4 The deteriorating low-income position of recent immigrants

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The increase in the earnings gap between immigrants and the Canadian born has been larger at the bottom than at the top of the earnings distribution, and hence it is evident in low-income rates. Picot and Hou (2003) observed that the proportion of recent immigrants with family incomes below the low-income cutoff6 rose from 24.6% in 1980, to 31.3% in 1990, and to 35.8% in 2000. These years are roughly at business cycle peaks, and hence are reasonable indicators of longer-term trends. During this period, the low-income rate among the Canadian born fell. Hence, it was not a general deterioration in economic conditions affecting all Canadians that was responsible for the rising low-income rates among immigrants. Indeed, recent immigrants had low-income rates 1.4 times that of the Canadian born in 1980, 2.7 times in 1995, with some improvement by 2000 falling marginally to 2.5. Results from the administrative longitudinal file suggest that the improvement was short lived, as relative low-income rates among 'recent' immigrants returned to around 2.7 by 2004. This deterioration in low-income rates over the past 20 years was not restricted to recent immigrants, but was observed among all immigrants who had lived in Canada for less than 20 years. Furthermore, this deterioration occurred in spite of rapidly rising educational attainment and increased numbers entering in the skilled economic immigrant class.

But stopping at an analysis of low-income rates alone may be masking the most significant outcomes. Policy analysts are more concerned with persistent or chronic low-income spells than all low-income spells, many of which are quite short. Picot, Hou and Coulombe (2008) used longitudinal administrative taxation data to focus on low-income dynamics: the probability of entering low income, of exiting low income, and the persistence of low-income spells. Furthermore, they asked whether the changes in immigrant characteristics brought about by the changes in immigrant selection rules in the early 1990s had any positive effect on these outcomes. They found that ifimmigrants are going to enter low income, they are likely to do so during their first year in Canada. The probability of entering low income was quite high during the first year in Canada, ranging from 35% to 45% among cohorts entering through the 1990s and early 2000s. But by the second year in Canada, this probability had fallen to around 10% and remained low thereafter. If immigrants did not enter low income immediately, they had a pretty good chance of escaping it.

Many of these low-income spells were quite short. Approximately one third exited the first low- income spell after one year, and a slightly higher percentage remained in low income after three years. But there may be repeated spells of low income and a longer-term perspective is useful. Toward this end, a measure of 'chronic low income' was developed, identifying immigrants who were in a low-income state for at least four of their first five years in Canada. Under this definition, about 20% of immigrants entering through the 1990s found themselves in chronic low income; and, when chronic low income was defined over a 10- rather than 5-year time span (in low income at least 7 of the first 10 years in Canada), about 17% of entering immigrants found themselves to be in chronic low income over this longer period.

 

6 Statistics Canada's after transfer, before tax LICO (low-income cutoff) is used, since taxes paid are not available in the census data.