Earnings Instability of Immigrants in Canada

A study published by Statistics Canada provides insights into the changing fortunes of immigrants in Canada by focusing on the volatility of their earnings. Earnings volatility, or earnings instability, refers to year-to-year deviations of individual annual earnings from the average earnings of this individual in a given time period.

The study found that instability in earnings for immigrants usually declines substantially after they have spent several years in Canada. This is consistent with the view that during the first several years in Canada, immigrants move more frequently from one job to another, or have part-time or temporary jobs. As they gain experience in Canada, immigrants are likely to find more stable employment.

The study is also the first to compare the earnings instability of immigrants who arrived in Canada in the 1980s with that of immigrants who arrived in Canada in 1990s. For example, based on the earnings in the four years after landing, the earnings instability of immigrants who came to Canada between 1998 and 2000 was substantially higher than the earnings instability of those who came to Canada between 1980 and 1982.

It was also higher than the earnings instability of those who came to Canada between 1983 and 1985.

Another finding concerns the impact of business cycles on earnings instability for immigrants. While instability generally decreased during the first several years in Canada, it rose rapidly during the recession years in the early 1990s and fell in subsequent years.

Although almost all cohorts in the sample were affected by the recession in the early 1990s, the timing of its impact relative to the entry varied from one cohort to another. This made the comparison of the earnings instability of immigrants who arrived in Canada before and after the recession more difficult.

In the past, immigrants who came to Canada in their 40s had higher earnings instability than young immigrants. However, the earnings instability of young immigrants who came to Canada in the late 1990s was almost as high as the earnings instability of immigrants in their 30s and 40s who came to Canada during the same period.

The study found that earnings inequality rose among recent immigrants over the last two decades, consistent with previous studies that documented the evolution of earnings inequality for all Canadian workers.

Although foreign education, the ability to speak one of the official languages and birthplace accounts for a large part of immigrants’ earnings inequality (up to 44% depending on the cohorts considered), much of it remains unexplained by these factors.

The birthplace of immigrants seems to have had a stronger impact on earnings inequality than other factors considered in the study, such as foreign education and ability to speak English or French.