Immigration Wage Gap Costing Canadian Economy Around $50 Billion Per Year

The increasing wage gap between immigrants and Canadian-born workers has doubled in the last 30 years, with new Canadians earning Ten (10) per cent less on average, says a new financial report.

The gap, which spans age, gender, occupation and region, is costing Canada $50 billion each year, according to an RBC Economics study set for release today.

The problem comes from the inability to adequately recognize qualifications and work experience abroad, said Dawn Desjardins, the deputy chief economist at Royal Bank of Canada (RBC) Economics.

About thirty-eight (38) per cent of university-educated immigrants aged twenty-five (25) to fifty-four (54) work at a job that fits their level of education, compared with more than 50 per cent of their Canadian-born counterparts.

“That means we are not really exploiting that education, but as well we are not actually benefiting from the experience that some of these workers have,” Desjardins declared in a phone interview.

“We are not really accurately valuing their contribution to our economy, to the labour market. And therefore we are leaving on the table, I would say, some of this surpluses return we could accumulate it to benefit of the economy overall.”

Over half of the earnings gap — the shortfall is eighteen (18) per cent for immigrants aged forty-five (45) to fifty-four (54) with a bachelor’s degree or higher — can be accounted to employers disregarding work experience gained in other countries, she said.

The wage gap in median earnings is nothing new but has increased over the past three (3) decades, rising to 10.3 per cent in 2016 from 3.8 per cent in 1986.

The report gathers that Canada remains popular among — and dependent upon — immigrants. A recent Gallup poll found that the country came second only to the United States as the desired destination.

“Pretty good for a country of thirty-seven (37) million with a long winter,” the RBC study indicates.

Immigrants make up about one-fifth of Canada’s entire population, a number that’s expected to rise to twenty-eight (28) per cent by 2036.

“Our country needs to close its immigrant wage gap,” it states, adding that by doing so would boost Canada’s annual GDP by as much as 2.5 per cent, or about $50 billion.

Desjardins stated that the federal government should improve its credentials assessments — a “longstanding issue” — to help employers recruit foreign work experience and commit more resources to aiding immigrants’ transition into the workforce.

Federal Government Roles

The report gives approval to government efforts to fill labour shortages with highly skilled immigrant workers, including the Express Entry program launched by the federal Conservatives in 2015, increasing Provincial Nominee programs and accelerates pre- and post-settlement services.

The earnings gap is relatively stable in manufacturing — about twenty-eight (23) per cent— and agriculture — about sixteen (16) per cent — and sits at between Ten (10) and Fifteen (15) per cent in education, Trades and law.

The divide is even wider in the Prairies, with hourly wages hovering at about twenty (20) per cent less for immigrants. It is smaller in the Atlantic provinces, possibly due to efforts to draw a younger workforce, the report said.

In March, Ottawa released a two-year extension of the Atlantic Immigration Pilot to ease the hiring of skilled labour and recent international graduates. “Programs like this one, that connect employment to immigration from the beginning, maybe a route towards faster integration and helping immigrants gain greater wage parity,” the study indicates.

Of Ten (10) sectors profiled, natural and applied sciences is the only one where new immigrants made more on average than those Canadian-born in the country.

Immigrants who arrived before their 16th birthday earn at least five (5) per cent more on average than Canadian-born workers.