Author: Joyce Pang
This is the second blog to our three-part series on RBC Economics’ recently published report ‘Untapped Potential: Canada needs to close its immigrant wage gap.’ In the previous blog, we talked about what the immigrant wage gap is, and newcomers can do to succeed in Canada.
Immigration is a very large portion of Canada’s population growth and demographic composition. As immigrants are carefully screened before entry, you may expect relatively quick integration into the Canadian economy and a convergence in wages. But, this is not always the case. Canada’s success in integrating newcomers into the labor force continues to fall short on earnings. RBC’s recent report discovered that immigrants earn 10% less than Canadian born workers, a gulf that spans age, gender, and occupation. This gap in earnings has risen from 3.8% in 1986 to an astounding 10.3% in 2016.
Understanding the wage gap
While the earnings gap has always existed, it has worsened over time even as immigrants become more skilled and educated. But why does the gap exist? An immigrant’s tendency to work in lower-paid occupations relative to their education accounts for nearly half of the earnings gap. RBC’s report finds that 38% of university-educated immigrants work in an occupation that suits their education level, compared with 52% of Canadian-borns. However, even immigrants who find employment in their chosen occupation earn significantly less. This issue points to Canada’s failure to properly recognize credentials and work experience gained abroad.
The “Untapped Potential”
Canada is not maximizing the education and experience that some of these immigrants have. The implications for the country are significant and costly. RBC’s report estimates that bringing immigrants to the wage and employment levels of Canadian born workers could potentially add $50 billion to the GDP.
With over 2 million newcomers set to arrive in Canada by 2025, this is an issue that needs to be addressed now. In our next blog, we will discuss actions being done to narrow the wage gap and other solutions moving forward.