{"id":13981,"date":"2019-12-16T15:24:07","date_gmt":"2019-12-16T20:24:07","guid":{"rendered":"https:\/\/irpp.org\/research-studies\/technological-change-and-declining-immigrants-earnings-outcomes-implications-for-income-inequality-in-canada\/"},"modified":"2022-04-04T11:24:07","modified_gmt":"2022-04-04T15:24:07","slug":"technological-change-and-declining-immigrants-earnings-outcomes-implications-for-income-inequality-in-canada","status":"publish","type":"research-studies","link":"https:\/\/irpp.org\/fr\/research-studies\/technological-change-and-declining-immigrants-earnings-outcomes-implications-for-income-inequality-in-canada\/","title":{"rendered":"Technological Change and Declining Immigrants\u2019 Earnings Outcomes: Implications for Income Inequality in Canada"},"content":{"rendered":"

This chapter was\u00a0published in\u00a0<\/em>Income Inequality: The Canadian Story<\/a>.\u00a0It is the result of a two-year collaboration between the IRPP and the Canadian Labour Market and Skills Researcher Network (CLRSN). As part of this project, twenty-seven leading economists and experts in the field examine income inequality trends in Canada, the factors contributing to its marked increase since the early 1980s, and the role of policy in addressing the problem.<\/em><\/p>\n

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Immigration can affect income inequality in the receiving country through immigrants\u2019 own incomes and through the impact their presence in the labour market has on the earnings of other workers. The decline in immigrants\u2019 earnings in Canada in the 1980s and 1990s and into the 2000s was large and has been well documented (see, for example, Green and Worswick 2012). This raises the possibility that changes in immigrants\u2019 earnings may have played a substantial role in driving increases in overall inequality. In an article in the Canadian Journal of Economics<\/em> (Warman and Worswick, forthcoming) that mirrors the work of Picot and Hou (in this volume) but focuses more on the role of education and occupational outcomes, we assess whether this is the case.<\/p>\n

The causes and consequences of changes in immigrants\u2019 earnings depend heavily on how immigrants are affected by other forces that drive changes in inequality. For example, the large decline in immigrants\u2019 earnings over the past several decades coincided with rapid changes in information technology (IT). Autor, Levy and -Murnane (2003) identify the adoption of computers and the resulting differentiation of tasks that can be routinized by computers and those that cannot as an important reason for the growing earnings gap between workers with university and high school education in the United States. These same technological shifts might have changed the way immigrants\u2019 education and work experience are valued in the Canadian labour market, making it more difficult for immigrants to integrate successfully.<\/p>\n

Technological change, however, also coincided with significant changes in Canada\u2019s immigration policy that resulted in, first, a large increase in the intake of immigrants coupled with a pronounced shift in the selection process toward highly -educated immigrants and, second, a shift away from traditional immigrant source countries, such as the United Kingdom, other European countries and the -United\u2008States, and toward countries in Asia, Africa and Latin America (Sweetman and Warman 2013, 2014). These more highly educated immigrants should have benefited from technological changes in the Canadian economy, but only if they were able to find jobs in occupations advantaged by such changes. If, for instance, the shift in source countries meant that immigrants\u2019 language skills were weaker than those of earlier arrivals from traditional source countries and as a result they ended up in occupations that did not reflect their higher education, then technological changes would have worsened, rather than improved, their economic outcomes. Thus, our other main objective in Warman and Worswick (forthcoming) is to assess how technological changes have affected immigrants\u2019 earnings and whether the interaction of technological changes and immigration has played an important role in Canada\u2019s changing earnings distribution.<\/p>\n

Immigrants\u2019 Earnings in Canada since the 1970s<\/h2>\n

To understand how the changing composition of immigrants interacted with the changing role of computer technology in the Canadian labour market between the early 1970s and the early 2000s, we need to compare immigrants\u2019 earnings across different arrival periods. Figure 1 shows the differences in the earnings of male immigrants who arrived between 1975 and the early 2000s relative to the earnings of those who arrived between 1970 and 1974.1<\/sup>\u00a0(We repeated this analysis for female immigrants, with broadly similar findings.) As the figure indicates, the relative decline in the earnings of each successive cohort of new arrivals between 1975 and the early 1990s was large: the earnings of the 1990-94 cohort were 16 percent below those of immigrants who arrived between 1970 and 1974.<\/p>\n

The earnings of newly arrived male immigrants rebounded in the mid-1990s\u2008\u2014 although they were still 5.9 percent below those of the 1970-74 cohort \u2014 which coincided with a greater emphasis on postsecondary education in the point system under which immigrants to Canada are selected. The importance of this change can be seen in the dashed line in figure 1, which shows what the earnings pattern would have been if the educational composition of male immigrants had not changed across cohorts. Once we control for education changes in this way, the improvement in immigrant earnings in the mid-1990s was much smaller, suggesting that the shift toward higher education in immigrant selection was effective in slowing down, and even reversing for a while, the decline in immigrant earnings. The fact remains, however, that the immigrants admitted in the late 1990s and early 2000s, who on average tended to be very highly educated, had lower earnings than the immigrants who arrived in the early 1970s and on average tended to be less educated. This suggests that more recent immigrants were unable to find jobs corresponding to their educational levels, and did not benefit from the rapid technological changes that were occurring at the time, which, at least in the United States, were increasing the wages of individuals with postsecondary education relative to those with secondary education or less.<\/p>\n

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Occupational-Task Requirements of Immigrants to Canada since the 1970s<\/h2>\n

What role, if any, did the onset of the IT revolution play in shaping the wages of immigrants \u2014 in particular, highly educated immigrants? To answer this question, we consider the occupational-task requirements of the jobs male immigrants held and how these changed for immigrants admitted in the 1990s and early 2000s relative to those admitted in the 1970s and 1980s. The basic idea is that occupations can be viewed as bundles of key tasks:<\/p>\n