Twenty Years in the Careers of Immigrant and Native-born Workers
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by René Morissette and Rizwan Sultan
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This article addresses three questions: (1) What were the employment dynamics of a specific cohort of immigrant and native-born workers over the 20 years from 1991 to 2010? (2) To what extent did initial differences in earnings and pension coverage between the two groups narrow during this period? (3) Which factors were associated with the narrowing of these differences? The data are from the linked 1991 Census–Longitudinal Worker File and pertain to real annual wages and salaries, and pension coverage of immigrants aged 25 to 34, in 1991, who arrived in Canada from 1985 to 1990, and native-born workers of the same age group.Note 1
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From the early 1980s to the mid-2000s, earnings differences between recent immigrant and native-born workers have widened substantially (Statistics Canada, 2008) (Chart 1). This widening gap raises the question of whether earnings of the two groups eventually converge in the long-term. Despite substantial research on immigrant/native-born earnings differences, no study has followed immigrant and native-born workers individually over a 20-year period to identify factors associated with earnings convergence over the long-term. To shed light on this issue, this article examines the individual employment and wage trajectories of a specific cohort of young immigrants and their native-born counterparts over the 1991-to-2010 period. It shows how real annual wages and salaries and pension coverage of both groups evolved over that 20-year period, and the role that various job characteristics played in this convergence.
The typical immigrant employee had four different employers from 1991 to 2010
Immigrants who were aged 25 to 34 in 1991 and who had arrived in Canada from 1985 to 1990 were less likely than their native-born counterparts to have paid employment throughout the 1991-to-2010 period. Among those who had paid jobs in both 1991 and 2010 (hereafter, 'employees' or 'workers'), 64% of immigrant men and 59% of immigrant women had paid employment in each year from 1991 to 2010. The corresponding figures for native-born men and women in the same age range were higher, at 79% and 71%, respectively.
Even though―or perhaps because―they were less likely to have paid work every year throughout the period, immigrants changed employers more often than native-born employees because of layoffs, quits or other reasons. Immigrant men and women averaged 4.8 and 5.0 employers, respectively, versus 4.4 and 4.3 for their native-born counterparts. The median number of employers for immigrants was 4, compared with 3 for native-born employees.
The fact that immigrants were less likely than native-born employees to be employed in large firms at the beginning of the period may be one reason why they changed employers more often. In 1991, 30% of immigrant men and 43% of immigrant women were in firms with 500 or more workers. The corresponding percentages for native-born men and women were higher, at 50% and 53%, respectively. Because wages, pension coverage, job security, and opportunities to move up the earnings ladder within the organization are often better in large firms, worker turnover is generally lower than in small firms (Morissette et al., 2013).
Partial convergence in earnings and pension coverage
Both immigrant and native-born workers experienced substantial growth in annual real wages and salaries from 1991 to 2010. For instance, in 2010 when they were aged 44 to 53, members of this cohort of male immigrant employees earned, on average, $60,330 a year, 1.71 times what they had earned in 1991 ($35,290) (Table 1). The corresponding amounts for native-born male employees were $70,210 and $46,410, respectively, an increase of over 51%. The net result was a partial convergence in relative earnings. The average annual wages and salaries of immigrant men were 86% of those of native-born men in 2010, up from 76% in 1991.Note 2
Nevertheless, the earnings gap did not narrow steadily throughout the 20-year-period. From 1991 to the early 2000s, the annual wages and salaries of immigrant men in this cohort rose relative to those of native-born men (Chart 2). However, convergence stalled around 2001, and, from 2003 on, immigrant men lost some ground relative to their native-born counterparts.
The partial earnings convergence took place as immigrant men increased their presence in large firms to a greater extent than native-born men. In 2010, 39% of male immigrant employees were in firms with 500 or more workers, up from 30% in 1991. By contrast, about one-half of native-born male employees were in large firms in both 1991 and 2010. Immigrant men's growing presence in large firms, combined with the stable percentage of native-born men in such firms, accounted for between one-quarter and one-third of the narrowing of the earnings gap between the two groups.Note 3 Other factors (for instance, differential employment movements across narrowly defined industries and occupations, and differential improvements in language skills and social networks) that may underlie the partial earnings convergence cannot be measured with existing data.Note 4
The earnings of immigrant and native-born women also partially converged. Average annual wages and salaries of immigrant women were 93% of those of native-born women in 2010, up from 78% in 1991. While immigrant women's presence in large firms increased, so did that of native-born women. As a result, differential movements in employment across firm sizes accounted for a relatively small portion―3% at most―of the earnings convergence among women.
For immigrant employees of both sexes, partial earnings convergence was observed among both less-educated (those with a trades certificate, a high school diploma, or less education) and more-educated workers (Table 1). By 2010, regardless of their level of education, immigrant women's earnings were roughly 95% of those of their native-born counterparts. For men, the extent of convergence differed by education level. In 2010, less-educated male immigrants' earnings were 78% of those of their native-born counterparts, compared with 93% for more-educated immigrant workers.
Along with relative earnings, differences in pension coverage narrowed during the 1991-to-2010 period. For example, in 2010, 44% of immigrant men had a registered pension plan (RPP) or a deferred profit-sharing plan (DPSP), compared with 56% for their native-born counterparts (Chart 3). Two decades earlier, the figures had been 25% and 50%, respectively.
