Canada’s increasing reliance on immigration for its labour growth is, unquestionably, a critical driver of the country’s economic future. But might it also be a factor in the country’s confoundingly slow wage growth?
A couple of recent Statistics Canada reports, when taken together, do raise the question.
The first clues were in last Friday’s monthly labour force survey, which showed that the pace of year-over-year growth in average hourly wages slowed for the sixth straight month, even as employment surged. That report also showed a six-month growth spurt in the labour force – which, I suggested at the time, had provided an influx of supply to keep rising demand at bay. Much of that fresh supply has been coming from the country’s increased immigration intake: We’re on track to bring in about 330,000 newcomers this year, up from 286,000 last year.
Which leads us to the second clue: a Statscan report this week on incomes of recent immigrants. While the data are a bit out of date – they only take us as far as 2016 – they show a rising trend over the past few years in earnings for newcomers. The median income for immigrant workers one year after admission to the country, at $25,400, was up a healthy 16 per cent in three years.
The findings provide evidence that Canada’s increased emphasis on economic and skills needs in its immigrant selection process is paying dividends – not least for the immigrants themselves.
Nevertheless, there remains a substantial gap between new-immigrant incomes and those of the Canadian work force as a whole. The country’s overall median employment income in 2016 was $34,050 – 34 per cent higher than the median for one-year immigrants. (Even for immigrants who had been in the country for a decade by 2016, the median income was still 7 per cent below that of Canadian workers as a whole.)
With Canada increasing its immigration intake, and immigrants now accounting for the majority of Canada’s labour force growth, that wage gap must be having a meaningful drag on the overall income growth. A lot of the new jobs the economy is creating are being filled by a pool of new workers who, the data tell us, are paid less.
We certainly should be asking ourselves, as a decidedly pro-immigration country, why these wage discrepancies persist. Do they reflect unscrupulous business owners taking advantage of naive newcomers? Are they evidence of racial and/or cultural prejudice?
Well, those could well be factors; they certainly warrant further study to better assess and address their role in immigrant income levels. However, the details of the report suggest that a big part of these wage discrepancies is tied to qualifications and experience – something that Canada’s immigration program has put a considerable emphasis on upgrading in recent years.
For example, the data show that while median income for new arrivals (less than one year in the country) was just $17,600 in 2016, the median for those brought in under the “economic” immigration stream – using Canada’s points system that grants entry to those with economically desirable attributes – was a whopping 77 per cent higher, at $31,100. Those recruited under the provincial nominee program, which allows provinces to nominate specific applicants to fill their specific regional labour needs, did even better, with a median of $32,600.
Statscan also noted that new immigrants who had previously gained experience in the Canadian labour market with previous work and study permits earned a median of $34,400 after one year with full immigrant status – putting them fully on par with the median for the national work force as a whole.
The report added that with the immigration program putting an increased emphasis on granting permanent residency to newcomers who have gained experience in the country, whether via work permits or as international students, “the entry wages of immigrants are increasing.”
Indeed, the figures suggest that the more Canada emphasizes recruiting immigrants who are not only labour-force-ready, but who possess the skills needed to fill the labour market’s existing needs, the less the gap in immigrant wage outcomes will be an issue. That’s undeniably better for the newcomers arriving in this country – who have a long history of being underpaid relative to their long-time-Canadian neighbours.
But it’s also healthy for the economy as a whole, as newcomers fill critical skills gaps and help drive healthy economic growth – ultimately bringing wages along for the ride. We have all heard the stories of the foreign PhDs who are driving taxis; the more those tales become anomalies, the more those skills are valued and appropriately rewarded in the Canadian labour market, the better off we’ll all be.