Immigrant Labour Market Outcomes in Canada: The Benefits of Addressing Wage and Employment Gaps

While Canadian immigrants have higher education levels and are more likely to live in cities where earnings tend to be higher, they experience higher unemployment rates and lower incomes than their Canadian-born counterparts, according to a new report by RBC Economics.

If immigrants’ skills were rewarded similarly to their Canadian-born counterparts, their total income would increase by $30.7 billion, or 2.1 per cent of GDP, according to Immigrant Labour Market Outcomes in Canada: The Benefits of Addressing Wage and Employment Gaps. This would also translate into an additional 42,000 jobs.

Immigrant Wage and Employment Gaps Widening

There was little difference between the unemployment rates of new immigrants and the Canadian-born in 1981, according to the report. But by 2006, immigrants who had been in Canada for less than five years had an unemployment rate of 12 per cent, compared to just 6.4 per cent for the Canadian born.

The unemployment rate was 8.4 per cent among immigrants who had been in Canada for five to 10 years and 5.4 per cent among immigrants who had been in Canada for more than 10 years. The overall unemployment rate for immigrants was 6.9 per cent.

In 2005, immigrants working full time in Canada earned an average of $45,000 a year, two per cent less than the average for Canadian-born workers. However, the most recent immigrants earned an average of just $28,700, states the report.

Looking back over the past three decades, immigrants who arrived between 1976 and 1980 earned less than their Canadian-born counterparts initially, but their earnings caught up rapidly and eventually surpassed those of the Canadian born.

However, the earnings gap for subsequent cohorts of new immigrants has widened — those who arrived between 1976 and 1980 earned 75 per cent of what their Canadian-born counterparts earned while those who arrived between 1991 and 1995 earned just 63 per cent. At the same time, wage growth has remained steady, leading to larger earnings gaps that persist for much longer.

Reasons for the Gaps

The report puts forward several reasons, based on other research, for the gaps in employment and income, including:

  • Quality of education: One study found some differences in the skills acquired in other countries compared to Canada, but the study only looked at test scores of primary students and the RBC report states a more targeted measure of educational quality is needed before any conclusions can be drawn.
  • Language skills: One study found immigrant literacy skills can account for the entire wage gap among high-school educated immigrants and university educated female immigrants, and about half of the gap for university-educated male immigrants.
  • Discrimination: One study found job applicants with English-sounding names are 40-per-cent more likely to be called for an interview than applicants with ethnic-sounding names.
  • Credential recognition: Surveys suggest many employers would discount internationally educated applicants because they don’t know how to assess their credentials.
  • Skills mismatch: One study found the mismatch between immigrants’ skills and the needs of the Canadian economy could account for 14 per cent of the wage gap.

Potential Solutions

These findings suggest immigrant outcomes can be improved through more extensive language training, faster credential recognition and other integration initiatives, concludes the report.

Read the full report: Immigrant Labour Market Outcomes in Canada: The Benefits of Addressing Wage and Employment Gaps