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human capital. Indeed, two-thirds of immigrants sampled atpre-immigration had planned totake jobs requiring the highest

skill level. Among the samplefinding jobs within six months of arrival, 73 percent took an initialCanadian job requiring a lowerskill level. The researchers sug-gest that compared to thoseimmigrants finding jobs usingformal means, immigrants find-ing their first jobs through net-works are actually more likelyto be in jobs which underutilizetheir skills. Despite this, theyfind no evidence that eitherlarger networks or stronger ties

contributes to underutilizationof skills. Many studies havenoted that average immigrantwages increase dramatically if they have some Canadian ex-perience, so the advantage im-migrant networks provide newimmigrants in finding their first

 job in Canada can be seen in apositive light.

Many studies suggest that immi-grants who have had previousCanadian work experience haveboth an easier time finding a job,and are often able to find better-paying jobs. For immigrants

who arrive in Canada withoutany Canadian work experiencehowever, finding a first job canbe a very difficult experience, ashaving previous Canadian work experience is a precursor thatmany new immigrants simply donot have. In some instances,immigrant social networks – orareas where there is a highpercentage of immigrant settle-ment can help other immigrantswho settle those areas to helpfind a first job more quickly. Astudy by Deepti Goel (Boston

University) and Kevin Lang(Boston University), “The Role of 

Social Ties in the Job Search of 

Recent Immigrants” (CLSRNWorking Paper no. 5) tries todetermine the impact availablesocial networks can have onimmigrants in the labour market.

Goel and Lang combined censusdata with the Longitudinal Sur-vey of Immigrants into Canada – a national representative sampleof recent immigrants arriving in

Canada between October 1,2000 and September 30, 2001 – in order to examine the impactof strong social ties immigrantsentering the Canadian labourmarket. They examined boththe role of immigrant network/ enclave size – or the size of theimmigrant community where anew immigrant settles – as wellas the adding the dimension of 

network strength – or theexistence of one or more strongsocial ties, such as a friend orfamily member in the communitywhere the new immigrant settles

 – to their analysis.

The study found that the presenceof a strong social tie is significantlyassociated with better chances of finding a job through an immigrantnetwork, but not significantlyassociated with finding a job ingeneral. Strong social networkswere found to be associated withslightly higher wages at the lowerend of the worker’s potentialwage distribution, but are notsignificantly associated withimproved wages at the higher endof this distribution. For otherwise

apparently comparable immi-grants, among those who did notfind their job -through thenetwork, the 25th percentile of the wage distribution among Iimmigrants who have at least onestrong social tie in their locality is12.8 percent higher compared tothose who do not have strongsocial ties. Among apparentlysimilar immigrants who did nothave strong social ties, the 25th percentile of the wage distributionwas 17.2 percent higher for those

who nevertheless found their jobthrough the network than forthose who did not. 

Goel and Lang’s findings essen-tially indicate that the principaleffect of immigrant social net-works is to provide access to jobsat the lower end of the incomedistribution, which could alsosuggest an underutilization of 

Study finds that social networks aid immigrants in finding first job, butthose finding jobs through formal means found to have better wages

TOSHIBA

November 2009Volume 1, Issue 4

Labour Market

Matters

Deepti Goel

“[C]ompared to those

immigrants finding their 

first jobs through formal

means, immigrants find-

ing their first jobsthrough networks are

actually more likely to

be in jobs which under-

utilize their skills” 

Kevin Lang

(Boston University)

Special points of 

interest:

!" Immigrants with strong socialnetworks found to be able tofind first job more easily, butimmigrants finding jobsthrough formal means found

to land higher-paying jobs

!" Study finds that althoughimmigrants entering Canadaare increasingly better

educated, many well-educated new immigrants arestill trapped in low paying

 jobs.

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During the early 1990s, immigrantselection rules were significantlyaltered. The changes were verysuccessfully implemented, and bythe mid-to-late 1990s, thenumber of immigrants entering

Canada with university degreesrose dramatically, particularly inhigh-tech disciplines. Averageearnings among entering immi-grants increased during the late1990s, potentially driven by bothchanging immigrant characteris-tics, and an expanding economy.Unfortunately, improving averageentry earnings outcomes in thelate 1990s were followed by theIT bust of the early 2000s, whichcoincided with the influx of largenumbers of new immigrants withuniversity degrees, particularly in

the IT and engineering disciplines.

