Employer Policies and the Immigrant-Native Earnings Gap

Professor David Card

A new discussion paper co-authored by Canadian Studies faculty affiliate David Card, a professor of economics at UC Berkeley, argues that hiring and wage decisions made by individual firms are largely responsible for the immigrant-native wage difference in Canada.

The research, which was published by the IZA Institute of Labor Economics and is currently undergoing peer review, used longitudinal tax data to study the impacts of firm-level pay scales on immigrants' economic success. Rather than considering just the skills or productivity of immigrant workers, the authors take into account the hiring and salary practices of firms to understand pay gaps for immigrants in Canada. The study found that 20% of the gap between immigrant and native earnings could be attributed to the decreased chance of an immigrant being hired at a highly-paying firm. This was particularly noticeable for immigrants from developing countries who lacked a university education, who made 40% less on average than native-born Canadians. However, immigrants with a university degree from these regions exhibited the largest percent wage growth over time, and experienced rapid career advancement, which the paper argues demonstrates delayed recognition of initially-discredited skills. The findings align with previous research that suggests that firms' wage-setting policies widen inequality both between and within groups.

Read the whole study here (PDF file).