Economic and Social Reports
Why have immigrant entry earnings fluctuated widely in recent years? The role of immigration selection and labour-market conditions

by Search for Statistics Canada publications by Feng Hou, Feng Hou , ORCID for Feng Hou and Nicolas Bastien

DOI: https://doi.org/10.25318/36280001202600400003-eng

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Abstract

In recent years, the entry earnings of newly admitted immigrants to Canada have exhibited substantial year-to-year fluctuations. Notably, first-year average earnings increased by 21% for the 2020 admission cohort relative to the previous cohort and by 11% for the 2021 cohort, followed by a 13% decline for the 2022 cohort—despite a continued modest rise in the median wages of all Canadian workers. This article examines the extent to which these fluctuations reflect changes in immigration selection and broader labour-market conditions.

Using data from the Longitudinal Immigration Database, the analysis focuses on admission cohorts from 2015 to 2022 and measures earnings (annual wages or salaries) in immigrants’ first full calendar year after admission. Regression and decomposition analyses are used to assess the relative contributions of sociodemographic characteristics—including pre-admission Canadian earnings, immigration class, education, language ability and region of birth—and labour-market conditions, such as industry of employment, provincial unemployment rates and annual earnings of young Canadian-born workers by province.

The results show that rapid changes in cohort composition, particularly a large decline in the share of immigrants with pre-admission Canadian earnings, explain most of the sharp decline in entry earnings for the 2022 cohort. Changes in labour-market conditions account for a larger share of the yearly change for earlier cohorts. Once these factors are accounted for, year-to-year fluctuations in entry earnings largely disappear, with steady growth across cohorts, except for a decline related to the COVID-19 pandemic among the 2019 cohort. These findings highlight the central role of two-step immigration pathways, changes in immigration selection and labour-market conditions in shaping the early economic outcomes of immigrants admitted from 2015 to 2022.

Authors

Feng Hou is with the Economic and Social Analysis and Modelling Division, Analytical Studies and Modelling Branch, at Statistics Canada. Nicolas Bastien is with the Centre for Population and Social Statistics, Social, Justice and Indigenous Statistics Branch, at Statistics Canada.

Acknowledgments

The authors would like to thank Karine Begin, Georgina Chuatico, Rafee Hoque, Maciej Karpinski, John Leung, Helene Maheux and Anne-Marie Rollin for their advice and comments on an earlier version of this article.

In recent years, Canada has seen large fluctuations in the entry earnings of newly arrived immigrants, measured in the first full calendar year after their admission. Since the late 2010s, first-year earnings have risen sharply in some years and fallen just as sharply in others, creating unusually large year-to-year swings that are not immediately easy to explain. For example, recent Statistics Canada analyses of the Longitudinal Immigration Database show that the 2020 admission cohort recorded a 21% increase in real median entry earnings compared with the 2019 cohort. Yet the 2022 cohort experienced an 11% decline relative to 2021, even as the median wages of all Canadian workers continued to rise slightly (Statistics Canada, 2025).

Understanding why these swings occur and what drives them is essential, as entry earnings are a key indicator of whether immigrants can “hit the ground running”; entry earnings are also widely used to assess the effects of changes in immigration selection (Aydemir & Skuterud, 2005; Hou & Picot, 2016). They are also one of the strongest predictors of immigrants’ long-term economic outcomes, influencing career trajectories, family well-being and emigration decisions (Belfi et al., 2021; Picot, Hou & Crossman, 2023; Zhang & Banerjee, 2021).

Earlier research highlights several forces that have shaped newcomers’ entry earnings in recent decades, including shifts in immigration selection, the rise of two-step immigration (the selection of immigrants from among temporary foreign workers [TFWs] and international students) and changes in the broader macroeconomy (Hou & Picot, 2016). In particular, studies identify the increased selection of economic immigrants from the pool of TFWs, the introduction of the Express Entry system and favourable labour-market conditions as the key factors behind the improvement in entry earnings during the 2010s (Hou, 2024).

