiency, declining returns to foreign work experience, a broad deterioration in labour market outcomes for new labour market entrants, the growing competition from the highly educated Canadian born, and discrimination (Aydemir and Skuterud 2005, Green and Worswick 2004, Picot and Sweetman 2005, Reitz 2001). The continuing supply of new immigrants and fewer opportunities in the mainstream labour market may increase the salience of ethnic economies as an alternative avenue for the economic incorporation of newcomers and minorities in Canada.

These new circumstances raise the issue of whether today's visible minority immigrants will follow the assimilation path that the earlier waves of many European immigrants had undertaken for adaptation into the mainstream culture and society (Glazer and Moynihan 1963, Lee and Bean 2004, Massey 1995; but see the discussions about Italians and Jews in the United States and Canada by Glazer and Moynihan [1963] and Reitz [1990]). The segmented assimilation theory posits three possible pathways of adaptation: growing acculturation and assimilation into White middle-class; the development of a subculture that resists mainstream norms and values, and becomes absorbed into the minority underclass; and, economic mobility but with deliberate preservation of the immigrant community's values and ethnic solidarity (Portes and Zhou 1993, Zhou 1997). What makes an immigrant group susceptible to a particular path depends on the interaction between contextual factors—such as ethnic stratification, economic opportunities and spatial segregation—and characteristics specific to the group—such as human and financial capital and community resources (Zhou 1997).

Specific to the economic incorporation of immigrants and minorities, several models have been posited as alternatives to being absorbed in all sectors of the mainstream economy. These include middleman minorities, segmented labour market, ethnic economy and enclave economy (Nee and Sanders 2001, Zhou 2004a). Middleman minorities are essentially minority entrepreneurs who operate their businesses in poor minority neighbourhoods avoided by the mainstream retail and service industries. Middleman-minority entrepreneurs, for example the Korean business owners in Black neighbourhoods in some large U.S. metropolitan areas, often have few social connections with, and often face resentment from, their clienteles (Zhou 2004a). Segmented labour market accounts argue that some immigrant or minority groups are blocked from economic mobility because they primarily work in industrial sectors typified by instability, low pay, limited benefits and poor working conditions.

The concept of ethnic economy originates from the literature on middleman minorities, while enclave economy derives from segmented labour market perspectives (Light, Sabagh, Bozorgmehr and Der-Martirosian 1994). Although with different conceptual origins, both ethnic economy and enclave economy emphasize the shared ethnicity among ethnic-minority members as the basis for upward economic mobility and community development (Sanders 2002, Zhou 2004b). In its initial designation, the ethnic economy is defined by co-ethnicity of personnel and refers to any businesses that are either owned, supervised or staffed by minority-group members, regardless of size, type or spatial boundaries. As a special case of the ethnic economy, the enclave economy requires a geographic concentration in an identifiably ethnic community, a clustering of diverse economic activities that are governed by bounded solidarity and enforceable trust, and co-ethnic social relations between owners and workers based on a commonly accepted norm of reciprocity (Zhou 2004a).

In empirical studies, however, the terms of enclave economy and ethnic economy have often been used interchangeably, with the former being frequently stretched to cover other aspects of ethnic economy and the latter being applied to specific issues (Light and Gold 2000; Logan, Alba and Stults 2003). As a metaphor to the conceptual ambiguity and uncertainty in empirical operationalization, these concepts have been described as "a stew, to which researchers have added so many ingredients and seasonings that it is hard to tell what is essential" (Logan, Alba and McNulty 1994, 693). As an example of the confusion in the literature, some researchers define the participation in ethnic economies based on residential concentration, either within or across metropolitan areas, while others use concentration in workplace or industrial/occupational sectors as the criteria (Borjas 2000; Edin, Fredriksson and Åslund 2003; Fong and Lee 2007; Sanders and Nee 1987; Wilson and Portes 1980).

To better understand the mechanisms through which ethnic economies have become established, how they differ from the mainstream economic activities and their implications, scholars have called for more focused studies on specific aspects and forms of ethnic economies (Waldinger 1993, Waters and Eschbach 1995). An important step toward this direction is the growing number of studies on self-employment or ethnic entrepreneurs (Baily and Waldinger 1991, Min and Bozorgmehr 2000, Portes and Zhou 1996, Raijman and Tienda 2000, Sanders and Nee 1996, Zhou 2004a). These studies, however, do not make the explicit distinction between ethnic entrepreneurs and entrepreneurship in general. They also do not frame the economic activities of immigrants in the context of broad changes in advanced urban economies (Rath and Kloosterman 2000).

More recent advancement in the literature involves the specification of several forms of ethnic economies (Light and Gold 2000; Logan, Alba and Stults 2003; Logan, Alba and McNulty 1994). For instance, Reitz describes three measures of ethnic economy: ethnic occupations; ethnic work groups, including co-workers, supervisors and subordinates; and, employment in ethnic business (Reitz 1990, Reitz and Sklar 1997). Logan, Alba and Stults (2003) identify the following three patterns of ethnic economy: employment niches; entrepreneurial niches; and, ethnic enclaves. They are based, respectively, on group members' clustering in certain economic sectors as either workers, owners, or as both owners and workers within specific metropolitan areas. Their results show that, while various minority groups in three large U.S. metropolitan areas concentrate to a substantial degree in certain industrial sectors, there is no consistent association between job outcomes and the degree of concentration in the sector where an individual works.

