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The Earnings Advantage of Landed Immigrants Who Were Previously Temporary Residents in Canada

The Earnings Advantage of Landed Immigrants Who Were Previously Temporary Residents in Canada

by Feng Hou and Aneta Bonikowska
Social Analysis and Modelling Division, Statistics Canada

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Abstract

This paper compares the entry earnings and earnings growth of economic immigrants who initially arrived as temporary residents and held a work or study permit with those of economic immigrants who were directly selected as permanent residents from abroad. Using the Longitudinal Immigration Database, this study finds that the skill level of prior Canadian work experience matters significantly to earnings. Former temporary residents with work permits for skilled jobs had much higher initial earnings than immigrants without any prior Canadian experience. This earnings gap narrowed during the first 10 years but did not disappear. By comparison, former temporary residents with work permits for non-skilled jobs had significantly lower initial earnings and slower earnings growth than immigrants without any prior Canadian experience. Former foreign students without prior Canadian skilled work experience had slightly higher initial earnings than immigrants landing directly from abroad, entirely because of their longer stay in Canada.

Executive summary

Although most Canadian temporary foreign worker programs did not include provisions that allow participants to apply for permanent residency until recently, a substantial number of temporary foreign workers have become landed immigrants since the 1980s. For instance, from 2008 to 2012, about 32,000 temporary foreign workers gained permanent residency each year, accounting for 13% of the total inflow of landed immigrants.

This paper examines the earnings of economic immigrants who initially arrived as temporary residents and held a work or study permit, and compares them to economic immigrants who were directly selected as permanent residents from abroad. It seeks to answer three questions. First, do economic immigrants who were initially temporary residents with work permits for skilled jobs, work permits for non-skilled jobs, or study permits earn significantly more than economic immigrants who were not previously temporary residents? Second, does any earnings advantage of immigrants who were temporary residents simply reflect the fact that they resided in Canada longer than other economic immigrants? If so, there should be no significant earnings differences between groups when comparisons start from the year of first arrival (i.e., the year in which individuals first came to Canada to work or study as temporary or permanent residents), rather than from the year of landing (i.e., the year in which individuals became landed immigrants or permanent residents). Third, does any earnings advantage appear only in the initial years after arrival or landing, or does it continue over the longer term?

The analysis is based on the Longitudinal Immigration Database, which combines immigrant landing records and annual tax records for immigrants who arrived in Canada since 1980. To make immigrants with and without prior Canadian experience as comparable as possible, this study focuses on immigrants in the Economic Class and excludes those in the Family Class and refugee categories. This is done because immigrants with prior Canadian experience are mostly admitted through the Economic Class. Within the Economic Class, those who came as live-in caregivers (a major source of low-skilled temporary foreign workers) or in the Business Class are excluded. The study sample is restricted to immigrants who landed between 1990 and 2006, who were aged 20 to 54 at the time of landing, and who had at least $1,000 (2011 constant dollars) in paid employment earnings in a given income year. Additional analysis is conducted to include immigrants with earnings under $1,000.

The results show that immigrants who had prior Canadian skilled work experience had a very large initial earnings advantage over economic immigrants who were selected for permanent residency directly from abroad, no matter whether the comparison was made from the year of landing or the year of arrival. In their first full year after immigration, they earned even more than the average among Canadian-born workers. Their advantage is likely related in large part to labour market institutional selection in terms of the role of employers in selecting foreign workers and of subsequent on-the-job screening, and to self-selection among skilled temporary foreign workers. The earnings advantage of immigrants with prior Canadian skilled work experience over immigrants without any prior Canadian experience narrowed rapidly in the initial years after landing as the latter group experienced more rapid earnings growth, but the advantage did not disappear.

Immigrants who had both prior Canadian skilled work experience and study experience also had superior labour market performance after landing. They had a large initial earnings advantage over immigrants without any prior Canadian experience. This advantage narrowed gradually in the first 10 years after landing but expanded subsequently. Although their initial earnings advantage at the time of landing was much smaller than that of immigrants with only prior Canadian skilled work experience, their earnings growth was more rapid. They surpassed immigrants with only prior skilled work experience within 10 years after landing.

By comparison, immigrants with prior Canadian study experience but without prior Canadian skilled work experience had only a small earnings advantage at the time of landing over immigrants without any prior Canadian experience, and this advantage was entirely attributable to their longer stay in Canada. Immigrants with only prior Canadian non-skilled work experience had significantly lower earnings at the time of landing and slower earnings growth after landing than did economic immigrants without any prior Canadian experience.

1 Introduction

Although work experience is an important characteristic that typically contributes to the earnings potential of individuals, many immigrants from developing countries do not benefit from or are even penalized for work experience acquired abroad. Indeed, many Canadian studies show that through the 1990s and 2000s there were no earnings returns—or negative returns—on the foreign work experience of immigrants (Aydemir and Skuterud 2005; Green and Worswick 2010; Hou 2013). This may place immigrants in a catch-22 situation in which they are unable to obtain jobs commensurate with their skills and education because they lack Canadian work experience, but are unable to obtain appropriate Canadian work experience because they are underemployed.

However, immigrants who initially come to Canada as temporary foreign workers and then subsequently become permanent residents may be able to avoid this problem, obtaining Canadian work experience during their initial temporary residence in Canada. The potential scope for this practice has certainly increased over the last decade. Canada formally established temporary foreign worker programs in the early 1970s, with a focus on a small number of highly skilled workers (Vineberg 2010). Temporary foreign worker programs remained small in scope through the 1980s and 1990s, but were broadened through the 2000s to include a larger number of workers, including workers in low-skilled occupations (Foster 2012). By the late 2000s, the number of temporary foreign workers present in Canada exceeded the annual admission of permanent residents. Like many developed Western countries, Canada has increasingly relied on temporary foreign workers to address short-term labour shortages (Pang 2013). Although most Canadian temporary foreign worker programs did not include provisions that allow participants to apply for permanent residency until recently, a substantial number of temporary foreign workers eventually became landed immigrants, even in the 1980s and 1990s.Note 1 The provincial nominee programs (PNPs), introduced in the late 1990s, and the Canadian Experience Class (CEC), introduced in 2008, have become two pathways from temporary to permanent residence (Citizenship and Immigration Canada 2013b). From 2008 to 2012, about 32,000 temporary foreign workers gained permanent residency each year, accounting for 13% of the total inflow of landed immigrants.Note 2

This paper examines the earnings of economic immigrants who initially arrived as temporary residents and held a work or study permit, and compares them to economic immigrants who were directly selected as permanent residents from abroad. The paper addresses three questions. First, do economic immigrants who were initially temporary residents with work permits for skilled jobs, work permits for non-skilled jobs, or study permits earn significantly more than economic immigrants who were not previously temporary residents? Second, does any earnings advantage of immigrants who were temporary residents simply reflect the fact that they resided in Canada longer than other economic immigrants? If so, there should be no significant earnings differences between groups when comparisons start from the year of first arrival (i.e., the year in which individuals first came to Canada to work or study as temporary or permanent residents), rather than from the year of landing (i.e., the year in which individuals became landed immigrants or permanent residents). Third, does any earnings advantage appear only in the initial years after arrival or landing, or does it continue over the longer term?

