By: Arvind Magesan in Calgary, AB
Defenders of Donald Trump say his “shithole countries” remark regarding people from Africa, Haiti and other nations was just Trump being Trump — the president may have used salty language, but it’s really just his way of saying the United States should have a merit-based immigration system like Canada’s.
A generous interpretation of Trump’s comments are that immigrants from certain so-called “shithole” countries — African nations, Haiti and El Salvador — are not typically highly skilled or economically self-reliant, and if admitted would need to depend on the state.
In fact, Trump apologists — and the president himself — might be surprised by what the economic data says about immigrants who come to Canada from the “shithole” countries.
John Fredericks, who was Trump’s campaign chair in Virginia, told CNN that immigrants from those countries “come into the United States and they do nothing to increase the prosperity of the American worker. They lower wages or go on welfare and extend our entitlement system …. Australia and Canada have a merit-based system. You know why they do that? Because they want to bring people into their country who are going to enhance the prosperity of their citizens.”
Trump, himself tweeted a similar sentiment.
"I, as President, want people coming into our Country who are going to help us become strong and great again, people coming in through a system based on MERIT. No more Lotteries! #AMERICA FIRST"— Donald J. Trump (@realDonaldTrump) January 14, 2018
The conclusion we are expected to make, it seems, is that if the United States was to adopt a purely merit-based system, immigrants would not come from these countries — they would come from countries like Norway, and immigrants from these Norway-like countries would not put pressure on blue-collar U.S. workers because they would be highly skilled and, more importantly, they wouldn’t be a drain on the system because they would be economically self-reliant.
A merit-based system
Canada offers an opportunity to take a look at this hypothesis because our points-based immigration system screens immigrants on merit to a large degree. So when we screen immigrants on merit, who do we let in and how do they do?
The first thing to note is that Canada admits many immigrants from the “shithole” countries.
Data from the 2016 Census shows over the last five years there have been more than twice as many immigrants from Central America and the Caribbean (which includes Haiti and El Salvador) than there were from the U.S. There were also more immigrants from the African continent than from the U.S. and North and Western Europe combined.
Clearly a merit-based system does not mean we only admit people from the “Norways” of the world — and in fact, the census data shows only 230 people immigrated from Norway over the five-year period.
The next question is how do these immigrants fare?
To look more closely at this, I used individual 2011 Canadian census data (detailed 2016 data isn’t yet available) to look at three groups: Canadians whose families have been here for three generations or longer; immigrants from the “Norways” of the world (Northern and Western Europe, including the U.K., Germany, and Scandanavia) and immigrants from Trump’s “shithole” countries (Central America, the Caribbean, Africa).
I looked at the skill levels of the different groups, as measured by their education level, and then at their economic self-sufficiency: Employment, wages and how much they receive in transfers and employment benefits from the government.
Let’s start with skill level.
Forty per cent of Canadians who have been here for three generations or longer have at least some post-secondary education, and 18 per cent have a bachelor’s degree. By comparison, a much larger percentage of immigrants of either type (53 per cent) have some post-secondary, and 27 per cent of immigrants from “Shitholes” have a bachelor’s degree. So by this standard measure of skill, immigrants from “Shitholes” have a slightly higher skill level than do immigrants from “Norways,” and a much higher skill level on average than Canadians who have been here for generations.
What about self-sufficiency?
It is commonly argued that immigrants, particularly from poorer countries, are “expensive” because they receive a disproportionate amount of government transfers and unemployment benefits. The truth is, though Canadians who have been here for generations are more likely to be employed and earn (slightly) more on average than either immigrant group, immigrants from the “Shitholes” are far more likely to be employed than immigrants from the “Norways.”
Fewer transfer payments
Perhaps more interestingly, immigrants from the “Shitholes” receive fewer transfer payments from all levels of government than “Norwegian” immigrants.
Finally, looking at employment insurance benefits alone, Canadians who have been here for generations receive more than either group.
What can we say about these numbers?
