This article examines the role of two-step selection in explaining differences in the short-term and medium-term outcomes of economic immigrants in four major admission programs: FSWP, PNP, QSWP, and CEC. These programs are devised to meet various national, regional and sectoral economic needs. The labour market outcomes of economic immigrants in these admission programs are of policy interest because they are often used as indicators of a program’s success. More importantly, the knowledge of which factors underlie the success of one program can help inform the improvement of other programs.
This is the fourth article of a series that provides a broad overview of the increasing importance of temporary foreign workers in the selection and labour market outcomes of immigrants. The first article provides an overview of the international and Canadian literature on the advantages and potential risks of two-step immigration selection (Crossman, Hou and Picot 2020). The second article documents the recent expansion of two-step immigration selection in Canada (Hou, Crossman and Picot 2020a). The third article examines whether the expansion of two-step selection accounts for most of the recent improvement in immigrants’ employment rates and entry earnings (Hou, Crossman and Picot 2020b). This article starts with a review of previous studies on immigrant economic outcomes by admission program. It further provides an updated analysis of how the level of two-step selection affects the labour market outcomes by admission class of economic immigrants.
The expansion of the Provincial Nominee Program (PNP) and the introduction of the Canadian Experience Class (CEC) have been a driving force for the development of two-step immigration selection—the process of selecting economic immigrants from among former temporary foreign workers. Under this two-step migration process, temporary foreign workers will gain Canadian work experience, and their skills and qualifications are evaluated and tested by Canadian employers. Their work experience increases their chances to qualify for economic immigration through the Federal Skilled Worker program (FSWP), Quebec Skill Worker (QSWP), and particularly PNP and CEC. While the CEC specifically targets temporary foreign workers with skilled work experience in Canada, low-skilled temporary foreign workers often rely on the PNP to transition to permanent residence (Hou and Picot 2016; Lu and Hou 2017). Since the early 2010s, the PNPs have evolved, and now place an emphasis on human capital criteria similar to that of the FSWP (IRCC 2017).
Previous studies show that immigrants who were selected through the PNP and CEC tended to have better initial labour market outcomes relative to other economic immigrants (Hou and Picot 2016; Lu and Hou 2020; Pandey and Townsend 2013). One possible explanation for the variation in economic outcomes across admission programs is their different use of the two-step selection approach. Virtually all CEC immigrants are skilled temporary foreign workers, because at least one year of skilled Canadian work experience is required for this program. Starting from the mid-2000s, the PNP has selected relatively much more immigrants from temporary foreign workers than the FSWP and QSWP (Hou, Crossman and Picot 2020a). Since immigrants who were former temporary foreign workers have higher employment rates and earnings than immigrants who were admitted directly from abroad (Hou and Bonikowska 2018; Hou and Picot 2016; Sweetman and Warman 2014), an admission program with a higher share of former temporary foreign workers would have better average labour market outcomes. Differences in human capital and source region composition could also result in different outcomes across admission programs.
Over the 2009 to 2016 period, economic principal applicants selected through both the PNP and CEC programs had higher levels of entry (in the first full year) earnings and higher entry employment incidences than their counterparts selected via the FSWP. Much of this difference (between 43% and 100%) was due to a higher proportion of PNP and CEC immigrants having medium or high levels of pre-immigration Canadian earnings.
Five years after immigration, PNP and CEC immigrants continued to have employment incidences superior to those of FSWP immigrants. Again, these employment rate gaps were mostly accounted for by differences among admission programs in the share with pre-immigration Canadian earnings. When differences in the share with pre-immigration Canadian earnings were taken into consideration, CEC and FSWP immigrants had similar earnings five years after immigration. Put differently, FSWP immigrants would likely approach the success of CEC immigrants if they had the same level of pre-immigration Canadian earnings, even though they went through different selection processes. However, PNP immigrants had significantly lower earnings than FSWP immigrants five years after immigration. One possible explanation is that PNP immigrants may be more likely to be selected into low- or medium skilled jobs that tend to have slow earnings growth. These results support the argument of some previous research that it is not simply having pre-immigration Canadian work experience, but having high-skilled pre-immigration Canadian work experience that is a key indicator for post-immigration superior labour market outcomes (Hou and Picot 1996; Hou and Lu 2017).