The remainder of this paper is organized in four sections. Section 2 reviews the literature on the potential advantages of gaining host-country work experience before acquiring permanent residency. Section 3 discusses the data source, measures, and analytical approaches. Section 4 presents descriptive statistics and multivariate analysis results. Section 5 concludes the paper.

2 Potential advantages of host-country work experience before permanent residency

It is expected that in the years immediately after gaining permanent residency, immigrants who were temporary residents would have better labour market outcomes than immigrants admitted directly from abroad. This is because immigrants who were temporary residents would have had more years of host-country work or study experience. Indeed, previous studies show that host-country work experience is one of the most important predictors of immigrants’ earnings (Aydemir and Skuterud 2005; Bonikowska, Hou and Picot 2015). Aydemir and Skuterud (2005) show that the earnings return of an extra year of Canadian work experience among immigrants tends to be similar to or higher than that among the Canadian-born. Canadian work experience is also an important factor associated with finding a job. Oreopoulos (2011) examines the likelihood of obtaining a job interview and finds that it makes no difference whether an immigrant obtained his or her bachelor’s degree in Canada or abroad if the candidate also has four to six years of Canadian work experience. If the length of host-country experience is the only difference between immigrants who were temporary residents and other immigrants, one would not expect significant differences in earnings to remain once the duration of host-country experience is taken into account.

In addition to the length of host-country experience, the literature suggests that immigrants who were temporary residents may outperform other immigrants because they were successfully screened through multiple selection processes before becoming permanent residents. One such process is labour market institutional selection (Hao 2013). Hao (2013) argues that unlike the supply-driven system for selecting permanent residents, such as the points system in Canada, the admission of temporary foreign workers is demand-driven. In demand-driven systems, as practiced in the United States for economic immigrants, employers who face a shortage of domestic-born workers initiate the process of hiring foreign workers by submitting a request to immigration authorities (Koslowski 2014). Foreign workers admitted through this process normally have a job lined up upon arrival. Furthermore, because of the high cost of recruiting and of hiring temporary foreign workers, employers likely conduct stringent screening of potential recruits to ensure a good fit between jobs and workers. More importantly, employers may further screen foreign workers using their actual performance on the job to decide whether to retain and sponsor them for immigration (Hao 2013). In short, foreign workers are offered a job at admission on a trial basis, and only those whose employers want to retain them for long-term employment will be sponsored for permanent residency. By comparison, in the supply-driven system, permanent residency is offered at admission to applicants whose human capital characteristics are considered to offer high potential for labour market success but who have not been directly screened and tested by employers.

There may also be an element of individual self-selection differentiating immigrants who were temporary residents from those admitted directly from abroad (Sweetman and Warman 2014). Returning to the country of origin is an option for immigrants whose experience in the host country is not satisfactory. For temporary foreign workers, dissatisfaction would manifest itself in the decision not to seek permanent residency. Return migration is less costly and more prevalent because of the transient nature of their stay in Canada. By contrast, return migration may be less prevalent among immigrants directly admitted from abroad, because their costs of return migration may be higher and because labour market difficulties are offset by eligibility for a wider range of public programs and benefits than available to temporary residents. The higher degree of self-selection among immigrants who were temporary residents may lead to better labour market outcomes. On the other hand, if prospective immigrants are becoming temporary residents as a foot-in-the-door strategy for permanent residency, regardless of their labour market prospects in Canada, the self-selection effect may not be substantial.

Empirical studies in the United States have provided some evidence of the labour market performance of highly skilled temporary foreign workers. Using the 2003 National Survey of College Graduates, Hunt (2011) shows that immigrants who initially entered the United States on temporary work visas or student or trainee’s visas earned higher wages and registered more patents than native-born college graduates. This was primarily because of their higher levels of educational attainment and fields of study. By contrast, immigrants who arrived as lawful permanent residents (mostly through family reunification) did not outperform native-born college graduates in wages and innovative activities. Mithas and Lucas (2010) find that foreign information technology (IT) professionals, most of them on H-1B or other work visas,Note 3 have a large salary premium when compared with IT professionals with U.S. citizenship. They argue that foreign IT professionals offer skills that are complementary to those of U.S. IT professionals. Similarly, Lofstrom and Hayes (2011) find that H-1B visa holders in IT and postsecondary education occupations have higher earnings than U.S.-born workers, while those in health, engineering, and mathematics and science occupations have earnings similar to those of U.S.-born workers.

While the above studies compare highly skilled temporary foreign workers with U.S.-born workers, Hao (2013) focuses on the earnings differences among foreign-born workers admitted to the United States through temporary worker visas, through permanent residence visas for economic purposes, and through student visas. Hao (2013) argues that the earnings differentials between these groups support the hypothesis of labour market institutional selection. Similarly, Lowell and Avato (2014) focus on earnings differences between foreign-born workers admitted to the United States through temporary worker visas and through student visas. They argue that foreign-born workers who first come to the United States to pursue education are likely not as highly selective as those admitted via temporary work visas, the latter having to demonstrate their skills and job readiness to U.S. employers. An Australian study also finds that former international students who lack advanced English ability and are in low-demand fields fare poorly in employment and earnings compared with other skilled immigrants (Hawthorne and To 2014).

