Prior host-country work experience and immigrant labor market outcomes: evidence from Canada

James Townsend,Manish Pandey

doi:10.1186/s40176-016-0075-x

Abstract

Recent changes to immigration selection policies favor skilled workers with prior work experience in the immigrant host country. Using unique administrative tax data for Canada, we estimate earnings equations to quantify the difference in earnings of immigrants with prior Canadian experience (prefilers) and those without prior experience (non-prefilers). We find that, relative to non-prefilers, entry earnings are higher for prefilers and, for male immigrants, this earnings advantage persists for at least 20 years after arrival. We show that the primary source of the higher entry earnings of prefilers is a higher return to foreign experience. In addition, the prefiler earnings advantage is largest for university graduates and the return to foreign experience is higher for prefilers from Western countries than those from the rest of the world. Our findings suggest that a move towards an immigrant selection system which uses previous host-country work experience as a criterion will improve the labor market performance of immigrants.

Highlights

For selecting skilled immigrants, countries design policies aimed at identifying individuals with the ability to succeed in the host country’s labor market.1 In particular, countries use an employer-driven system, a migrant-driven system, or a combination of the two systems (Facchini and Lodigiani 2014)
We find that for both male and female immigrants, the primary source of the higher entry earnings of prefilers is a higher return to foreign experience in the Canadian labor market
We find that immigrants with prior experience have higher entry earnings and for male immigrants, this advantage persists for at least 20 years after arrival

Summary

Introduction

Countries design policies aimed at identifying individuals with the ability to succeed in the host country’s labor market. In particular, countries use an employer-driven system, a migrant-driven system, or a combination of the two systems (Facchini and Lodigiani 2014). Prefilers are more likely than non-prefilers to be from Europe or the USA and to speak an official language of Canada as either the mother tongue or as a language learned prior to obtaining permanent resident status For both male and female immigrants, prefilers have significantly higher mean earnings than non-prefilers 1 year after arrival. We find that for both male and female immigrants, the primary source of the higher entry earnings of prefilers is a higher return to foreign experience in the Canadian labor market. While male non-prefilers receive a negative return to a year of foreign experience (the estimate is −0.019 log points for the 1988–1989 cohort, whereas the lowest return is −0.032 log points for the 1997–1999 cohort), male prefilers receive a positive return (0.035 log points for the 1988–1989 cohort and 0.022 log points for the 1997–1999 cohort) This suggests that a large part of the earnings advantage of male prefilers is due to higher valuation of their foreign experience by the Canadian labor market.

Years 15 Years 25 Years

Findings

Conclusions