Logan, Alba and Stults (2003) acknowledge that the limitation of their study, as well as others that have been solely based on census data, involves the lack of direct measure of group representation at the individuals' immediate work settings (Fong and Lee 2007; Logan, Alba and McNulty 1994; Sanders and Nee 1987; Zhou and Logan 1989). The proxy measure based on geographic concentration across metropolitan areas or among neighbourhoods within a metropolitan area, or relative representation in industrial/occupational sectors will underestimate the effects of participation in ethnic economies on labour market outcomes. Such a proximate measure, on the one hand, overlooks ethnic businesses operating outside the concentrated geographic areas or economic sectors and, on the other hand, includes non-ethnic businesses within these areas and sectors.

To illustrate this point, let's take a look at the usual approach of defining employment niches as an example. An employment niche for an ethnic group is often identified as a sector in which the group's representation as workers is 50% more than in the rest of the workforce¹ (Fong and Lee 2007; Logan, Alba and Stults 2003; Logan, Alba and McNulty 1994; Wilson 2003). In the case of the Chinese in the New York metropolitan area where they account for less than 3% of the total workforce, an industrial sector would be identified as a Chinese employment niche if over 4.5% of its workers are Chinese. In this particular sector, the majority of the workers are non- Chinese; hence the chance of a Chinese working alongside other Chinese is rather small. Furthermore, the relative representation of a group may vary with the level of detail in economic sectors and the size of geographic areas. The difference from these sources is probably the main reason for the large discrepancy in the reported extensiveness of ethnic niches in the United States. For example, Light and Gold (2000) reported that the share of the average ethnic group's concentration in ethnic niches is about 41%. By comparison, Wilson (2003) reported a value of 14%.

In addition to providing a more precise measure, focusing on co-ethnic concentration at the immediate work settings presents unique analytical angles that are complementary to studies based on concentration in large-scale urban areas or industrial/occupational sectors. The latter are more suitable to issues at the group or community level, such as the relationship between ethnic business development and community social capital and social network, group differences in participating ethnic businesses, the degree of dependence in social and economic functions among ethnic businesses and whether the existence of ethnic economies benefits an ethnic group as a whole (Logan, Alba and Stults 2003; Zhou 2004a).

By comparison, examining co-ethnic concentration at the immediate work environment is more suitable to issues related to causes and consequences of participating in ethnic economies at the individual level. For instance, individual workers could benefit from informal on-the-job training and business apprenticeship within ethnically based companies, more efficient evaluation by ethnic employers of foreign education credentials, higher productivity in these companies by clustering same-language workers (Galster, Metzger and Waite 1999). On the other hand, ethnically homogenous work settings may be associated with poor working conditions and low wages (Reitz 1990, Sanders and Nee 1987). The closed within-group networks in ethnic businesses may also hamper workers' employment in the wider economy, reducing the incentives to acquire the host-country's language, work experience and educational qualifications (Fong and Ooka 2002). All these possible effects operate primarily within the immediate work environment.

Some ethnographic studies and small surveys targeted to specific groups in specific metropolitan areas do have some direct measures of ethnic composition at immediate work settings (Fong and Ooka 2002; Nee, Sanders and Sernau 1994; O'Bryan, Reitz and Kuplowska 1976; Reitz 1980; Reitz, Calzavara and Dasko 1981; Wilson and Portes 1980). These studies have indeed been instrumental in the theoretical advancement of the study of ethnic economies, but they are also limited in terms of their coverage of labour market activities, ethnic groups or geographic areas. It remains unclear, then, as to what extent the scope and consequences of workplace concentration can be generalized beyond their particular context.

Taking advantage of a large national representative sample of various visible minority/ethnic groups and a direct measure of workplace concentration, this study aims to fill the gaps in the literature in several ways. First, we estimate the level of workplace concentration for various minority groups in Canada's large metropolitan areas. We further compare the levels among groups, by immigrant status, and with the level of residence concentration measured at narrowly defined neighbourhoods (street blocks).

Second, this study examines how workers who mostly work with co-ethnics differ from other workers and from people who are not in the workforce. This will at least partially show whether workplace concentration is a survival strategy for those with less-marketable human capital or a chosen path of economic activities for those who prefer a co-ethnic environment. The key explanatory variables here are education, proficiency in the host-country language(s), and ethnic attachment in terms of ethnic identity and friend networks.

Third, this study examines variations in earnings associated with the level of co-ethnic concentration at the workplace. Previous studies on the effect of participating in ethnic economies on individuals' earnings have been primarily based on concentration in large-scale urban areas or economic sectors. From these studies, it is often difficult to infer whether any observed earnings penalties or benefits are intrinsic to ethnic firms. This study is able to control for important factors that are not inherent to ethnic business, including individuals' demographic and human capital variables, working time, industry and occupation.

Finally, this study examines the degree of life satisfaction associated with working in an ethnically homogenous environment. Many scholars have stressed the implications of ethnic economies that go beyond individuals' employment and income, but few studies have examined the non-economic outcomes (Fong 2001, Fong and Ooka 2002). Since the workplace has become a social centre of people's lives, co-ethnic concentration facilitates social interaction among members who share the same language and culture, thus contributing to an overall improvement on their psychological well-being. On the other hand, if an ethnically homogenous workplace is associated with poor work conditions and minimal benefits, those who work in such an environment may suffer psychologically (Fong 2001).

 

¹ This is formally expressed as an odds ratio of 1.5. The odds ratio is calculated as ( E_ij/O_ij)/( E_j-1/O_j-1), where E_ij is the number of workers of ethnic group i in industrial/occupational sector j, O_ij is the number of workers of all other ethnic groups in industrial/occupational sector j, and E_j-1 and O_j-1 are similarly defined as workers in all other industrial sectors.