Recent Canadian studies generally confirm the earnings advantage associated with Canadian work experience obtained before permanent residency. A government evaluation report prepared by Citizenship and Immigration Canada (2010) finds that having a minimum of one year of full-time authorized work in Canada, before applying for permanent residency, increases an immigrant’s earnings by about 30%. By comparison, having studied in Canada, before applying, is associated with lower earnings, when factors related to age, educational level, language, and work experience are controlled for. Using census data, Thomas (2010) finds that non-permanent residents working full time have higher average weekly earnings than recent immigrants who have been in the country for five years or less. He attributes this advantage of non-permanent residents to the fact that most of them are recruited to remedy specific skill shortages and have prearranged jobs. Warman (2010) shows that temporary foreign workers have positive earnings returns on their foreign work experience, but recent regular immigrants obtain no such returns. The only Canadian study directly comparing former temporary foreign workers, former foreign students and other immigrants is a study by Sweetman and Warman (2014). Based on the Longitudinal Survey of Immigrants to Canada, which interviewed immigrants who landed between late 2000 and early 2001, their study found that men who were previously temporary foreign workers had higher employment rates and higher earnings six months and four years after landing than other skilled worker principal applicants (who were evaluated through the points system) and other categories of immigrants (e.g., spouses and dependants of skilled worker principal applicants, family, and refugees). The advantage of former foreign students over other skilled worker principal applicants was found to be small and not statistically significant.

This study contributes to the literature in several ways. First, by using information on the actual years of work experience temporary residents have in Canada before becoming landed immigrants, it directly examines the extent to which any earnings advantage of former temporary residents is attributable to more years of Canadian work experience relative to other immigrants. Information on actual years of prior Canadian experience also allows this study to estimate any earnings advantage associated with an extra year of prior Canadian experience. Second, this study distinguishes between former temporary residents who had skilled and non-skilled Canadian work experience, as defined by type of work permits issued to temporary foreign workers, as well as between former foreign students with or without prior Canadian work experience. This provides far more nuance than available in previous U.S. and Canadian studies. Moreover, this disaggregation of former temporary residents is highly relevant to policy, given that low-skilled workers were a major component of the expansion of temporary foreign worker programs in Canada through the 2000s (Foster 2012). Third, with multiple cross-sections of data, this study can follow immigrants for a minimum of 5 years and up to 30 years. This makes it possible to determine whether earnings advantages (or disadvantages) of former temporary residents are evident only in the years immediately after becoming landed immigrants or persist over the longer term.

3 Data and methods

3.1 Data

This study used the Longitudinal Immigration Database (IMDB). The IMDB combines immigrant landing records and annual tax records for immigrants who arrived in Canada after 1980. Immigrants who have filed at least one tax return since 1982 are included in the database. Information on immigrant characteristics at landing, including age, education, marital status, source country, official language, and immigration category (e.g., skilled worker, family, and refugee) is drawn from immigrant landing records. Information on earnings and other income, current marital status, and place of residence is drawn from the tax records. This study is based on tax records covering the period from 1982 to 2011. Information on Canadian experience obtained before landing is derived from administrative data on temporary residents.

To make immigrants with and without prior Canadian experience as comparable as possible, this study focuses on immigrants in the Economic Class. Immigrants with prior Canadian experience are predominantly admitted as permanent residents through this class. Immigrants in the Family Class and refugee categories are excluded. Within the Economic Class, immigrants who came under the live-in caregivers program (a major stream of low-skilled temporary foreign workers) and the Business Class are also excluded.Note 4 The analysis is restricted to immigrants who landed between 1990 and 2006, although earnings were traced back to 1982 for former temporary residents who filed taxes during that period, and trace them forward to 2011. The focus on immigrants landing between 1990 and 2006 makes it possible to observe the earnings of immigrants who worked in Canada prior to landing and to track earnings after landing for at least 5 years. The final sample is restricted to immigrants who were aged from 20 to 54 at the time of landing and who had at least $1,000 (2011 constant dollars) in paid employment earnings in a given income year.Note 5 The restriction on minimum earnings is to reduce the possible inconsistency in the tax-filing patterns of low earners (mostly zero earners) over time because of the implementation of new tax rules in the late 1980s and early 1990s.Note 6 To show the effect of the sample restriction, some descriptive results are produced for the sample with no earnings or small earnings and are discussed in the results section.

Although immigrants can be followed longitudinally in the IMDB, this study treats the data as repeated cross-sections.Note 7 The final sample size for the earnings model is 4.01 million person-years for men, and 3.15 million person-years for women.

3.2 Measures

The outcome variable in the analysis is annual earnings from paid employment (wages and salaries). Annual earnings reflect the combined effect of annual hours worked (i.e., weeks worked and weekly full-time or part-time status), hourly wage rates, and bonuses and other supplementary earnings. The IMDB does not contain information on work times (weeks and hours worked), so it is not possible to disaggregate wage rates and time worked. Annual earnings are adjusted to 2011 constant dollars. To reduce the influence of outliers, real annual earnings were capped at $300,000.Note 8 All models use the natural logarithm of real annual earnings.

The key independent variable in this analysis is the type of Canadian experience obtained before receiving permanent residency in Canada. It is derived from the type of permits held: work permits for skilled jobs or non-skilled jobs, and study permits.Note 9 This variable consists of six categories: (1) immigrants with only prior Canadian skilled work experience,Note 10 (2) immigrants with prior Canadian skilled work and study experience, (3) immigrants with prior Canadian non-skilled work experience,Note 11 (4) immigrants with only prior Canadian study experience, (5) immigrants with other prior Canadian experience (those who had neither work permits nor study permits, but who appeared in the tax files before the landing year),Note 12 and (6) immigrants without any prior Canadian experience. In regression models, this variable is entered as five dummy variables, and immigrants without any prior Canadian experience are the common reference group. An alternative model specification uses the number of years of Canadian skilled work, non-skilled work, study, and other experience to replace the type of prior Canadian experience.

This study distinguishes between year of landing and year of arrival. Year of landing represents the year in which a person became a permanent resident of Canada. For many immigrants, this is also the year in which they first arrived in Canada. However, the year of arrival precedes the year of landing for immigrants who first came to Canada temporarily to work, study, or stay for other reasons. This study uses this distinction to derive two other key independent variables: years since landing and years since arrival. For those with prior Canadian experience, years since arrival are counted from the year of first appearance in the tax files.Note 13 For those without any prior Canadian experience, this variable is counted from the year of landing.

