Multi-ethnic Group Of Students

New Report: Which Human Capital Characteristics Best Predict the Earnings of Economic Immigrants?

 

Happy diverse group of friends together outdoors at twilight  Immigrant “Success”

For immigrants, finding “success” in Canada or whichever country they choose is a very subjective idea. Some measure success in improved opportunities for themselves and their children, whereas others may focus on newfound freedoms, or on safety and security.

From the government’s perspective, success is often related to employment and income-related factors. How to do immigrants compare to Canadian-born populations in terms of economic well-being? As Canada has moved to increase its proportion of economic class immigrants in recent years, it is not surprising that new research has focused on economic outcomes of immigrants. In addition to the obvious reasons to focus on economic well-being, it is an indicator of opportunity, inclusion, skills match, and other less tangible factors.

A Focus on Economic Outcomes

The most recent of these Statistics Canada reports examines the relative importance of various human capital factors – notably language, work experience and education — when predicting the earnings of economic immigrants in Canada. This is the interesting topic of the analysis by Bonikowska, Hou and Picot in Which Human Capital Characteristics Best Predict the Earnings of Economic Immigrants?

(This research employs Statistics Canada’s Longitudinal Immigration Database (IMDB).This study is limited to economic immigrants, most of whom arrive in Canada as federal skilled workers or provincial nominees. It also focuses exclusively on the principal applicants, not their spouses or dependents.)

This paper addresses two questions:

“First, what is the relative importance of observable human capital factors when predicting earnings of economic immigrants (principal applicants), who are selected by the points system? Second, does the relative importance of these factors vary between the short, intermediate, and long terms?”

Over the past two decades, changes were made to the points system with the goal of improving immigrant earnings that had been in decline. Yet we continue to lack knowledge of the relative importance of various human capital factors. For example, Canada is giving more points for language, but what is the importance of language in terms of earnings? And so on. This study sought to remedy that gap.

Language and Work Experience: Short Term Importance

According to this research, the relative predictive power of various human capital variables depends on the number of years immigrants have spent in Canada. At the time of landing, knowledge of English or French is one of the most important variables in predicting earnings. Over time, this factor becomes less important, probably because immigrants begin to acquire capacity in an official language.

Work experience is a similar phenomenon, being a strong predictor of earnings in the short term, but less so in the longer term.

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Education and Age: Important in the Long Term

During the early 2000s, new cohorts with higher education did not earn much more than newcomers with less education. Over time, however, their earnings trajectory was much steeper. After 5 to 10 years in Canada, the highly educated enjoyed a significant earnings advantage. In fact, education was the best long term predictor of earnings among the available variables.

Age was also important in the longer term. In essence, younger immigrants of working age perform better in the labour market.

Education and Language: A Winning Combination  Outdoor Portrait Of Multi-Ethnic Crowd

Some combinations of these four variables were also found to be important. The analysis found that higher education in combination with strong language skills greatly was connected to greatly increased earning power.

Further Questions

It would be interesting to expand this analysis to other immigrant classes.

  • Would these predictors apply to spouses or family class immigrants?
  • What about refugees?

Research by Canadian economists conducted on data from the 1980s and1990s found that within a generation all immigrant classes were essentially the same in terms of earnings.

“We cannot know if this has changed unless a wider range of immigrants is compared over time.”

Sarah V Wayland

Sarah Wayland, Principal Investigator

 

 

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