This article examines how changes in immigration selection and labour-market conditions may have contributed to the volatility in entry earnings among immigrants admitted in the early 2020s (up to the 2022 admission cohort, the latest year for which first-year earnings are available). On the selection side, by the late 2010s, more than one-third of all new immigrants were selected from former TFWs. This share surged to 62% in 2021, as international travel restrictions sharply reduced the number of immigrants selected directly from abroad and temporarily increased the reliance on those already in Canada (Statistics Canada, 2024). By 2022, however, the share had fallen back to 36% (Hou, 2025), representing a large and rapid shift in cohort composition.

On the labour-market side, the early 2020s were marked by dramatic macroeconomic disruptions and recovery. The unemployment rate in Canada decreased from 7.1% in 2016 to 5.7% in 2019, spiked to 9.7% in 2020 during the pandemic, and then fell to historic lows of around 5.3% by 2022 before edging up slightly in 2023 (Statistics Canada, n.d.). Over the same period, hourly wages continued to grow (Statistics Canada, 2026). Together, these changes signal an environment in which newly admitted immigrants faced very different opportunities depending on the timing of their arrival.

By analyzing recent admission cohorts in the context of these structural shifts, this article aims to shed light on the underlying sources of the large swings in immigrant entry earnings observed since the mid-2010s. The analysis draws on the Longitudinal Immigration Database, with earnings information available up to 2023. The next section examines changes in the sociodemographic characteristics of recent admission cohorts, followed by an analysis of changes in their annual earnings.

Large changes in the share of immigrants with pre-admission Canadian earnings

Table 1 summarizes selected sociodemographic characteristics of new immigrant workers with positive first-year earnings for the 2015 to 2022 admission cohorts.

A major shift during this period is the changing share of new immigrant workers with pre-admission Canadian earnings—a measure of prior work experience in Canada as TFWs (Picot et al., 2022). After fluctuating between 41% and 49% in the late 2010s, the share of new immigrant workers with pre-admission Canadian earnings increased to 55% for the 2020 cohort, surged to 75% in 2021 and then fell back to 51% in 2022 (Table 1). Within this group, the share with high levels of pre-admission earnings (above the national median earnings of all Canadian workers) rose from below 17% in the late 2010s to 21% in 2020 and 23% in 2021 before dropping to 16% in 2022. These movements highlight both the growing importance of two-step immigration pathways and the volatility introduced by pandemic-related disruptions.

These shifts align closely with changes in immigration class composition. The share of new immigrant workers admitted through the Canadian Experience Class (CEC), a stream that exclusively selects from skilled TFWs, rose sharply in 2020 and even more in 2021. By 2022, however, the CEC share had returned to levels observed in the mid-2010s. Other streams, particularly the Provincial Nominee Program, also selected TFWs, though to a lesser extent (Hou, 2025). Meanwhile, the 2022 cohort included the largest share of refugees since the mid-2010s.

The early 2020s also saw moderate changes in language profiles, education levels and source-region composition, although these changes were less pronounced than the shifts in pre-admission Canadian work experience and program selection.

Taken together, these changes in immigrant characteristics and selection pathways—especially the substantial variation in pre-admission Canadian earnings, the strongest predictor of entry earnings (Picot et al., 2022)—likely played a major role in producing the large fluctuations observed across recent admission cohorts.

The decline in the share of immigrants with pre-admission Canadian earnings explains the entry earnings drop of the 2022 admission cohort

Chart 1 presents the observed and adjusted percentage changes in first-year earnings between adjacent cohorts. These changes are derived from differences in log annual earnings (annual wages or salaries).^Note The adjusted estimates come from a regression model controlling for sociodemographic characteristics (gender, age at admission, official languages, education, immigration class, detailed region of birth, pre-admission Canadian earnings and province of residence). The model also controls for three measures of labour-market conditions in the first full year following admission: (1) industry of employment (two-digit North American Industry Classification System code) of immigrant workers, capturing sectoral demand for new immigrants; (2) median annual earnings of Canadian-born workers aged 20 to 29 by province, reflecting broader labour-market conditions for new entrants; and (3) provincial unemployment rates (Hou & Picot, 2014).