3.3 Models

Three alternative models are constructed to examine the effects of Canadian experience obtained before landing on immigrant earnings:
Log  earnings =  β type *TYP E j + β ysl *YSL + β ysl2 *YS L 2 + β tysl *TYP E j *YSL                        + β tysl2 *TYP E j *YS L 2 + ΣβX + β u *U + e                                       (1) MathType@MTEF@5@5@+= feaagKart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGceaqabeaaieaaca WFmbGaa83Baiaa=DgacaWFGaGaa8xzaiaa=fgacaWFYbGaa8NBaiaa =LgacaWFUbGaa83zaiaa=nhacaWFGaGaa8xpaiaabccaieGacaGFYo WaaSbaaSqaaiaadshacaWG5bGaamiCaiaadwgaaeqaaOGaa4Nkaiaa +rfacaGFzbGaa4huaiaa+veadaWgaaWcbaGaamOAaaqabaGccaGFGa Gaa43kaiaa+bcacaGFYoWaaSbaaSqaaiaadMhacaWGZbGaamiBaaqa baGccaGFQaGaa4xwaiaa+nfacaGFmbGaa4hiaiaa+TcacaGFGaGaa4 NSdmaaBaaaleaacaWG5bGaam4CaiaadYgacaaIYaaabeaakiaa+Pca caGFzbGaa43uaiaa+XeadaahaaWcbeqaaiaaikdaaaGccaGFGaGaa4 3kaiaa+j7adaWgaaWcbaGaamiDaiaadMhacaWGZbGaamiBaaqabaGc caGFQaGaa4hvaiaa+LfacaGFqbGaa4xramaaBaaaleaacaWGQbaabe aakiaa+bcacaGFQaGaa4xwaiaa+nfacaGFmbGaa4hiaiaa+bcacaGF OaGaa4xmaiaa+LcaaeaacaGFGaGaa4hiaiaa+bcacaGFGaGaa4hiai aa+bcacaGFGaGaa4hiaiaa+bcacaGFGaGaa4hiaiaa+bcacaGFGaGa a4hiaiaa+bcacaGFGaGaa4hiaiaa+bcacaGFGaGaa4hiaiaa+bcaca GFGaGaa4hiaiaa+TcacaGFYoWaaSbaaSqaaiaadshacaWG5bGaam4C aiaadYgacaaIYaaabeaakiaa+PcacaGFubGaa4xwaiaa+bfacaGFfb WaaSbaaSqaaiaadQgaaeqaaOGaa4hiaiaa+PcacaGFzbGaa43uaiaa +XeadaahaaWcbeqaaiaaikdaaaGccaGFGaGaa43kaiaa+bcacaGFJo Gaa4NSdiaa+HfacaGFGaGaa43kaiaa+bcacaGFYoWaaSbaaSqaaiaa +vhaaeqaaOGaa4Nkaiaa+vfacaGFGaGaa43kaiaa+bcacaGFLbaaaa a@A0B2@ Log  earnings =  β type *TYP E j + β ysl *YSA + β ysa2 *YS A 2 + β tysa *TYP E j *YSA                        + β tysa2 *TYP E j *YS A 2 +ΣβX + β u *U + e                                     (2) MathType@MTEF@5@5@+= feaagKart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGceaqabeaaieaaca WFmbGaa83Baiaa=DgacaWFGaGaa8xzaiaa=fgacaWFYbGaa8NBaiaa =LgacaWFUbGaa83zaiaa=nhacaWFGaGaa8xpaiaabccaieGacaGFYo WaaSbaaSqaaiaadshacaWG5bGaamiCaiaadwgaaeqaaOGaa4Nkaiaa +rfacaGFzbGaa4huaiaa+veadaWgaaWcbaGaamOAaaqabaGccaGFGa Gaa43kaiaa+bcacaGFYoWaaSbaaSqaaiaadMhacaWGZbGaamiBaaqa baGccaGFQaGaa4xwaiaa+nfacaGFbbGaa4hiaiaa+TcacaGFGaGaa4 NSdmaaBaaaleaacaWG5bGaam4CaiaadggacaaIYaaabeaakiaa+Pca caGFzbGaa43uaiaa+feadaahaaWcbeqaaiaaikdaaaGccaGFGaGaa4 3kaiaa+bcacaGFYoWaaSbaaSqaaiaadshacaWG5bGaam4Caiaadgga aeqaaOGaa4Nkaiaa+rfacaGFzbGaa4huaiaa+veadaWgaaWcbaGaam OAaaqabaGccaGFGaGaa4Nkaiaa+LfacaGFtbGaa4xqaiaa+bcacaGF OaGaa4xmaiaa+LcaaeaacaGFGaGaa4hiaiaa+bcacaGFGaGaa4hiai aa+bcacaGFGaGaa4hiaiaa+bcacaGFGaGaa4hiaiaa+bcacaGFGaGa a4hiaiaa+bcacaGFGaGaa4hiaiaa+bcacaGFGaGaa4hiaiaa+bcaca GFGaGaa4hiaiaa+bcacaGFGaGaa43kaiaa+bcacaGFYoWaaSbaaSqa aiaadshacaWG5bGaam4CaiaadggacaaIYaaabeaakiaa+PcacaGFub Gaa4xwaiaa+bfacaGFfbWaaSbaaSqaaiaadQgaaeqaaOGaa4hiaiaa +PcacaGFzbGaa43uaiaa+feadaahaaWcbeqaaiaaikdaaaGccaGFRa Gaa43Odiaa+j7acaGFybGaa4hiaiaa+TcacaGFGaGaa4NSdmaaBaaa leaacaGF1baabeaakiaa+PcacaGFvbGaa4hiaiaa+TcacaGFGaGaa4 xzaaaaaa@A105@ Log  earnings =  β ypej *TYP E j + β ysl *YSL + β ysl2 *YS L 2 + β typsl *TYP E i *YSL                        + β typsl2 *TYP E j *YS L 2 +ΣβX + β u *U + e                                     (3) MathType@MTEF@5@5@+= feaagKart1ev2aaatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeGaciGaaiaabeqaamaabaabaaGceaqabeaaieaaca WFmbGaa83Baiaa=DgacaWFGaGaa8xzaiaa=fgacaWFYbGaa8NBaiaa =LgacaWFUbGaa83zaiaa=nhacaWFGaGaa8xpaiaabccaieGacaGFYo WaaSbaaSqaaiaadMhacaWGWbGaamyzaiaadQgaaeqaaOGaa4Nkaiaa +rfacaGFzbGaa4huaiaa+veadaWgaaWcbaGaamOAaaqabaGccaGFGa Gaa43kaiaa+bcacaGFYoWaaSbaaSqaaiaadMhacaWGZbGaamiBaaqa baGccaGFQaGaa4xwaiaa+nfacaGFmbGaa4hiaiaa+TcacaGFGaGaa4 NSdmaaBaaaleaacaWG5bGaam4CaiaadYgacaaIYaaabeaakiaa+Pca caGFzbGaa43uaiaa+XeadaahaaWcbeqaaiaaikdaaaGccaGFGaGaa4 3kaiaa+bcacaGFYoWaaSbaaSqaaiaadshacaWG5bGaamiCaiaadoha caWGSbaabeaakiaa+PcacaGFubGaa4xwaiaa+bfacaGFfbWaaSbaaS qaaiaadMgaaeqaaOGaa4hiaiaa+PcacaGFzbGaa43uaiaa+XeacaGF OaGaa4xmaiaa+LcaaeaacaGFGaGaa4hiaiaa+bcacaGFGaGaa4hiai aa+bcacaGFGaGaa4hiaiaa+bcacaGFGaGaa4hiaiaa+bcacaGFGaGa a4hiaiaa+bcacaGFGaGaa4hiaiaa+bcacaGFGaGaa4hiaiaa+bcaca GFGaGaa4hiaiaa+bcacaGFRaGaa4hiaiaa+j7adaWgaaWcbaGaamiD aiaadMhacaWGWbGaam4CaiaadYgacaaIYaaabeaakiaa+PcacaGFub Gaa4xwaiaa+bfacaGFfbWaaSbaaSqaaiaadQgaaeqaaOGaa4hiaiaa +PcacaGFzbGaa43uaiaa+XeadaahaaWcbeqaaiaaikdaaaGccaGFGa Gaa43kaiaa+n6acaGFYoGaa4hwaiaa+bcacaGFRaGaa4hiaiaa+j7a daWgaaWcbaGaa4xDaaqabaGccaGFQaGaa4xvaiaa+bcacaGFRaGaa4 hiaiaa+vgaaaaa@A291@