Firstly, immigrants from the “Shithole” countries are not typically low skill and in principle, should not be putting pressure on employment or wages of blue-collar workers in Canada. Then why is this such a common perception?
It’s likely due to a different issue, that high-skilled immigrants are unable to get high-skill jobs for other reasons (discrimination in the labour market, an inability of employers to recognize or evaluate credentials, or even language issues) and then do end up competing with lower-skilled Canadian workers.
Secondly, immigrants from the “Shithole” countries are generally no more dependent on the state than other Canadians. Though they earn less than those from the “Norway” countries, they are more likely to be employed and they receive less total government transfer payments.
As an economist, it’s important to state that we shouldn’t interpret these relationships between country of origin and economic outcomes as causal — workers from different countries are different for many reasons (demographics like age, as well as occupation, etc).
But that doesn’t at all affect the main point — Trump’s perception of the differences in the average immigrant from countries like Haiti and Norway is at the very least a consequence ignorance, or as many have suggested, racism.
One thing that can’t be rationalized by the raw numbers here: The course of history and the current plight of many of the “shithole” countries is at least partly a consequence of U.S. foreign policies, that the position of relative economic superiority of the U.S. is partly an outcome of these policies, and that this above all might imply a moral obligation on the part of the U.S. when deciding who to let in and from where.
Commentary by: Arvind Magesan in Calgary, AB
Statistics Canada has released new data from the 2016 census that shows more than any other G8 country, Canada is a nation of immigrants. One in five Canadians (21.9 per cent to be exact) were born in another country.
Immigration is a significant component of Canada’s population growth and evolving demographic composition. The census data shows more than 1.2 million new immigrants came to Canada between 2011-16. Immigrants are also typically younger and more educated than the average Canadian.
Not surprisingly then, immigration is often touted as a necessary condition for sustained economic prosperity. And yet in spite of their ostensible importance to the Canadian economy, immigrants themselves have yet to catch up to other Canadians in terms of economic outcomes.
Economists refer to this catching up as “economic assimilation” and often measure it using the “native-immigrant wage gap” — the difference between the average wages of immigrants and those whose families have been here at least three generations. The persistence of this wage gap is a feature common to economies in the Western world that rely heavily on immigration.
As an economist and a child of immigrants myself, I was curious to delve into the census data to understand how this gap has evolved over time and across major cities in Canada — and to get a hint of what may be at the root of it.
The first thing that surprised me is the gap has not changed much over the past 10 years. Census data from 2006 showed, at a national level, first-generation immigrants earned wages 12.6 per cent less than the average wage of native Canadians. In 2011, the gap dropped slightly to 10 per cent, but the new census data shows it’s climbed significantly to 16 per cent.
Importantly, the gap is a countrywide phenomenon. Looking at the three of the most popular destinations for immigrants in the past decade — Toronto, Vancouver and Calgary — the gap in 2016 sits at 25, 17 and 23 per cent respectively.
Interestingly, the gap doesn’t only exist for first-generation immigrants, but also for the children of immigrants (second generation, i.e. Canadians born to immigrant parents). The new data shows at the national level, second-generation immigrants earn 5.4 per cent less than natives.
Understanding the wage gap
The obvious question that follows then is: What is the source of these gaps?
Canada is an especially interesting case given the “points” system used to screen potential immigrants, where language, education and job skills are key determinants. And for the first time, the census has reported that about six out 10 new immigrants came here under the so-called economic admission category, meaning they have the skills “to enhance and promote economic development.”
Given the way immigrants are screened before entry, one would expect relatively quick integration into the Canadian economy and a convergence in wages. But this is clearly not the case.
The reasons put forward to explain the wage gap range from employer difficulty in assessing immigrant education credentials to outright discrimination. Economists refer to two types of “discrimination” in the labour market context, “statistical discrimination” and “taste-based discrimination.”
In the former, employers use observable traits (such as race) to make inferences about something like productivity. For example, an employer sees a job applicant with brown skin. The employer isn’t prejudiced towards brown people, but is worried (stereotypically) the employee is going to want to take trips “home” to Sri Lanka and would need a lot of vacation time. So the employer hires someone else equally qualified. Taste-based discrimination is more what we think of as prejudice — not wanting to hire someone purely because of skin colour.
