Tuesday, February 06, 2007

Skilled immigrants and earnings

In a paper published by Statistics Canada, Garnett Picot, Feng Hou, and Simon Coulombe suggest that Canada’s policy on points-based immigrant selection and higher educational standards has not lowered the probability that an immigrant will enter a low income bracket; however, it has changed the composition of immigrants in chronic low income.

Basically, the authors show that many skilled immigrants are not able to secure high-paying jobs before their arrival. They saw that once skilled workers entered low income, they only had a slightly higher chance of exiting it than high school educated immigrants, but their relative advantage of exiting low income increased marginally over the period observed.
Excerpts from StatsCan:

For the purposes of this report, "chronic" low income was defined as being in low income at least four of the first five years in Canada. The report found that nearly one in five (18.5%) of recent immigrants who arrived between 1992 and 2000 were in low income at least four years during their first five years in Canada. This was more than twice the corresponding rate of around 8% among Canadian-born people.
For the group that arrived in 1993, the five-year chronic low-income rate was 20.5%. For those who arrived in 2000, it had declined to 16.2% as the economy improved.
There were two possible reasons for the decline: the more favorable labour market-related characteristics of immigrants entering in the late 1990s, and improving economic conditions (business cycle). The report found immigrant characteristics accounted for virtually none of the improvement; improving economic conditions accounted for the majority.
Overall, the large rise in educational attainment of entering immigrants and the shift to the skilled class immigrant had only a very small effect on poverty outcomes as measured by the probability of entry, exit and chronic rates.
This is because by the early 2000s, skilled class entering immigrants were actually more likely to enter low income and be in chronic low income than their family class counterparts.
In addition, the small advantage that the university educated entering immigrants had over, say, the high school educated in the early 1990s had largely disappeared by 2000, as the number of highly educated immigrants rose.
Changes in entering immigrant characteristics did alter the composition of the immigrants in chronic low income.
Among those who arrived in 2000, 52% of those in chronic low income were skilled economic immigrants. About 41% had university degrees, up from 13% in the 1993 cohort.
And from the report: (pdf warning)

… With respect to immigrant class, immigrants in the skilled economic class were more likely to enter low income than their family class counterparts, possibly because the family class immigrants often entered an already economically established family. This relative disadvantage observed for the skilled class increased significantly over the 1992 to 2004 period, when the number of skilled class immigrants rose. However, this should not necessarily be interpreted as meaning that individuals in the economic class do worse in the labour market (i.e., in term of individual earnings) than their family class counterparts. The opposite has historically been the case.

This is an interesting report because it’s acting as fuel for debates from all sides. On one hand, it can be seen as a call for more friendly policies towards skilled immigrants. (As long as labour regulations create barriers to immigrants, to what extent can we really expect the contributions of skilled immigrants to be greater than lesser-skilled immigrants?) Martin Collacott, on the other hand, has used the report to further his anti-immigration argument (which I don’t buy).


dingus said...

"Canada’s policy on points-based immigrant selection and higher educational standards has not lowered the probability that an immigrant will enter a low income bracket; however, it has changed the composition of immigrants in chronic low income."

Courtesy of the Stuff You Already Know But Here's Some Formal Validation Of It Department.

Also available from the SYAKBHSFVOI Dept: "Unbridled Economic Activity Has Been Not So Good For the Environment", "Income Inequality Linked to Social Problems", and "People Are, Like, Totally Way Too Far In Debt From Spending Money on Stuff They Can't Afford".

The foreign trained engineer who mows my lawn will be thrilled.

amphimacer said...

Yes, I know a taxi driver who was a doctor in his home country. But he still prefers to live here in Canada than in Iran.

Of course, no matter what the stats say, it's almost always fuel for both sides, since life is not black and white. I think we need to welcome immigrants, I think we're better off with better-educated immigrants, who do have a better chance than less-educated immigrants to adapt and flourish here, I think we could do more to help them find ways to make the most of themselves in career terms once they get here; but I also think that the best thing we are able to do for immigrants is to make sure this country is as excellent a place to live as possible.

So here's a case where you need to put it on the line, T.D.: what do you think?

true dough said...

Is it true? We agree on something?!

Martin Collacott has claimed that we don’t have enough skilled jobs for immigrants, and that immigrants erode our taxes, therefore we should close the doors to immigrants. I think this is poor reasoning, although I do believe that there are adjustments to be made.

First, Canada has an expansionist approach to immigration, yet our barriers on immigrant workers are somewhat as restrictive as the US’s; of course our pains are magnified. 19.2% of our workforce are immigrants, while 11.7% of the US’s are immigrants. With our small country and low reproduction rates, I don’t think there’s anything wrong with being expansionist. But we should let market forces decide who gets hired. Instead, firms are crying that there’s a skills shortage while immigrants cry that there are no jobs. Cutting back on immigration is no solution.

Second, studies in the U.S. show that immigrants actually pay more in tax dollars than they receive. As far as I know, there is no such comparable Canadian study. But if we would, say, restructure our citizenship policy as I suggested here: http://truedough.blogspot.com/2007/01/canadas-generous-passport-policy.html
we could be more confident that we’ll come out with a surplus.
There’s a lot of room for effective decision-making, but closing the doors on immigrants shouldn’t make the list.

dingus said...

The trouble is, immigration policy is federal jurisdiction, and professional licensing is run by statutory bodies under provincial jurisdiction. Where the fed take an expansionist approach to immigration and encourage applicants with better education and skills, a major goal of most licensing bodies is to protect the franchise of their members by creating barriers to entry to the profession.

Ottawa can allow all the foreign doctors it wants into the country, but if the provincial College of Physicians and Surgeons doesn't recognize the credentials, then that doctor drives a cab.

happyjuggler0 said...

Sorry I don't have any links, but I've read in more than one place in stories on India that despite the fact that they have lots of engineering grads, and lots of demand for engineers in India, they aren't getting hired.

The reason is that what they are learning to get their degrees simply doesn't cut it as far the multinationals are concerned. So what is happening is that some (or maybe only one, I wasn't paying close enough attention to that detail) of the Indian IT outsourcing companies started their own in-house school to train engineers in what they really needed to know. Even before these "students" "graduated", many of them were getting poached by other companies in India.

As an aside, needless to say salaries for IT workers in India are exploding upwards.

This by the way is essentially the reason why more such intensive retraining of employees isn't the norm in industries in general anywhere in the world, the investments are attached to the worker, not the business that is doing the investing.

If the government feels it foolishly must have a corporate income tax, then I'd love to see a huge tax writeoff for companies that engage in genuine worker skill upgrades. This is surely a much better way to spend money budgeted for "worker retraining" than having the government try to pick training in fields that might or might not need new workers, and where the skills might or might not match what companies actually need, and where the training costs are likely to be much higher than if a company was doing it with its own money.

Anyway, the point of this post (yes, there is one) is that just because you have an immigration policy that brings in credentialed immigrants doesn't mean that those credentials are worth the paper they are printed on.

I strongly suspect that immigrants into Canada that actually have genuine white collar skills aren't driving taxis in any great numbers and are overwhelmingly employeed in their trained field.