The first model uses the year of landing as the starting point to compare earnings by type of prior Canadian experience.  YSL MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeaaciGaaiaabeqaamaabaabaaGcbaacbiGaa8xwai aa=nfacaWFmbaaaa@387B@  is years since landing. The TYP E j MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeaaciGaaiaabeqaamaabaabaaGcbaacbiGaa8hvai aa=LfacaWFqbGaa8xramaaBaaaleaacaWFQbaabeaaaaa@3A5D@  variable includes the five dummy variables identifying the different types of Canadian experience prior to landing. Χ MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeaaciGaaiaabeqaamaabaabaaGcbaacciGae83Pdm eaaa@3773@  represents the selected individual-level socio-demographic characteristics. U MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeaaciGaaiaabeqaamaabaabaaGcbaacbiGaa8xvaa aa@36D6@  represents the regional unemployment rate variables in the year of arrival and the year when the earnings are observed. The significance and size of the interaction terms between years since landing and type of prior Canadian experience show how long the earnings differentials by type of prior Canadian experience last after landing. The squared years since landing ( YS L 2 ) MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeaaciGaaiaabeqaamaabaabaaGcbaWaaeWaaeaaie GacaWFzbGaa83uaiaa=XeadaahaaWcbeqaaiaaikdaaaaakiaawIca caGLPaaaaaa@3AF7@  capture the possibility that immigrants without prior Canadian experience might have a faster rate of catch-up with immigrants who had some prior Canadian experience in the years immediately after immigration, but that this rate of catch-up might level off over time. This model excludes earnings observations before landing for former temporary residents from the analysis.

The second model uses the year of arrival as the starting point to compare earnings by type of prior Canadian experience. In this model, YSL MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeaaciGaaiaabeqaamaabaabaaGcbaacbiGaa8xwai aa=nfacaWFmbaaaa@387B@  is replaced by YSA MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeaaciGaaiaabeqaamaabaabaaGcbaacbiGaa8xwai aa=nfacaWFbbaaaa@3870@ —years since arrival. This model includes in the analysis all earnings observations before landing for former temporary residents.

The third model examines earnings advantages associated with an extra year of prior Canadian experience. This model replaces the TYPE MathType@MTEF@5@5@+= feaagKart1ev2aqatCvAUfeBSjuyZL2yd9gzLbvyNv2CaerbuLwBLn hiov2DGi1BTfMBaeXatLxBI9gBaerbd9wDYLwzYbItLDharqqtubsr 4rNCHbGeaGqiVu0Je9sqqrpepC0xbbL8F4rqqrFfpeea0xe9Lq=Jc9 vqaqpepm0xbba9pwe9Q8fs0=yqaqpepae9pg0FirpepeKkFr0xfr=x fr=xb9adbaqaaeaaciGaaiaabeqaamaabaabaaGcbaacbiGaa8hvai aa=LfacaWFqbGaa8xraaaa@3946@  variables by four variables: years of prior Canadian skilled work experience,Note 14 years of prior Canadian non-skilled work experience,Note 15 years of prior Canadian study experience,Note 16 and years of other prior Canadian residence experience.Note 17 As does the first model, this model excludes earnings observations before landing for former temporary residents from the analysis.

All models also control for individual-level socio-demographic characteristics and macro labour market conditions. Individual-level characteristics include the following: (1) landing cohort and its interaction term with years since landing or arrival; (2) age at landing; (3) principal applicant, or spouse or dependant; (4) education at landing; (5) official language at landing, derived from the combination of mother tongue and self-reported ability to speak an official language at landing; (6) months of full-time school attendance in a given year;Note 18 (7) immigrant source region; and (8) geographic location of residence in each tax year.Note 19 Table 2 presents the coding of these variables.Note 20 The variables for labour market conditions include the regional unemployment rates of males in prime working ages (25 to 54 years old) in the year of arrival, and the regional unemployment rates for males in prime working ages in the year earnings are observed.Note 21 The first measure is commonly used to reflect the macroeconomic conditions for immigrants at landing (e.g., Aydemir 2003; Chiswick, Cohen and Zach 1997). This variable was included to control for the effect of economic conditions at landing on immigrant earnings and the possibility that the transition from temporary foreign worker status and foreign student status to permanent residency is more likely to occur in tight labour markets. The second measure controls for the effect of changes in economic conditions on immigrant earnings profiles in years after landing or arriving in Canada.