The observed changes in average log earnings closely match the median earnings patterns reported in Table 1. The results show a strong increase for the 2017 cohort (+15%), followed by a decline for the 2019 cohort (-9%). Large increases appear for the 2020 (+21%) and 2021 (+11%) cohorts, before a substantial drop for the 2022 cohort (-13%).

After adjusting for changes in immigrant characteristics and labour-market conditions, the decline in entry earnings for the 2022 cohort is reversed to a small increase. This implies that, without these shifts in immigrant composition and labour-market conditions, the 2022 cohort would have experienced a small increase rather than a sharp decline relative to the 2021 cohort. Decomposition analysis indicates that the reduction in the share of new immigrant workers with pre-admission Canadian earnings alone accounts for 87% of the observed decrease (Chart 2).

Changes in immigrant characteristics and labour-market conditions also explain a sizable share of the large changes observed in entry earnings for the 2017, 2019, 2020 and 2021 cohorts. They account for 67% of the increase for the 2017 cohort, 72% of the decrease for the 2019 cohort, 81% of the increase for the 2020 cohort and 63% of the increase for the 2021 cohort. The 2016 and 2018 cohorts experienced relatively small increases in entry earnings, and changes in immigrant characteristics and labour-market conditions together explained little of the observed growth.

Decomposition results further show that, for the 2021 cohort, changes in the share of immigrants with pre-admission Canadian earnings and other sociodemographic characteristics account for 37% of the observed increase, with the positive effect of the rising share with pre-admission Canadian earnings partially offset by changes in other sociodemographic characteristics. Meanwhile, changes in labour-market conditions account for 26% (Chart 3).^Note

For the 2017, 2019 and 2020 cohorts, changes in labour-market conditions^Note played a larger role than sociodemographic characteristics in explaining the observed changes in entry earnings. For example, the 2020 cohort experienced the largest increase in entry earnings among the cohorts studied. Changes in labour-market conditions account for 51% of the increase, ^Note while changes in immigrant characteristics (primarily the rise in the share of immigrants with pre-admission Canadian earnings) account for 30%, with the remaining 19% attributable to other factors not examined in this study (Chart 4).

For the 2019 cohort, which experienced a 9% decline in entry earnings relative to the 2018 cohort, the first full calendar year in Canada coincided with the onset of the COVID-19 pandemic in 2020, when the national unemployment rate increased from 5.7% to 9.7% and annual earnings among Canadian-born workers aged 20 to 29 declined by 6%. Changes in labour-market conditions account for the majority (92%) of the decline in entry earnings, while changes in certain immigrant characteristics, primarily immigration class, pre-admission Canadian earnings and province of residence, partially offset this decline (Chart 5).

Conclusion

The large fluctuations in immigrants’ entry earnings since the mid-2010s can be traced primarily to two factors: rapid changes in the composition of incoming cohorts and major shifts in labour-market conditions during the pandemic and recovery. The analysis shows that annual variations in the share of new immigrant workers with pre-admission Canadian earnings were the central driver behind the sharp drop in entry earnings for the 2022 cohort, while changes in labour-market conditions explain more of the variation for earlier cohorts. Once immigration selection and labour-market conditions are accounted for, year-to-year fluctuations in immigrants’ entry earnings largely disappear, with moderate growth across most cohorts and a COVID-19-related decline among the 2019 cohort. These findings highlight the extent to which Canada’s two-step immigration pathways shape newcomers’ early labour-market outcomes. As selection policies and labour-market conditions continue to evolve, monitoring these patterns will be essential for understanding and improving the economic integration of future immigrants.

References

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