The developing success of Indigenous populations in the Canadian labor market and their closer integration with the society has recently received increased attention from the government. In 2017 the Prime Minister of Canada announced the dissolution of Indigenous and Northern Affairs Canada and the creation of two new departments: Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada, signifying a more specialized approach to the engagement with Indigenous populations. In the past several years much research was devoted to their labor market outcomes. Most of it found that indigenous peoples face challenges in the Canadian
labor market, both in employment and earnings. For example, Drost (1994), Walters et al. (2004)), Pendakur and Pendakur (2011), Frenette et al. (2011) and Lamb (2013) found negative earnings differentials and lower rates of employment in comparison to the rest of the Canadian population . They have all identified education to be the major impediment in the integration of aboriginals into the Canadian labor market. This situation is not unique to Canada. Similar tendencies have been recorded for other countries, e.g. Australia (Jones (1993), Halchuk et al. (2006)) and the United States (Gitter and Reagan (2002)).
Education is non-doubtfully an important factor contributing to the observed disparities in the labor market for aboriginals, but as fairly noted by Hu et al. (2019), there are deeper reasons linked to the information-processing skills, which affect labor outcomes and are not necessarily connected to formal education. The skills of people in literacy and numeracy, for example, up until recently were hard to quantify, and they remained in the shroud of unobserved heterogeneity.
Using the Programme for the International Assessment of Adult Competencies (Canadian sample) the paper examines overskilling among Indigenous off-reserve peoples and compares the outcomes to the other Canadian born. We construct several measures of skill mismatch in literacy and numeracy finding no statistically significant difference between aboriginal and non-aboriginal Canadian-born populations. In general, skill mismatch has pernicious consequences for the mismatched workers, and our results support previous literature, which found no evidence of economic discrimination of Canadian aboriginals after controlling for their skill level and standard socio-demographic characteristics.
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