By Isabella Mira, Queen’s Law & Economics

Canada is a country built by immigrants. It is known for its multiculturalist approach to welcoming these newcomers and uses a points system to select immigrants. This method of screening has received much praise from economists and policy-makers alike for its ability to identify applicants that will answer the varying demands of the labor market. As an immigrant myself, this initial description is both reassuring and inspiring.

Yet a component often forgotten is that attracting and screening immigrants is only half the battle. Once they arrive, it is just as important to ensure immigrants’ skills and assets are properly integrated into the labour market and the Canadian economy.  Reports on Canada’s immigration policy reflects this gap in analysis by offering both positive and negative accounts of immigrant success in Canada. Statistics and articles such as OECD report a positive picture by stating that employment of foreign-born Canadian citizens has increased since 2008, and in 2012 Canada had the third highest employment rate for immigrants among the OECD member countries (Canada, 2014). In sharp contrast, articles by Ley and Smith (2008) discuss extensive immigrant poverty in gateway cities, Bloemraad (2006) speaks to non-economic factors such as possession of cultural knowledge as barriers to immigrant success, and Derwing et al. (2000) present the now-familiar issue of foreign credential recognition. These conflicting accounts invite questions as to the true success of Canada’s immigration policy.

In my M.A. essay, I propose an approach to reconcile these different accounts of immigrant labour market integration. I posit that the decision to ascend to citizenship acts as a signaling tool for employers.

The signal of citizenship allows the worker to distinguish themselves from those who are not yet integrated into the Canadian labour market, and therefore do not have the soft skills that has been greatly identified in the literature as necessary for various jobs and for labour market success. The shift to a knowledge-based workforce consequently placed more emphasis on having a high level of communication standards and language proficiency on the job. Without a proper understanding of the culture and the market it is extremely difficult or impossible to achieve success. This distinction between immigrant workers can help us understand the varying accounts of immigrant success in Canada.

I develop a model building on Spence’s (1973) seminal signaling model. In the paper, I focus primarily on the theoretical model, but at the end test the model against the data from the National Household Survey 2011.

In the model, the steps necessary to obtain citizenship status within Canada greatly overlap with the skills and characteristics employers look for when hiring workers; specifically, immigrant workers. Some of these include investment in the culture and in Canada, establishing roots and improving communication skills in either of the official languages. Furthermore, recent literature informs us that many immigrant’s decision to ascend to citizenship involves cost-benefit-like analyses, which further strengths the idea to use citizenship as a signal to employers. The cost to immigrants with the demanded skills to ascend to citizenship is both lower than the cost to workers who do not possess the skills, and lower than the potential benefits available to the worker and employer by the match. Thus, making it a viable signal to distinguish the relevant workers.

The results tested against the data suggest that citizenship is an effective signal for workers. I ran separate regressions using total income and wages as the dependent variable to capture labour market success. I included both measures to capture both the pure labour market effect of wages, and the cost-benefit analysis undertaken by the worker as they take inventory of all income available to them. Some of the variables the regression controls include for gender, age at immigration, province of residence, years in Canada, country of last citizenship, highest degree earned, field of education, language, etc.

Overall, immigrant workers who ascended to citizenship enjoyed a premium on income and wages in the jobs that required such soft skills, and little return on jobs that did not require such integration. As expected, those whose jobs do not require soft skills will not see a benefit in investing in their citizenship status. When looking at highest degree level achieved by the worker, the premium on citizenship increased with the level of the degree. This implies that despite the known issues of degree recognition, the steps to become a citizen can positively contribute to success in the labour market.

Another interesting observation that comes out of the results is the perception of employers based on the country of origin of the immigrant worker. Those workers from countries that were farther from Canada both geographically and culturally saw the greatest drop in wage from lack of citizenship status. The premium for citizenship for a worker originally European is 62%. In contrast, the premium for citizenship for a worker originally from eastern Asia is 89%.  Most of the countries with the smaller premium for citizenship were democracies, countries which have had substantial American influence or countries that were colonized by western European countries. From the results, we can see that the ascension to citizenship helped the immigrant worker combat some of the country-of-origin bias.

Finally, the paper briefly touches on a possible reverse causality at work. It may be possible that workers who are already successful in the labour market are the ones choosing to become citizens. The evidence does not indicate this to be too strong of a possibility, yet a brief discussion is included in the paper along with other data limitations.

Immigrant integration into the Canadian culture and labour market has been discussed in various other disciplines, with little contribution from the economics perspective. This project is by no means an extensive analysis, but it does invite future applications of the model. I would suggest further analysis on the topic once data past 2011 is available. This will allow for an examination of the effects of a recession on immigrant and naturalized citizens’ wages, and given the recent influx of refugees in the country, will provide insights to the ease of integration when the applicants are not as thoroughly screened for economic characteristics.

References:

Canada. (2014). Why hire internationally trained workers?. Immigration, Refugees and Citizenship Canada: Publications and Manuals. Retrieved from http://www.cic.gc.ca/english/resources/publications/employers/roadmap/section1-1.asp

Ley, D. & Smith, H.(2008). Even in Canada? The Multiscalar Construction and Experience of Concentrated Immigrant Poverty in Gateway Cities. Annals of the Association of American Geographers, 98 (3), 686-713.

Bloemraad, I. (2006 a). Becoming a Citizen: Incorporating immigrants and refugees in the United States and Canada. Berkeley: University of California Press.

Bloemraad, I. (2006 b). Becoming a Citizen in the United States and Canada: Structured Mobilization and Immigration Political Incorporation. Social Forces, vol 85(2), 667-695.

Derwing, T. et al., (2000). Educated and underemployed: Refugee integration into the Canadian labour market. Journal of International Migration and Integration, 1(1), 59-84.

Spence, M., (1973). Job Market Signaling. Quarterly Journal of Economics, 87 (3), 355-374