Fewer Newcomers with Pre-admission Canadian Earnings Led to Median Entry Earnings Decline in 2022

The study reveals that the higher proportion of newcomers with Canadian income before becoming a permanent resident impacted median first-year earnings for the entire 2021 cohort. Other factors that contributed to year-on-year changes to median entry earnings for newcomers included province of residence, occupation industry, education, unemployment rate, and earnings of young Canadian-born workers.

Key Takeaways 

• Median entry earnings fell 13% for the 2022 PR cohort, following a 21% rise in 2020 and an 11% rise in 2021. 

• The drop in PRs with pre-admission Canadian earnings alone explains 87% of the 2022 decline. 

• The 2021 increase in entry earnings also correlates to a spike in transition of temporary residents to permanent residents. 

• Province of residence had a larger effect on changes to entry earnings than gender, age, language ability, or education. 

What the Study Measured: Entry Earnings Fluctuation 

The study set out to explain why median entry earnings for new PRs had swung sharply from year to year since the mid-2010s. 

The researchers looked at first-year earnings for every PR admission cohort from 2015 to 2022, using tax data from the Longitudinal Immigration Database. “Entry earnings” means annual wages or salaries in the first full calendar year after landing. 

The cohort-to-cohort swings were dramatic. Median entry earnings rose 21% for the 2020 cohort, another 11% for the 2021 cohort, then fell 13% for the 2022 cohort. Meanwhile, wages for Canadian workers kept climbing at a steady pace. 

The study measured how much of the earnings change came from shifts in factors like age, gender, education, language ability, immigration class, source region, province of residence, industry of employment, and the broader labour market. 

However, the study only covers admission cohorts up to 2022, with earnings measured in 2023, so it doesn’t speak to more recent arrivals. It also captures only wages and salaries, not self-employment income. Moreover, entry earnings only give a snapshot of the first-year earnings and are not a measure of long-term career outcomes. 

Pre-admission Canadian Earnings Play the Biggest Role in 2022 Entry Earnings Drop 

Through the 2020 to 2022 cohorts, pre-admission Canadian earnings were the single largest contributing factor for changes in entry earnings. StatCan’s analysis showed that the proportion of new PRs with pre-admission Canadian earnings accounted for 67% to 87% of the change in entry earnings.  

Between 2019 and 2022, pre-admission Canadian earnings had a greater impact on changes in first-year earnings than gender, age, language, education, province of residence, and industry distribution combined. 

The Earnings Drop Corresponded with Shift in Newcomer Selection 

The study tracked the proportion of new permanent residents who had earned income in Canada prior to their admission as PRs. It found that the composition shift between cohorts was significant. In the late 2010s, 41% to 49% of new PRs had pre-admission Canadian earnings. That climbed to 55% in 2020, then 75% in 2021, before falling back to 51% in 2022. 

Within that group, the share earning above the national median before becoming a PR rose from below 17% in the late 2010s to 23% in 2021, before dropping back to 16% in 2022. 

The 2021 spike reflects the pandemic-era focus on transitioning temporary residents to PR. The Canadian Experience Class, which selects only from people with skilled Canadian work experience, made up 38.8% of the 2021 cohort. By 2022, CEC was back down to 8.3%. 

The decline in PRs with pre-admission Canadian earnings alone accounted for 87% of the 2022 earnings drop. It is also clear that this was due to a change in who was being selected for PR rather than labour market softening, or because the cohort was less educated or less proficient in official languages. 

After adjusting for composition changes and labour market conditions, the 2022 cohort actually showed a small increase in entry earnings, not a decline. When selection and labour market conditions were adjusted for, the year-to-year swings largely disappeared, replaced by moderate growth in most years and a COVID-19-related dip for the 2019 cohort. 

Province Matters More Than Age, Language, or Education 

Among all the factors the study looked at, province of residence had a larger effect on changes in entry earnings than gender, age, language ability, or education. 

The study doesn’t isolate which provinces performed best for newcomers in a given year. However, the implication is that where a newcomer settles in their first year shapes what they earn, above and beyond what their credentials or language scores would predict. 

This makes sense given the difference in median wages by province and the variations in labour market demands. 

Labour Market Conditions Impact Entry Earnings for Newcomers Too 

Although the 2022 entry income dip is largely due to selection, earlier cohorts tell a different story. 

The 2019 cohort of permanent residents saw a 9% drop in entry earnings. Their first full calendar year in Canada was 2020, when the national unemployment rate jumped from 5.7% to 9.7%. For that cohort, labour market conditions explained 92% of the earnings decline. 

The 2020 cohort saw a 21% jump in first year earnings. About half of this hike came from the post-pandemic labour market rebound. Roughly 30% can be attributed tocomposition selection changes, mainly the rising share of PRs with pre-admission Canadian earnings. 

New PRs Out-earn Young Canadian-born Workers from Day One 

In general, median entry earnings for new PRs exceeded the median annual earnings of Canadian-born workers aged 20 to 29. This was true in every cohort from 2015 to 2022, including the years where entry earnings for new permanent residents fell. 

In 2022, for example, new PRs had median entry earnings of $40,000. Canadian-born workers in that age group earned a median of $32,500 that year. 

The comparison uses workers aged 20 to 29 as the benchmark because that age range is a reasonable proxy for people entering the labour market for the first time. It’s not a comparison against all Canadian-born workers, and outcomes will likely vary depending on occupation, province, and experience level. 

What These Findings Mean for You 

The data makes a strong case for building Canadian earnings before applying for PR. Not all Canadian work experience is equal, and how much you earn relative to the median wage makes a difference. This finding isn’t surprising, and IRCC has already taken this aspect into account while setting immigration priorities.  

Over the last few years, there has been a stronger in-Canada focus and draws have prioritized Canadian Experience Class (CEC) candidates, who have at least one year of Canadian experience in a NOC TEER 0, 1, 2, or 3 occupation. A dedicated one-time TR to PR pathway is expected to be launched soon as well. 

The level of pre-admission earnings has not been a selection or scoring factor so far. However, IRCC is currently holding consultations on proposed Express Entry reforms, key among which is more CRS points for experience or job offers in higher-wage occupations. 

If you’re already in Canada on a work permit (or a study permit), keep this in mind as you think about the jobs you take and the pathways you pursue. 

Where you settle also plays a bigger role than most people expect. Province of residence had a larger effect on changes in first-year entry earnings than age, language ability, or education. If you’re weighing job offers in different provinces, or comparing Provincial Nominee Program (PNP) streams, compare provincial median wages and demand forecasts for your occupation. 

Also, these findings don’t mean that applying from outside Canada will necessarily result in lower post-arrival earnings. This data reflects averages across large cohorts. If you’re in a high-demand occupation with strong credentials but no Canadian experience, you may still earn well above those averages in your first year.