Explaining the Deteriorating Entry Earnings of Canada’s Immigrant

The study explores causes of the deterioration in entry earnings of Canadian immigrant cohorts by estimating an empirical specification that nests a number of competing explanations found in the Canadian literature. To do this, we use the pooled sample of Canadian-born and immigrant men employed full-year, full-time from the complete 20 percent samples of the 1981, 1986, 1991, 1996 and 2001 Canadian Censuses. Our results indicate that no more than one-third of the deterioration can be explained by compositional shifts in the knowledge of an official language, mother tongue and region of origin of recent immigrant cohorts. We also find little or no evidence that declining returns to foreign education are responsible. Roughly one-third of the deterioration appears to be due to a persistent decline in the returns to foreign labour market experience which has occurred almost exclusively among immigrants originating from non-traditional source countries. We are able to explain two-thirds of the overall decline in the entry earnings of Canada’s most recent immigrants without any reference to entry labour market conditions. When we also account for entry conditions, our results suggest that Canada’s immigrants who arrived in the 1995-1999 period would otherwise be enjoying entry earnings that were significantly higher than the entry earnings of the 1965-1969 cohort.