Academic Literature

Immigrants with University Education in Canada – A large earnings gap with their Canadian‑born counterparts, even in the long term

The number of international students pursuing education in countries with advanced economies has been rising rapidly over recent decades. International students are often regarded as an important group of young and well‑educated individuals from which to select permanent residents. However, a few studies from Australia, Canada and the United States have shown that the earnings advantage of former international students over other economic immigrants is either small or non‑existent. These empirical findings have been reflected in recent changes to immigrant selection policies in Australia and Canada.

This study compared the earnings trajectories of three groups of young university graduates: former international students in Canada who became permanent residents (Canadian‑educated [CE] immigrants), foreign‑educated (FE) immigrants who arrived at age 25 or over and had a university degree before immigration, and the Canadian‑born population. It asked two questions. First, do university‑educated CE immigrants earn as much as Canadian‑born university graduates both in the initial years after immigration and in the long term, and, if there is a large earnings gap between the two groups, what are the possible determinants? Second, do CE immigrants have a large earnings advantage over FE immigrants in the short and long term?

Three data sources were used in this study. The sample of CE immigrants was drawn from the linkage of three files: the Temporary Residents File (TRF), the Immigrant Landing File (ILF) and the T1 personal tax file. International students were identified among temporary residents as anyone who ever held a study permit in Canada. The sample of FE immigrants was derived from the Longitudinal Immigration Database (IMDB). The sample of Canadian‑born workers was created from the linkage between the 20% sample file of the 1991 Census and the Longitudinal Worker File, which is a 10% random sample of the tax‑filing population, and the linkage between the 20% sample file of the 2006 Census and the T1 personal tax file. Common to all three data sources are the longitudinal earnings data from the tax file.

This study examined the earnings trajectories of university‑educated individuals, by immigration status, in two cohorts: the 1991 cohort and the 2006 cohort. The 1991 cohort included the Canadian‑born population aged 25 to 34 in 1991 (the census year), FE immigrants who arrived in Canada and were aged 25 to 34 in 1991, and CE immigrants who became landed immigrants from 1990 to 1992 and were aged 25 to 34 in the year of landing. Similarly, the 2006 cohort included the Canadian‑born population aged 25 to 34 in 2006, FE immigrants who arrived in Canada and were aged 25 to 34 in 2006, and CE immigrants who became landed immigrants from 2005 to 2007 and were aged 25 to 34 in the year of landing.

CE immigrants who graduated from university had a large earnings gap with their Canadian‑born counterparts both in the initial years after immigration and in the long term. In the first full year after becoming permanent residents, CE immigrant workers earned on average 50% less (for women) to 60% less (for men) than Canadian‑born workers in the 1991 cohort. This gap narrowed in the first 10 years after immigration to 20% among women and 31% among men, but there was no further catching up afterwards. Narrowing of the initial earnings gap was also observed during the six‑year follow‑up period for the 2006 cohort. Part of the earnings gap was related to the fact that most CE immigrants belonged to a visible minority, and they tended to spend more time pursuing additional education. However, most of the gap could be accounted for by differences between CE immigrants and the Canadian‑born population in their Canadian work history before the follow‑up started. For both the 1991 cohort and the 2006 cohort, about 50% of CE immigrant men had medium or high earnings in Canada before the year of immigration, compared with about 90% of Canadian‑born men. When group differences in prior Canadian work history were taken into account, the earnings gap of CE immigrants became much smaller in the 1991 cohort and disappeared in the 2006 cohort.

On average, CE immigrants had some moderate advantages in post‑immigration earnings over FE immigrants. The earnings advantages of CE immigrants were concentrated among those who had medium or high earnings in Canada before immigration. CE immigrant men without a Canadian work history before immigration earned significantly less than FE immigrants, while CE immigrant men who had worked in Canada with low earnings before immigration did not have a significant earnings advantage over FE immigrants. Only CE immigrants who had medium or high earnings had much higher earnings than FE immigrants. The post‑immigration earnings of CE immigrant women without prior Canadian work experience were similar to those of FE immigrant women. However, as long as CE immigrant women had prior Canadian work experience, they surpassed FE immigrant women in post‑immigration earnings by a wide margin.

Conditional on the earnings level in Canada before immigration, an extra year of Canadian work or education experience before immigration made little difference to post‑immigration earnings for CE immigrants. These results may suggest that what matters to CE immigrants is not the length of Canadian work or study experience, but the realized market value of this experience, as indicated by the earnings level before immigration.

Chosen excerpts by Job Market Monitor. Read the whole story at International Students, Immigration and Earnings Growth: The Effect of a Pre-immigration Canadian University Education

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