The IMDB contains the intended occupation reported by principal applicants in the Economic Class. This variable is used as an additional control in the analysis on a subsample of principal applicants in the Economic Class to examine the extent to which the earnings advantage of skilled temporary foreign workers is associated with their intention to work in high-paying occupations. This variable is coded into 14 broad groups.Note 22

All models are estimated separately for men and women. These models are also estimated separately for principal applicants in the Economic Class and their spouses. Given that the same immigrant could appear in the tax files in different tax years, cluster-robust standard errors are estimated to correct for autocorrelation among the repeated observations of the same immigrant.

4 Empirical results

In this section, descriptive statistics are first presented to show the percentage distribution of immigrants by type of prior Canadian experience. Observed earnings differences are presented by type of prior Canadian experience and years since landing or arrival. Next, model estimates are provided to show the earnings differences by type of prior Canadian experience or by years of prior Canadian experience, after adjusting for individual-level socio-demographic characteristics and macroeconomic conditions.

4.1 Descriptive results

Among male economic immigrants in the study sample who landed between 1990 and 2006, about 22.8% had some prior Canadian experience (Table 1). The share with prior Canadian experience was around 29.6% among those who landed in the early 1990s, decreased to slightly below 20% in the late 1990s and early 2000s, then increased to 29.7% over the period from 2005 to 2006. The relatively high rate in the early 1990s coincided with the implementation of the Backlog Clearance Program, although this study excluded immigrants who were admitted directly under this program from the study sample.Note 23 The high rate in the mid-2000s reflects the expansion of the PNPs, which often recruit immigrants from among temporary foreign workers. The rate of transition from temporary to permanent residency continued to increase in the late 2000s and early 2010s with the further expansion of the PNPs and the introduction of the CEC in 2008.Note 24

Among immigrant men with prior Canadian experience, just over one-half had prior Canadian skilled work experience or a combination of Canadian skilled work and study experience (Table 1). The share of immigrant men with Canadian non-skilled work experience was small through most of the reference period, reflecting the fact that temporary foreign worker programs were primarily confined to skilled workers until the mid-2000s.Note 25 The share of immigrant men with only Canadian study experience was small in the early 1990s but increased in subsequent years and by 2005/2006 accounted for about one-fifth of immigrants with prior Canadian experience. The trend for women is generally similar to that for men, although women were much more likely to have prior Canadian experience that was neither work nor study.

Chart 1 presents observed (i.e., not regression-adjusted) earnings of immigrant men by type of prior Canadian experience and year since landing. Immigrant men with only prior Canadian skilled work experience earned about $84,900 in their first full year in Canada. As a point of reference, Canadian-born male workers aged 25 to 64 with minimum annual earnings of $1,000 on average earned $60,900 in 2000, and university-educated Canadian-born male workers on average earned $91,200.Note 26 Thus, these immigrants in their first full year earned more than average Canadian-born workers, but earned slightly less than university-educated Canadian-born workers.

Furthermore, immigrant men with only prior Canadian skilled work experience clearly had the largest earnings advantage over immigrants without prior Canadian experience both in the initial years after landing and in the long term. The advantage was about $56,000 in the first full year after landing, or twice the average earnings of immigrants without prior Canadian experience, and remained at $35,000, or 60%, 15 years after landing.Note 27 Immigrants with both prior Canadian skilled work and study experience had the second highest initial earnings. They earned 42% more than immigrants without prior Canadian in the first full year after landing, and the advantage increased to 63% in the 15th year after landing. Immigrants in the other four categories all had low earnings initially after landing relative to immigrants without prior Canadian experience. Over time, immigrants with only prior Canadian study experience had higher earnings growth than those without any prior Canadian experience, while immigrants with Canadian non-skilled work experience had lower earnings growth than those without any prior Canadian experience.

A different pattern emerges when comparing immigrant men with and without prior Canadian experience, after taking into account group variations in the length of stay in Canada (Chart 2). Immigrant men with only prior Canadian skilled work experience still had the highest average annual earnings in the initial years and in the long term. Immigrant men without any prior Canadian experience had higher earnings than the other four groups in the first five years after arriving in Canada. However, over the longer term, the annual earnings of immigrant men with both prior Canadian skilled work and study experience and of immigrant men with only prior Canadian study experience were higher. Immigrant men with prior Canadian non-skilled work experience had lower earnings than immigrant men without any prior Canadian experience over both the short and long term.

Chart 1 Average annual earnings of immigrant men, by years since landing

Description for Chart 1

Chart 2 Average annual earnings of immigrant men, by years since arrival

Description for Chart 2

The average annual earnings trajectories of female immigrants in the various groups are generally similar to those of male immigrants, although the group differences tend to be smaller, particularly among those with skilled work experience or study experience, or both (Charts 3 and 4).  In the first full year after landing, female immigrants with only prior Canadian skilled work experience on average earned $43,800, which was higher than the average of similar aged Canadian-born female workers at $41,300 in 2000, but lower than the average of university-educated Canadian-born female workers at $58,000.Note 28

Chart 3 Average annual earnings of immigrant women, by years since landing

Description for Chart 3

Chart 4 Average annual earnings of immigrant women, by years since arrival

Description for Chart 4

The observed differences in earnings growth by type of prior Canadian experience may partly originate from group differences in human capital factors and source regions. As shown in Table 2, immigrants with only prior Canadian skilled work experience were more likely to have a graduate degree, to have English as their mother tongue, to be older, and to come from Northern and Western Europe and the United States than immigrants without any prior Canadian experience. Immigrants with prior Canadian study experience, either with or without Canadian skilled work experience, were most likely to have a graduate degree and to be in younger age groups. Immigrants with prior Canadian non-skilled work experience had lower educational attainment and were more likely to come from Southern and Eastern Europe, and the Caribbean and South America. These differences raise the question of whether the differences in earnings presented above remain significant when group differences in human capital and source regions are taken into account. This question is addressed in the following sections.

