Job-Education Mismatch and Its Impact on the Earnings of Immigrants: Evidence from Recent Arrivals to Canada

Abstract

Using the most recent Longitudinal Survey of Immigrants to Canada, this paper measures the incidence of job-education mismatch, particularly over-education, examines its determinants, and estimates its impact on the earnings of immigrants. Job-education mismatch is measured using the realized match method, and the corresponding earnings impact is estimated using an over-required-under education technique. Determinants of over-education are examined using a bivariate probit model to account for selectivity into employment. Panel data estimation methods are used to estimate earnings equations and the analysis is stratified by gender. Results show that recent immigrants to Canada have a persistent high incidence and intensity of over-education with a substantial negative impact on their earnings. In particular, two-thirds of recent immigrants to Canada are over-educated with a wage loss of 8%, while an under-educated immigrant loses around 2% on average. Results also show that proficiency in English or French and post-immigration investment in education and training significantly reduce the likelihood of being over-educated. The findings of this study could benefit policies directed to help immigrants integrate in the labour market.