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This paper reviews recent research on the determinants of the labour market outcomes of the children of immigrants in Canada and in the United States. New research on labour market outcomes in Canada is also presented. Much of the recent research focuses on outcome gaps between the children of immigrants, also referred to as the second generation, and the children of domestic-born parents, for whom the term third-and-higher generations is used. Intergenerational transmission of earnings between immigrants-the first generation-and their children is also reviewed.

In both Canada and the United States, the labour market outcomes of the children of immigrants are equal to, or better than, those of the children of domestic-born parents. On average-with no controls-the children of immigrants have higher levels of education than do the third-and-higher generations, but similar labour force participation rates and unemployment rates. Furthermore, the children of immigrants tend to have higher earnings and are more likely to be employed in professional occupations than their counterparts with domestic-born parents; again, this is before any controls are applied to account for differences in educational attainment, age, and so on.

In Canada in particular, most of the earnings advantage among individuals of the second generation relates to their higher level of education and their residential location, clustered as they are in large urban areas where wages are higher. Conditional on educational attainment and location of residence, in Canada, however, the second generation has a negative wage gap relative to the third-and-higher generations. This negative wage gap, after controlling for socio-economic differences, is observed primarily among visible-minority groups, particularly the Black population. In the U.S., conditional on education and residential location, the positive wage gap between the children of immigrants and those of American-born parents disappears; this suggests that these two factors account for the initial unadjusted positive gap between these groups.

Ethnic/source region group differences loom large in both countries. In the U.S., concern focuses on the second generation with Central American, South American, or Puerto Rican backgrounds. The "segmented assimilation" model in U.S. sociological research predicts poorer outcomes for these groups, driven by lower parental education, a higher share of single-parent families, discrimination, and other factors. The children of immigrants from Mexico and other Central/South American countries have poorer labour market outcomes-before controls-than third-and-higher-generation Whites or other second-generation groups. The much lower levels of education achieved by these groups account in part for their poorer outcomes. These educational attainment outcomes are in turn driven in part by the lower levels of educational attainment among their immigrant parents and by a relatively low level of upward educational mobility between the Mexican immigrant parents and their children. However, conditional on their socio-economic background, including education, second-generation Mexican-Americans register better earnings outcomes than the third-and-higher generations with comparable background characteristics. Furthermore, the negative wage gap between Mexican-American workers and third-and-higher-generation Whites is reduced considerably from the first generation to the second. However, as a result of their relatively disadvantaged economic backgrounds, negative outcome gaps persist between the children of many Hispanic/Latino, including Mexican, immigrants and the third-and-higher generations.

There is considerable variation in outcomes by ethnic group/source region background in Canada. Visible-minority groups tend to have superior educational attainment outcomes. In particular, educational levels among second-generation children with Chinese, South Asian, and African backgrounds are much above those of the third-and-higher generations. This is reflected in superior labour market outcomes, before controls. However, conditional on background characteristics, children whose parents came from developed European countries tend to do better in the labour market. In both Canada and the U.S., even after accounting for numerous socio-economic background variables, significant differences in outcomes among second-generation groups according to ethnic/source region background persist.

Regarding the determinants of aggregate outcomes, educational attainment may account for up to half of the positive unadjusted earnings gap between the second generation and the third-and-higher generations. Other important determinants of the wage gap include location of residence and community size, ethnic group/source region background, the "degree of stickiness" in educational and earnings transmission between immigrants and their children, and "ethnic capital." The latter concept typically refers to the advantages or disadvantages bestowed on the individual by the overall level of income and educational attainment for the ethnic group as a whole.

In the aggregate, educational and labour market outcomes of the children of immigrants in Canada and the U.S. tend to be equal to, or better than, those of the third-and-higher generations. Some caveats to this overall conclusion have been noted. Economic integration may be a multi-generational process. In both countries, the wage gap—after controls—between visible minorities and third-and-higher-generation individuals who are not members of a visible-minority group falls from the first generation (immigrants), to the second generation (their children), and even to the third-and-higher generations in some cases.