4.2 Multivariate analyses: Comparisons by type of prior Canadian experience

Table 3 presents regression-model estimates that compare earnings among immigrant groups starting from the landing year. When controls are added to account for characteristics at landing, including landing cohort, age, education, language ability, source region, months of school attendance in a given year, geographic location and macroeconomic conditions, immigrants with only prior Canadian skilled work experience still have much higher earnings upon landing than immigrants without any prior Canadian experience. Indeed, additional analysis shows that differences in control variables, primarily individual-level characteristics, accounted for less than one-fifth of the observed earnings advantage of immigrants with prior Canadian skilled work experience. In other words, most of the observed earnings advantage was not attributable to group differences in the control variables included.Note 29

In the model with the full set of controls (Table 3), the initial earnings advantage of immigrant men with prior Canadian skilled work experience over immigrant men without any prior Canadian experience was 1.107 log points or about 202%.Note 30 The negative and significant interaction term between prior Canadian skilled work experience and years since landing, plus the positive and significant interaction term between prior Canadian skilled work experience and squared years since landing, suggests that the earnings advantage of immigrants with prior Canadian skilled work experience over immigrants without Canadian experience narrowed, at least in the years immediately after landing. Chart 5 plots estimated earnings differences by type of prior Canadian experience and by year since landing based on the regression model. The chart shows that the earnings advantage of immigrants with prior Canadian skilled work experience narrowed to about 0.07 log points or 7.3% by year 13 and then stabilized.

The initial advantage of immigrant men with both Canadian skilled work and study experience over those without any prior Canadian experience was 0.545 log points, or about 70%. This initial advantage was smaller than the advantage for immigrants with only prior skilled work experience, but it narrowed at a much slower rate and remained at 0.19 points by the 10th year after landing before expanding again (Chart 5). Among the remaining three groups with some prior Canadian experience, the initial earnings advantage disappeared by the 4th year after landing for those with prior Canadian non-skilled work experience, by the 14th year for those with only prior Canadian study experience, and by the 7th year for those with other prior Canadian experience. Similar patterns held among immigrant women (Table 3 and Chart 6).

Chart 5 Estimated differences in log earnings with immigrant men without prior experience, by years since landing

Description for Chart 5

Chart 6 Estimated differences in log earnings with immigrant women without prior experience, by years since landing

Description for Chart 6

Table 4 presents regression-model estimates that compare earnings among immigrant groups starting from the arrival year. When group differences in actual years of residence in Canada and all the control variables were taken into account, immigrant men with only prior Canadian skilled work experience still had much higher initial earnings than immigrant men without any prior Canadian experience. Their initial advantage, 0.859 log points, narrowed as their years in Canada increase. The advantage decreased to around 0.13 log points by the 12th year after arrival, before starting to expand again (Chart 7). By comparison, immigrant men with other types of prior Canadian experience did not have an advantage in initial earnings over immigrant men without any prior Canadian experience. However, earnings growth after arrival tended to be stronger among immigrant men with both prior Canadian skilled work and study experience and among immigrants with only prior Canadian study experience than among immigrant men without any prior Canadian experience. Consequently, the initial negative earnings gaps of the former two groups disappeared by 11 to 13 years after arrival. There was little catch-up in the earnings growth for immigrant men with prior Canadian non-skilled work experience.

Again, similar patterns were observed among immigrant women, although the differences in initial earnings by type of prior Canadian experience were smaller among women than among men (Table 4 and Chart 8).

Chart 7 Estimated differences in log earnings with immigrant men without prior experience, by years since arrival

Description for Chart 7

Chart 8 Estimated differences in log earnings with immigrant women without prior experience, by years since arrival

Description for Chart 8

Overall, immigrants who had prior Canadian skilled work experience had a very large initial earnings advantage over immigrants who were selected directly from abroad, regardless of whether they were compared from the year of landing or the year of arrival. Immigrants who initially came as foreign students, either with or without prior Canadian skilled work experience, did not have an earnings advantage over immigrants who were selected directly from abroad when they were compared from the year of arrival, but an advantage existed by the time of landing. Former foreign students also tended to have higher earnings growth over time.

4.3 Multivariate analyses: Earnings return of an extra year of prior Canadian experience

While the above analyses compare earnings by type of prior Canadian experience, this section further quantifies the effect of prior Canadian experience by examining the earnings return of an extra year of prior Canadian experience at the time of landing and how long any such effect lasts. Table 5 presents the results. As in Table 3, where the group comparison starts from the year of landing, immigrants with an extra year of prior Canadian experience had higher earnings than immigrants without any prior Canadian experience at the time of landing. The positive effect was largest among immigrants with only prior Canadian skilled work experience, 0.248 log points or 28% for an extra year of such experience. This effect decreased over time and reached its lowest point at 0.03 log points or 3% by the 12th year after landing, before expanding again.

The effect of an extra year of other types of Canadian experience was much smaller. An extra year of prior Canadian non-skilled work experience was associated with an earnings advantage of 0.071 log points or 7.3% for immigrant men at the time of landing compared with immigrant men without any prior Canadian experience, but this effect decreased rapidly and became negative four years after landing. Similarly, an extra year of other prior Canadian experience was associated with about 0.075 log points or 7.8% at the time of landing, and this effect decreased gradually with time and disappeared about six years after landing. An extra year of prior Canadian study experience had no significant positive effect at the time of landing and this remained true over time.Note 31

For immigrant women, the initial effects of an extra year of prior Canadian skilled work experience, non-skilled work experience, or other Canadian experience tended to be slightly smaller than the corresponding effects among immigrant men. However, the initial effects of prior Canadian study experience were much larger among women than among men (Table 5).

4.4 Multivariate analyses: Principal applicants in the Economic Class and their spouses

The above analyses cover all economic immigrants and thus provide a broad picture of differences in earnings by type of prior Canadian experience. This section replicates the same analyses for principal applicants in the Economic Class and their spouses. In the study sample, principal applicants comprise 85% of the economic immigrants among men but only 43% among women, reflecting the fact that men are more likely to be the principal applicant than women. Principal applicants in the Economic Class were directly evaluated under the points system of immigrant selection with the expectation that their human capital factors and other adaptability characteristics would increase their potential to succeed in the Canadian labour market. An analysis focused on this group may reduce the possible confounding effects of unobserved factors among principal applicants, their spouses and their dependants. Furthermore, principal applicants reported their intended occupation in their applications. The addition of this variable serves to control for possible group differences in knowledge about the host-country labour market and for allocation in high-paying occupations.Note 32 Information on actual occupation after landing is not available in the data file.