In their paper, “The Effect of Immigrant Selection and the IT Bust on the Entry Earnings of Immi-

 grants” (CLSRN Working Paperno. 29), Garnett Picot (StatisticsCanada) and Feng Hou (StatisticsCanada) examine the effect of two events on the entry earningsof immigrants. The first was thesignificant shift in characteristicsduring the 1990s, notablyincreasing educational levels and

an increasing share of immigrantsin the skilled economic class andhigh-tech and engineering occupa-tions. This latter trend corre-sponded with the high-techboom. The study asks if theimprovement in entry earningsduring the late 1990s wasassociated with the inducedchange in characteristics of enter-ing immigrants, or was drivenprimarily by improving economicconditions. This period wasfollowed by the second majorevent, the IT bust of the early

2000s. Given the significant in-crease in the share of immigrantsin IT and engineering occupations,this event potentially placed con-siderable downward pressure on

aggregate entry wages. The studyfound that during the 1990s thechanging characteristics of enter-ing immigrants did, on average,increase entry earnings and, alongwith an expanding economy, did

result in rising entry earnings,both in absolute terms and rela-tive to the Canadian born. Thedecline in average entry earningsdating from the 1980s wasreversed during this period.However, this improvement wasnot shared by those immigrantsat the bottom of the incomedistribution, a group who increas-ingly had a university degree butwere unable to convert theireducation to higher earnings.Among the 1991 entering cohortof male immigrants aged 25 to 54,

about one quarter of those withthe lowest earnings (i.e. in thebottom quarter of the entry earn-ings distribution) held universitydegrees. Among the 2000 enter-ing cohort, this proportion hadincreased to over one-half, andfor the 2004 cohort, 60%. Thechanging characteristics did littleto improve poverty outcomesamong entering immigrants,

particularly those with degrees.

Changes in immigrant characteris-tics did however increase immi-grant entry earnings at the middle

and top of the earnings distribu-tion. Among men at the 50th percentile of the earnings distri-bution there was a 10-percentageincrease in earnings associated

with the changing characteristicsduring the 1990s, and at the 90th percentile, a 24 percentage point

increase.

The study found that during theirfirst two full years in Canada, menin the 1991 entering cohortearned 54 percent of what Cana-dian-born men of the same agemade (unadjusted estimates).The 2000 entering cohort earned64 percent of what theirCanadian counterparts earned,however the 2002-to-2004cohorts fell back down to 54

percent earnings level – despitethe fact that the cohorts of the2000s were more highly educatedthan the entering cohorts of the1990s. Indeed, about one quarterof the early 1990s enteringcohort held degrees, comparedto 61 percent of the 2004 enter-ing cohort. The study found thatmuch of the decline in entry earn-ings in the early 2000s, a periodwhen employment in the high-tech sector was falling, wasconcentrated among immigrantswho intended to work in the IT

or engineering occupations. Thenumber of entering immigrants inthis group rose significantlyduring the 1990s, from a fewthousand in the early 1990s to

Labour Market Matters is a publication of the Canadian Labour Market and Skills Researcher Network (CLSRN). The CLSRN is sup-ported by Human Resources and Social Development Canada (HRSDC) and the Social Science and Humanities Research Council of Canada(SSHRC). Opinions expressed in this publication do not necessarily reflect the views of HRSDC or the SSHRC.

Articles in Labour Market Matters are written by Vivian Tran - Knowledge Transfer Officer, CLSRN, in collaboration with the re-searchers whose works are represented. For further inquiries about Labour Market Matters or the CLSRN, please visit the CLSRN Website at:http://www.clsrn.econ.ubc.ca or contact Vivian Tran at: vivtran@interchange.ubc.ca

Rising Immigrant Educational Attainment, the IT Bust, and Entry Earnings Among Immigrants

Endnotes

Page 2 Labour Market Matters

around 25,000 by 2000, falling toa still historically high level of about 19,000 by 2004. The entryearnings for all male working ageimmigrants declined 12 percentbetween the 2000 and 2004

entering cohorts, however, if oneexcludes immigrants whointended to work as IT profes-sionals and engineers, the declinewas only 2%. For immigrantwomen, about half of the declinein entry earnings in the early2000s was accounted for byexcluding intended IT profession-

als and engineers.

There are a number of possiblereasons why, even during the1990s, increasing numbers of highly educated entering immi-grants found themselves at thebottom of the income distribu-tion. Perceived or real differ-ences in educational quality,issues regarding credential recog-nition, the inability of the labourmarket to absorb a largeincrease in the supply of the higheducated and occupationallyconcentrated immigrants (inevidence during the early 2000s),and language issues are amongsome of the possible reasonsthat entering immigrants to

Canada may have had difficultyconverting their educationalcredentials into higher paying

  jobs in Canada. One study1 found that in the United States,immigrants earned 7 percentmore for each additional year of education if they were fluent inEnglish, but only 1 percent moreif they were not. This suggeststhat higher education may notimprove earnings in the absenceof English (or French) languagefluency.

 ________________ 1Chiswick, Barry R., and Paul W. Miller.2002. “Immigrant earnings: Language skills,

linguistic concentrations and the business

cycle.” Journal of Population Economics. 15,

1: 31-57.

“2002-to-2004 cohorts fell

back down to 54 percent

earnings level—despite the

fact that the cohorts of the

2000s were more highly 

educated than the entering 

cohorts of the 1990s...one

quarter of the early 1990s

cohorts held degrees

compared to 61 percent of 

the 2004 entering cohort.” 

“The study found that during 

their first two full years in

Canada, men in the 1991

entering cohort earned 54

 percent of what Canadian-

born men of the same age

made”