Executive summary
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Declining entry earnings of successive cohorts of immigrants to Canada have been well documented in the literature. Few studies, however, analyze cross-cohort patterns for immigrants with specific education levels, particularly university graduates. To the extent that well-educated immigrants are becoming increasingly sought-after by traditional immigrant-receiving countries, their relative (to host country workers) outcomes could influence the choice of host country among individuals considering migration, and therefore the self-selection of individuals who choose to immigrate to Canada in the future.
The goal of this paper is to determine whether highly educated recent immigrants to Canada have fared as well economically as their counterparts entering the U.S., in light of the significant rise in the number of highly educated immigrants entering Canada. This study asks how economic outcomes at entry for the highly skilled have changed in the two countries over the last quarter-century (1980 to 2005). It further asks whether changes in the standard observable background characteristics of entering immigrants can account for the outcome trends documented in this study.
Two economic outcome measures are used: the mean relative (to domestic-born) entry wages of highly educated new immigrants (i.e., the wage gap at entry); and the university wage premium, (defined as the difference between the wages of university-educated and high-school-educated). Both unadjusted and adjusted (controlling for changes in observable characteristics across successive cohorts) estimates of these outcomes are produced.
This study finds that relative entry earnings of university-educated immigrants followed a significantly different path in Canada and the U.S., with generally superior outcomes in the U.S., particularly since 1990. This occurred despite the fact that significant declines in entry earnings for successive groups of entering immigrants as a whole (i.e., including immigrants with and without university education) were observed in both countries over the last quarter-century. Overall, the relative wages of university-educated male immigrants in the U.S. demonstrated little long-term decline, while those of university-educated male immigrants in Canada did. The university-educated immigrant women in the U.S. experienced a similar trend as the men, as did highly educated immigrant women in Canada.
Changes in the composition of new immigrants with respect to age, language spoken at home, English language ability (English or French in Canada), source country, and region of residence, which tended to be greater in Canada than in the U.S., accounted for most of the observed change in relative earnings of university-educated immigrants in Canada during the 1980s, but this was less true for more recent cohorts. Such compositional shifts had a smaller negative effect on aggregate relative earnings of university-educated immigrants in the U.S., where changes in relative immigrant wages were driven to a larger extent by changes in economic returns to characteristics over the entire 1980-2005 period. Even after accounting for these compositional changes in both countries, however, most of the gap in outcomes between Canada and the U.S. persisted.
The university wage premium increased marginally among new immigrants in Canada between 1980 and 2000, but fell between 2000 and 2005, especially for men. In the U.S., the university wage premium rose quite rapidly over the 1980-2005 period among both new immigrants and domestic-born workers, both men and women. Overall the adjusted university wage premium was only marginally higher among new immigrants to the U.S. than among new immigrants to Canada in 1980 but, by 2005, was dramatically higher in the U.S.
The objective of this paper is to document relative economic outcomes among highly educated immigrants in the two countries, and ask whether changes in observable characteristics among entering immigrants accounted for changing economic outcomes. But there are many other potential explanations for the different trends in relative earnings of new immigrants to Canada and the U.S. during the 1990s, explanations that are beyond the scope of this paper. This research has shown that differences in occupational composition of immigrants, particularly changes in the share of immigrants trained in the information technology and engineering fields, did not contribute significantly to the different trends in relative earnings of new immigrants over that period. Nor has there been a major shift over time in reliance on an employment-based immigration class, especially in Canada, that could explain the deterioration in relative earnings of new immigrants to Canada. Other possibilities, such as the more rapid increase in the supply of highly educated immigrants in Canada than in the U.S., more pronounced changes in host country language ability in Canada than in the U.S., or perhaps changes in other unobserved characteristics are areas for further research.
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