Multivariate analyses show that, as with relative earnings, the partial convergence of the RPP–DPSP coverage rates among men resulted partly from differential employment movements across firm sizes, which accounted for between roughly one-fifth and one-third of the narrowing of the gap. For women, such movements accounted for one-tenth to one-quarter of the reduction in the difference in RPP–DPSP coverage.
Regardless of their level of education, immigrant employees of both sexes increased their RPP or DPSP coverage faster than native-born employees (Table 2). As a result, coverage rates converged during the period, although not fully.Note 5
Cumulative earnings correlated with worker mobility
By the end of the 20-year period, the cumulative wages and salaries of male immigrant employees in this cohort averaged $974,900 (2010 dollars), which was 17% lower than what their native-born counterparts earned ($1,173,900). The amounts for women were $676,400 and $778,300, respectively, a difference of 13%.Note 6
As expected, cumulative earnings were positively associated with workers' education. When language skills (self-reported ability to sustain a conversation in one or both of the official languages) and region of residence in 1991 were taken into account, immigrant men who entered Canada with at least a bachelor's degree earned, on average, $664,500 more during the period from 1991 to 2010 period than their counterparts with a high school diploma. Immigrant women with a university degree earned $290,150 more, on average, than those with a high school diploma.
Cumulative earnings were also correlated with worker mobility. When education, language skills and region of residence at the beginning of the period were taken into account, immigrant men who had only one employer during the period earned about $205,000 more than those who had five employers. The corresponding estimate for immigrant women is close to $170,000. However, rather than indicating the impact of staying with one employer, these numbers likely reflect the tendency for people employed in high-wage firms to remain with those firms over a long period.
Job loss (or the absence thereof) also influenced the cumulative earnings of immigrant men and women in this cohort. Immigrant employees who were permanently laid-off at some point during the 20-year period had lower cumulative earnings than those who did not experience job loss. The cumulative earnings disadvantage associated with job loss varied between about $104,000 for immigrant men and $74,000 for immigrant women.
The decline in earnings of recent immigrants observed since the early 1980s raises the question of whether wages of immigrant and native-born workers fully converge in the long-term. To shed light on this issue, this study examined the employment and earnings trajectories of a specific cohort of immigrant and native-born workers from 1991 to 2010. The main finding is that while earnings and pension coverage of immigrant and native-born employees partially converged over the 20-year period, significant differences still remained. These results measure convergence at the individual level. Whether the degree of convergence in earnings and pension coverage that is achieved over a long period differs when convergence is defined at the family level is a question for future research.
This article in the Economic Insights series is based on research carried out by the Social Analysis Division. For more information, see:
Morissette, R., Y. Lu, and T. Qiu. 2013. Worker Reallocation in Canada. Analytical Studies Branch Research Paper Series, no. 348. Statistics Canada Catalogue no. 11F0019M. Ottawa: Statistics Canada.
Ostrovsky, Y., and A. Stark. Forthcoming. An Examination of Registered Pension Plan and Registered Savings Plan Saving Behaviour Across Cohorts of Canadian-born and Immigrant Workers. Analytical Studies Branch Research Paper Series. Statistics Canada Catalogue no. 11F0019M. Ottawa: Statistics Canada.
Picot, G., and P. Piraino. 2012. Immigrant Earnings Growth: Selection Bias or Real Progress? Analytical Studies Branch Research Paper Series, no. 340. Statistics Canada Catalogue no. 11F0019M. Ottawa: Statistics Canada.
Statistics Canada. 2008. Earnings and Incomes of Canadians Over the Past Quarter Century, 2006 Census: Findings. Statistics Canada Catalogue No. 97-563-X. Ottawa: Statistics Canada.
- Wages are expressed in 2010 dollars. To identify job characteristics (for example firm size, industry of employment) that contributed to immigrant/native-born earnings convergence over the 1991-to-2010 period, the sample consists only of individuals who had positive wages and salaries in both 1991 and 2010.
- This partial convergence is consistent with Picot and Piraino (2012), who tracked the annual earnings of immigrant men who arrived in Canada between 1985 and 1989, at the ages of 25 to 44, and the earnings of a comparison group (native-born workers and immigrants who arrived in Canada before 1980). From 1990 to 2005, earnings differences between the two groups narrowed, falling from 30.2% to 14.8%. Unlike the current study, Picot and Piraino (2012) did not assess earnings convergence by education level or convergence in pension coverage.
- This finding is from regression analyses that control for firm size, broad industrial groups, union status, and regions.
- Narrowly defined industries can be identified in the data set used for this study, but the relatively small sample sizes for immigrant employees preclude reliable analyses at a detailed level of industry disaggregation.
- Using the Longitudinal Administrative Databank, Ostrovsky and Stark (forthcoming) also find that immigrant versus native born differences in pension coverage tend to narrow over time. However, their data do not allow separate analyses by education level or an assessment of the degree to which differential employment movements across firm sizes account for the partial convergence in pension coverage.
- Consistent with Table 1, average cumulative earnings of less-educated immigrant men ($793,900) amounted to 77% of those of their native-born counterparts ($1,032,800). By contrast, cumulative earnings of more-educated male immigrants ($1,274,200) amounted to roughly 88% of those received by their native-born counterparts ($1,442,800). For both education levels, average cumulative wages and salaries of immigrant women amounted to roughly 90% of those of native-born women.