Executive summary
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This paper examines the process by which migrants experience gains in earnings subsequent to migration and, in particular, the advantage that migrants obtain from moving to large, dynamic metropolitan labour markets, using Toronto as a benchmark. There are two potentially distinct patterns to gains in earnings associated with migration. The first is a step upwards in which workers realize immediate gains in earnings subsequent to migration. The second is accelerated gains in earnings subsequent to migration. Immediate gains are associated with obtaining a position in a more productive firm and/or a better match between worker skills and abilities and job tasks. Accelerated gains in earnings are associated processes that take time, such as learning or job switching as workers and firms seek out better matches. Evaluated here is the expectation that the economies of large metropolitan areas provide workers with an initial productive advantage stemming from a one-time improvement in worker productivity and/or a dynamic that accelerates gains in earnings over time through the potentially entwined processes of learning and matching. This paper examines migration patterns of workers aged 20 to 29 and changes in income associated with moving. More precisely, it evaluates: (i) whether the rate of migration of young adults is higher to Toronto than to other parts of the country; (ii) whether these young migrants receive higher earnings than do migrants to other destinations and those not migrating; and (iii) whether the benefits are due to a one-time step upwards in earnings upon arrival and/or more rapid accumulation of income gains after moving.
Overall, the results suggest that Toronto benefits from a high in-migration of young workers (especially university graduates and knowledge workers). Moreover, and consistent with urban economic theory, moving to Toronto was associated with an earnings premium, such that in-migrants appear to receive an immediate step upwards in earnings, exceeding that associated with migration to other urban areas and/or not moving—a productivity and/or initial matching effect. However, contrary to the expectation of a more rapid career progression resulting from migrating to a large metropolitan economy, moving to Toronto did not accelerate the rate of earnings growth, that is; there is no evidence, on aggregate, of longer terms gains in earnings stemming from more rapid learning and effective matching facilitated by large labour markets.
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