Immigrant incomes have improved in recent years: report

Canada’s Parliamentary Budget Officer (PBO) recently released an independent report on Income dynamics of new immigrants to Canada. The report discusses the median income of new immigrants one year after  obtaining permanent residency. It highlights some of the underlying factors behind why median incomes have grown.

Parliamentary Budget Officer, Yves Giroux, explains the changes.

“The labour market outcomes of new immigrants to Canada improved considerably during the 2010s,” says Giroux.

“From 2014 to 2018, the median total income of new-immigrant tax-filers rose from 55 percent of the median total income of all tax-filers, to 78 percent. This reverses some of the relative losses that new immigrants experienced during the 1980s and afterwards.”

This change implies that the total income of new immigrants rose significantly faster than did the total income of all tax-filers.

Compare that to prior years, median income rose from about 49 percent of all Canadian residents in 2006 to about 89 percent in 2013.

The increases were notable in 2015 with 11 percentage points and 2018 at nine. In addition, temporary residents have seen rising wages since 2006.

A number of factors appear to be underlying causes of the income gains, even if the exact cause is not entirely clear.

One noteworthy trend is the greater pre-landing Canadian work experience among immigrants, indicating a more informed and prepared workforce. The shift in source-countries to South Asia, with immigrants from India making the largest contribution to the income gain, is another crucial factor. Additionally, the report highlights the growing importance of family connections, emphasizing the role of pre-existing social networks in influencing economic outcomes for new immigrants.

Professional groups, particularly engineers and applied scientists, have played a significant role in narrowing the income gap.

The report suggests that a disproportionate share of the reduced income gap is attributable to immigrants living in Ontario, followed by British Columbia. As both of these provinces have significant immigrant communities, it underscores how having diaspora communities from source countries facilitates economic integration.

Express Entry possible contributor to increased immigrant incomes

The introduction of the Express Entry system in 2015 seems to have played a pivotal role in this transformative period. The system, aimed at bringing immigrants to Canada with specialized skills, has likely contributed to the increased incomes, even though the impact may not be fully reflected in the immediate year after landing.

“Events like the establishment of Express Entry system was not a game-changer per se, instead it was part of an evolution that has facilitated the integration of immigrants into the workforce,” the report says.

The evolving landscape is not only broad-based, impacting immigrants from a variety of source countries, but also cuts across different occupational categories. Professional occupations, such as engineers, teachers, accountants, and physicians, have seen significant income gains, aligning with the skills-focused approach of the Express Entry system.

An interesting revelation from the report is the positive correlation between the Canadian experience of immigrants just before landing and their subsequent incomes. Increasing numbers of immigrants are working in Canada on a temporary basis before gaining permanent status, and their median total Canadian income in the year before landing has shown a steady increase since 2007.

While the changing dynamics of immigrant incomes provide an optimistic outlook, the report also addresses the potential impact on measured productivity growth in Canada. Lower relative incomes of new immigrants, especially in the initial years before full integration into the labor force, could create a temporary drag on productivity growth. However, the recent convergence of immigrant incomes to the Canadian median offers a silver lining, potentially removing part of this drag.

In terms of measured productivity growth, the elimination of the income gap could contribute up to 0.21 percentage points. This aligns with the broader economic context, where the recent announcement of increased immigration targets aims not only to address labor market needs but also to stimulate economic growth.

The report underscores the multifaceted nature of the evolving immigrant landscape, as Canada’s immigration levels plan aims to welcome 485,000 new permanent residents this year and 500,000 in 2025 and 2026.

The success of the Express Entry system and the positive trends in immigrant incomes highlight the potential for well-managed migration policies to not only address demographic challenges but also to enhance the economic vitality of the nation. The findings provide valuable insights for policymakers, emphasizing the importance of supporting immigrants in their initial years to maximize the long-term benefits of increased immigration.

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