Frances Woolley is a professor of economics at Carleton University, where she teaches public finance. Her recent Economy Lab posts can be found .
Australia is like Canada, only different. There, like here, one in five people were born abroad. Like us, they have a points based immigration system, favouring skilled workers.
Yet while Canada’s recent immigrants struggle in the labour market, earning significantly less than the native born, Australia’s immigrants experience a much smaller earnings gap.
A recent by University of Waterloo professor Mikal Skuterud and his Australian co-author, Andrew Clarke, attempts to discover Australia’s secret.
Is it Australia’s track record of economic growth? Something about the way wages are determined in Australia? Or is it Australia’s immigration policy, a model that has captured the imagination of policy makers in Ottawa?
In the late 1990s, Australia introduced two major changes to its immigration program. First, it introduced mandatory English language testing. Second, it began pre-screening immigrants like dentists, nurses or engineers, ensuring that their professional credentials met Australian standards.
The aim of the new Australian rules was to improve an immigrant’s labour market success. Immigrants who were already fluent in English would not, policy makers thought, struggle the way that non-English speakers do. Pre-screening would speed up the process of credential recognition. Immigrants would be able to get jobs in their field right away, instead of driving taxis.
Clarke and Skuterud tested the success of the Australian policy by focusing in on three specific groups of immigrants: men of Chinese, Indian and British origin.
In theory, because Australia generally expects Chinese immigrants to pass a rigorous English language test, and have credentials equivalent to Australian ones, immigrants from China should do relatively well in Australia -- better than in Canada, where immigrants do not go through such intensive pre-screening.
For British immigrants, who typically speak English fluently, and have professional credentials that meet Canadian and Australian standards, Australia’s pre-screening rules should not make much difference. Very few British immigrants would be screened out by English language testing and credential assessment. Immigrants from the U.K. should, therefore, do about the same in Canada and Australia.
India falls somewhere in the middle. English is widely spoken, but Indian credentials are not always comparable to Canadian or Australian ones. Still, the Australian rules would be expected to screen out some of the less qualified immigrants from India -- raising the average skill level of Indian immigrants, and thus their labour market success.
That’s the theory. But what was the reality?
Clarke and Skuterud found no evidence that Australia’s immigration policy helped immigrants succeed in the labour market. Australia’s carefully pre-screened Chinese immigrants do no better than immigrants admitted under Canada’s points and family reunification schemes. As the researchers put it, “neither the employment nor earnings estimates for Australia's Chinese immigrants …suggest improvements in average performance concomitant with Australia's tightening immigration policy.” As for immigrants from India, according to Clarke and Skuterud, “the earnings shortfalls of Indian migrants evident in the 1980s actually worsened with the tightening of Australia's selection [criteria].
So why does the average Australian immigrant do better than the average Canadian immigrant? Clarke and Skuterud argue that the new immigration policy led to a shift in the ethnic composition of Australian immigrants. Growth in immigration from Asia tailed off when the new rules were introduced. Compared to Canada, Australia now attracts relatively fewer Asian immigrants, and far more British ones. Less than 5 per cent of the recent Canadian arrivals in Clarke and Skuterud’s data are of U.K. origin, compared to 20 per cent of people coming to Australia. In both countries, immigrants from the U.K. are rapidly assimilated into local labour markets, quickly achieving earnings and employment levels similar to those of native-born Canadians. Immigrants in Australia do better, on average, than immigrants in Canada, because more belong to rapidly assimilated immigrant groups.
Immigration Minister Jason Kenney has recently announced plans to reform Canada’s immigration system, and it seems likely that the government will adopt at least some elements of the Australian model.
Yet Australian-style rules might play out differently in this country. Canada could throw its doors open to British immigrants, but it’s not clear how many would choose to come. Australia has better beaches. Even with tighter entry requirements, Canada will continue to be an attractive destination for Asian immigrants, with our economic opportunities, strong educational system, and thriving communities.
The key policy question then becomes: how can Canada help new immigrants succeed? The bottom line of Clarke and Skuterud’s paper is that Australia’s more rigorous screening of immigrants has not ended their labour market woes: immigrants of Chinese and Indian origin struggle there as much as here. Other studies, however, have identified a strategy that does work: encouraging young immigrants, especially ones who have at least part of their education in Canada. The earlier someone comes to Canada, the better their prospects of labour market success.