Tables 6-1 and 6-2 present the results of the models examining the overall effects of prior Canadian experience and the effects of an extra year of prior Canadian experience for principal applicants and for spouses separately. To save space, the tables present only the coefficients of variables representing types of Canadian experiences, years since landing, and the interaction between the two, although all the control variables were included in the model estimation. Overall, the results for principal applicants and spouses are broadly similar. The main difference is that the effects of prior Canadian work experience were stronger among principal applicants than among spouses. This pattern holds for both men and women. It is possible that when both members of a couple had prior Canadian work experience, the one who was more successful was more likely to apply as the principal applicant. Another possibility is the difference in the degree of employer selection. Temporary foreign workers can bring their spouses to Canada. These spouses can obtain work permits under certain circumstances and thus gain Canadian work experience. However, their work permits are not initiated by the employer, so they are not subject to the same level of labour market institutional selection as the original temporary foreign workers.

Controlling for intended occupation among principal applicants makes little difference to the positive effects of prior Canadian skilled work experience. It is clear that the higher initial earnings associated with prior Canadian skilled work experience are not due to group differences in intended occupation. However, after controlling for intended occupation, the positive effect of prior Canadian non-skilled work experience at the time of landing became slightly larger. For instance, the earnings return of an extra year of prior Canadian non-skilled work experience among male principal applicants was estimated at 0.072 log points without controlling for intended occupation, but increased to 0.083 log points after controlling for it. This suggests that immigrants with prior Canadian non-skilled work experience were disadvantaged by their intended occupation relative to immigrants without any prior Canadian experience.

5 Conclusion and discussion

Temporary mobility has emerged as a major form of international migration, and many Western developed countries have relied on temporary foreign workers to address labour shortage. Such workers have become an important ‘feeder pool’ for permanent immigration to Canada. Even in the 1980s and 1990s, Canada already selected a substantial share of permanent residents from among former temporary residents, including those with work or study permits. The acceptance of temporary foreign workers and students as permanent residents increased during the 2000s with the expansion of the provincial nominee programs and the introduction of the Canadian Experience Class (CEC).

When foreign temporary workers become permanent residents, not all types of prior host-country experience have the same effect on their post-migration labour market outcomes. This study clearly demonstrates that immigrants with prior Canadian skilled work experience had a very large initial earnings advantage over immigrants who were selected directly from abroad, regardless of whether they were compared from the year of landing or the year of arrival. Less than one-fifth of the earnings advantage of immigrants with prior Canadian skilled work experience is attributable to their higher education level, to their stronger English skills, and to the fact that more of them come from the United States and Northern and Western Europe. It appears that their advantage is related in large part to labour market institutional selection in terms of the role of employers in selecting foreign workers and of subsequent on-the-job screening, and to self-selection among skilled temporary foreign workers. The earnings advantage of immigrants with prior Canadian skilled work experience over immigrants without any prior Canadian experience narrowed considerably in the initial years after landing as the latter group experienced faster earnings growth, but the advantage did not disappear and, if anything, began to expand after the first 13 years.

Immigrants with both prior Canadian skilled work and study experience also had superior labour market outcomes after landing. They had a large initial earnings advantage over immigrants without any prior Canadian experience, and the advantage narrowed gradually in the first 10 years after landing, but expanded subsequently. Although their initial earnings advantage at the time of landing was smaller than that of immigrants with only prior Canadian skilled work experience, their earnings growth was more rapid. They surpassed immigrants with only prior skilled work experience within 10 years after landing. The group of immigrants with both skilled work and study experience is similar to the stream of the CEC, introduced in 2008, that allowed foreign students who had studied in Canada for at least two years, obtained postsecondary-level educational credentials and had at least one year of skilled work experience to apply for landed immigrant status. This study shows that, among individuals with prior Canadian skilled work experience, having studied in Canada makes a large difference in terms of initial earnings at the time of landing and subsequent earnings growth.

By comparison, immigrants with prior Canadian study experience but without prior Canadian skilled work experience had only a small earnings advantage at the time of landing over immigrants without any prior Canadian experience, and this advantage was entirely attributable to their longer stay in Canada. This advantage narrowed to near zero by about 10 years after landing and remained small in subsequent years. These former foreign students were much less successful than foreign students who also had prior Canadian skilled work experience, even though the former were more likely to have postgraduate degrees. These findings are consistent with those of Lowell and Avato (2014) for the United States and of Hawthorne and To (2014) for Australia. Lowell and Avato (2014) argue that in spite of the common perception that foreign students in the United States are the best and brightest from the rest of the world, they may not be as well selected as temporary foreign workers in their ability to fit into the U.S. labour market. Similarly, Hawthorne and To (2014) discuss challenges foreign students face in Australia.

The group that had the lowest earnings was immigrants with only non-skilled work experience in Canada. This group had significantly lower earnings at the time of landing and slower earnings growth after landing than did immigrants without any prior Canadian experience. Overall, immigrants who were initially admitted to Canada as temporary residents to fill low-skilled jobs fare most poorly in the labour market over the longer term. This result is based on data from a period when non-skilled foreign temporary workers only accounted for a small fraction of temporary foreign workers. The large shift in temporary foreign worker programs towards low-skilled labour that occurred in the mid-2000s may or may not result in different outcomes.

Overall, this study makes an important qualification to the role of employers and on-the-job screening in the immigrant selection process. The U.S. literature, based mostly on the experience of highly skilled temporary foreign workers, suggests that labour market institutional selection can facilitate the match between immigrant job skills and labour market demand. This is consistent with the results of this study for immigrants with prior Canadian skilled work experience. Specifically, this study finds that foreign temporary workers with Canadian skilled work experience do better than immigrants without any prior Canadian experience in the short and long term. However, the results for immigrants with prior Canadian non-skilled work experience highlight some potential limitations of employer selection, and the effects of employer selection may vary across industrial sectors (Ferrer, Picot and Riddell 2014; Foster 2012). Temporary foreign workers who are recruited to work in low-wage jobs may have difficulty moving to high-paying jobs after becoming landed immigrants.

In terms of foreign students, just as Canadian-born students with Canadian education have divergent labour market outcomes, so too do international students. Consistent with previous U.S., Australian and Canadian studies, this study finds that host-country education in and of itself does not necessarily provide a clear advantage to immigrants; it is most likely to do so when accompanied by skilled work experience.

Notes

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