Two-step immigration selection: Skilled work experience vs. pre-arranged jobs (2020)

The two-step immigration selection process—the selection of economic immigrants from among temporary foreign workers—has been expanding since the 2000s. From 2000 to 2018, the share with pre-immigration Canadian earnings among economic principal applicants increased from 12% to 59%. Thus, the majority of recent economic immigrant principal applicants were selected from former foreign residents who had worked in Canada (Hou, Crossman and Picot 2020a). This is a significant development. Immigrants who had Canadian skilled work experience before obtaining permanent residency tend to have higher initial employment rates and earnings than immigrants who are admitted directly from abroad (Hou and Bonikowska 2018; Hou and Picot 2016).

A key feature of two-step selection is the important role played by employers. In the first step, it is mostly employers who make the decisions on the hiring and retaining of temporary foreign workers. In the US employer-selection system, employers further sponsor temporary foreign workers for the application of permanent residency. In comparison, in Canada’s points-based system, it is generally the government that sets up rules and criteria to determine how many and which temporary foreign workers can transition to permanent residency. However, Canada, as well as other countries with a points-based system, including Australia, New Zealand, and the United Kingdom, have incorporated the input of employers by awarding points for job offers (Papademetriou and Hooper 2019; Hiebert 2019). Indeed, depending on the importance assigned to job offers, employers can play a decisive role in the selection of economic immigrants. When Canada’s Express Entry (EE) system was first introduced, a job offer essentially guaranteed an applicant’s success in applying for permanent residency. Two years after implementation, the points awarded for a job offer were dramatically reduced. However, a job offer is compulsory in some Provincial Nominee Programs (Papademetriou and Hooper 2019).

Since it would be relatively easy for temporary foreign workers to obtain a job offer for their immigration application, most applicants with a job offer are likely former temporary foreign workers. It is conceivable that a job offer can significantly boost a low-skilled temporary foreign worker’s chance to pass the application screen. However, high-skilled temporary foreign workers with favourable human capital factors may not have to rely on a job offer to qualify for permanent residency. Given that Canadian work experience and job offers are important selection criteria and they overlap to a large extent, this article asks whether a pre-arranged job results in the same economic advantage as pre-landing Canadian work experience.

This is the fifth article of a series on the increasing importance of temporary foreign workers in the selection and labour market outcomes of immigrants. Previous articles in this series provide an overview of the advantages and potential risks of two-step immigration selection (Crossman, Hou and Picot 2020), document the recent expansion of two-step immigration selection in Canada (Hou, Crossman and Picot 2020a), examine the effect of this expansion on immigrants’ labour market outcomes (Hou, Crossman and Picot 2020b), and explore whether two‑step selection explains the variation in labour market outcomes by admission class (Hou, Crossman and Picot 2020c). Following a review of the evolution of job offers and Canadian work experience as selection criteria for economic immigrants, this article compares their relative importance as predictors of economic immigrants’ initial labour market outcomes.

Findings
Canadian work experience and pre-arranged employment are both important criteria in Canada’s Express Entry system of economic immigration selection. While pre-arranged employment may more directly reflect employers’ preference than Canadian work experience, the latter can better capture the “realized market values of skills in Canada” when it is measured by levels of pre‑immigration Canadian earnings. Among prime-aged principal applicants selected through the EE system, having pre-immigration Canadian earnings was associated with a large advantage in employment incidence in the first two years after immigration, while having a pre-arranged job made no difference in employment when common immigrant characteristics are taken into account. With otherwise similar characteristics, immigrants with a pre-arranged job earned 15% more than those without a pre-arranged job in the first two years after immigration, while immigrants with high pre-landing Canadian earnings earned almost twice as those without pre‑landing Canadian earnings.

Immigrants with medium and low pre-landing Canadian earnings had no earnings advantage relative to those without pre-landing Canadian earnings after immigration. Overall, the level of pre-immigration Canadian earnings was a strong predictor of post-immigration earnings, while having a pre-arranged job accounted for little of the variation in post-immigration earnings among economic principal applicant immigrants selected through the EE system.

It is not surprising that pre-immigration Canada earnings are a strong predictor of post‑immigration earnings because past performance tends to be strongly associated with future performance. Such an association does not negate its potential relevance for the selection of economic immigrants. After all, the main purpose of the selection process is to identify which applicants are most likely to do well in the labour market. A high level of pre-immigration Canadian earnings is a very useful identifier if a selection goal is to choose prospective immigrants with the best earnings potentials.