The Improved Labour Market Performance of New Immigrants to Canada, 2006-2019 (2020)

What is this research about?

This report provides a descriptive analysis of the labour market outcomes of new immigrants to Canada from 2006 to 2019.

Using estimates from the Canadian Labour Force Survey (LFS), our analysis evaluates participation, unemployment, and employment rates, as well as average hourly wages. This report compares trends in labour market outcomes from 2006 to 2019 among very recent immigrants (5 years or less since immigration), recent immigrants (5-10 years since immigration), and Canadian-born workers.

What do you need to know?

This report uses estimates of labour market outcomes from the Canadian Labour Force Survey (LFS). As LFS provides annual estimates up to 2019, it has the most recent data for labour market outcomes compared to other sources. Thus, using LFS data allows for timely comparisons of labour market outcomes between new immigrants and Canadian-born workers between 2006 and 2019. This report analyzes four labour market indicators by immigrant status and education level: participation rate, unemployment rate, employment rate, and average hourly wages. As this report presents descriptive analysis, characteristics other than educational attainment, such as age, gender, and country of origin, were not controlled for. The analysis emphasizes trends in labour market indicators between 2006 and 2019, rather than levels. However, this report recognizes that new immigrants have performed poorly on certain labour market indicators, in particular the unemployment rate and wages, resulting in a loss of their potential contribution to the economy.

What did the researchers do?

This report first reviews the literature on the economic integration of new immigrants to Canada. The second section discusses the data used in this report. In turn, the third section offers an overview of the labour force by immigrant status. The fourth section provides a descriptive analysis of the labour market performance of new immigrants, including comparisons in outcomes between immigrants and the Canadian-born. Next, section five compares LFS estimates with Census/NHS data, highlighting the similarities in trends between the sources. Section six discusses the potential reasons for the improved labour market performance of new immigrants. Finally, section seven offers concluding remarks, including a summary of the labour performance of new immigrants and a future research agenda.

What did the researcher find?

The authors conclude that the labour performance of new immigrants generally improved between 2006 and 2019. This report finds that new immigrants are on average younger and better educated than the Canadian-born. As a result, their labour force participation and employment rates were comparable to, if not better than, those of the Canadian-born. However, the unemployment rates of new immigrants were higher, and average hourly wages were lower. Over the 2006 to 2019 period, very recent immigrants enjoyed an absolute and relative improvement in all four indicators. Recent immigrants enjoyed an improvement in all four absolute indicators and three of four relative indicators; relative hourly wages were the exception.

New immigrants were major assets to the Canadian labour force, due to their younger average age and higher average education than the Canadian-born. As a younger and more educated population compared to the Canadian-born, new immigrants had high participation and employment rates, which increased in both absolute and relative terms over the period. These high rates, however, were unable to absorb all new immigrants in the labour force, resulting in unemployment rates remaining above that of the Canadian-born. Although unemployment rates remained much higher than the rate of the Canadian-born, new immigrants benefited from a substantial decline in absolute and relative unemployment rates over the period. The unemployment rates of new immigrants decreased significantly in absolute and relative terms from 2006 to 2019.

Improvements in wages were less impressive. While the real wages of new immigrants increased, as did the relative wages of very recent immigrants, the relative wages of recent immigrants fell. Given their lower average age and higher education relative to the Canadian working-age population, new immigrants represent an important strength for the Canadian economy, from the perspective of their contribution to the labour force and to tax revenues. This contribution could be even greater if the gaps in unemployment rates and relative wages were reduced further.

The report posits six reasons for the general improvement in the labour market performance of new immigrants:

1. new immigrants became even better educated from 2006 to 2019; the share of very recent immigrant workers with a university degree increased by 7.5 percentage points, while the share of recent immigrant workers increased by 6.7 percentage points.
2. the strong labour market of the late 2010s may have disproportionately benefitted new immigrants.
3. federal and provincial programs aimed at immigrant workers, such as the Provincial Nominee Program, likely contributed to their improved labour performance.
4. support services for new immigrants could have better enhanced their integration into the Canadian labour market.
5. improved labour market information could have better prepared prospective immigrants to enter the Canadian labour market.
6. the foreign credential recognition process could have improved.

How can you use this research?

Given the increasing significance of highly skilled immigrants in the Canadian labour market, further monitoring and research on the labour performance of new immigrants is imperative.

As this report does not control for variables other than education level, further research should examine whether the improved results for the labour performance of new immigrants would hold under more specific contexts. For example, studies could compare immigrant labour market outcomes in Canada across geographical areas (e.g. regions, provinces/territories), immigrant characteristics (e.g. gender, race, country of origin, immigrant categories including economic immigrants and refugees), and occupation (e.g. industry, high-skilled vs. low-skilled jobs). Furthermore, as previously discussed, more research is required to determine the reasons for new immigrants’ improvement in the Canadian labour market.

For example, studies could explore whether government supports for immigrants have improved and impacted the labour outcomes of new immigrants.

Finally, future research should also focus on new immigrants’ weaker outcomes in unemployment rates and earnings: why did highly educated new immigrants consistently have high unemployment rates and low relative wages between 2006 and 2019? More research should explore the potential factors behind these outcomes, such as discrimination and “brain waste”. In particular, research on job mismatching using more recent data would help determine whether “brain waste” could explain new immigrants’ relatively low wages despite high employment rates.