Identifying causal factors that explain the wage gap is a difficult task - individuals who immigrate to Canada do so by choice. These choices are a function of a host of factors that could potentially jointly explain the decision to immigrate and labour market outcomes, including personal characteristics, job experience and education, to name just a few. Identifying discrimination in the labour market, and separating between taste-based and statistical discrimination, is even harder.
However, a 2011 study by University of Toronto economist Phil Oreopolous takes an important step in this direction.
In the study, thousands of computer-generated resumes were mailed out to companies that had posted ads searching for employees. The resumes were randomly assigned either a foreign or a “white” sounding last name, and were otherwise identical. The result: The resumes where the applicant had a foreign-sounding last name were less likely to receive a call back than identical looking resumes with a “white” last name.
When the author followed up with some of the recruiters, the overwhelming reason given for overlooking resumes with a foreign-sounding name was that they anticipated difficulty with language. Specifically, recruiters expected a lack of fluency in English, problems with communicating at work and difficulty for customers and co-workers in understanding a foreign accent. In other words, recruiters were statistically discriminating between job candidates based on their names.
Can language proficiency close the gap?
The census presents an opportunity to study the importance of English proficiency for the gap in labour market earnings between immigrants and native Canadians in 2016. The census provides information on wages, immigrant (and generation) status, as well as the language most commonly spoken at home.
Specifically, guided by the findings in Oreopolous’s study, I looked at how the gap in average wages changes when English is spoken at home. (For the purpose of this study, I looked at communities outside of Quebec, where French is the dominant language.) In 2016, 63 per cent of new immigrants living outside of Quebec most often spoke a language other than English or French while at home.
The latest census data says the native-first generation immigrant wage gap is 16 per cent at the national level. Once we examine whether immigrants speak English at home, things change — the wage difference is just 5.8 per cent. But for first-generation immigrants who don’t speak English at home, the gap jumps to 27.3 per cent.
For second-generation immigrants, there is barely any gap for those who speak English at home (0.7 per cent) but it’s still a significant gap for those who don’t speak English at home (a whopping 45.7 per cent).
This pattern also holds in the major metropolitan centres in the English-speaking parts of the country, which attract the most immigrants.
Interestingly, at almost 25 per cent, Toronto has one of the largest city level wage gaps in the country, explained at least in part by the fact that new immigrants tend to land in Toronto first and are more likely to be unemployed for a period of time. The three largest cities in English-speaking Canada, which also attract the most immigrants, also have gaps larger than the national average.
In Ottawa, immigrants of either generation who speak English at home actually earn more than natives on average. While it may be tempting to attribute the major differences across the cities to differences in culture, they are more likely due to regional differences in industrial composition and attendant labour demand.
The wage gap for immigrants who don’t speak English at home is very large. In Toronto and Calgary, first-generation immigrants who don’t speak English at home can expect to earn 37 per cent less than natives. Perhaps even more interesting is the fact that the gap across all cities for is larger for second generation immigrants who don’t speak English at home.
Though these patterns are striking, they should not be interpreted as causal – immigrants can’t necessarily start speaking English at home and expect to see their future earnings increase. There are unobserved qualities of individuals that may correlate both with the tendency to speak English at home as well as with labour market earnings potential. Without holding these fixed in some way, we can’t say whether there is a causal relationship between English skills and the gap in labour market outcomes.
But supposing that the findings here are suggestive of a causal relationship, why does speaking English at home matter so much?
One obvious answer is that individuals who speak English at home speak better English in general — and this would mean better communication at work. This would be consistent with the worries that the recruiters in Oreopolous’s study had when deciding who to call back. Or perhaps individuals of foreign descent that speak English at home tend to have other important skills on average.
But another possibility is the labour market discriminates against individuals with weaker English skills even when English is not important for productivity. Sorting between these different explanations (and others) will require more data and a deeper look.