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Unlike many of the previous studies, this paper examines the labor market substitutability or complementarity within and across the industry according to the classification of Industry Canada

The substitutability of labor between immigrants and natives in the Canadian labor market: circa 1995

Journal of Population Economics, no. 1 (2009): 199-217

Cited: 17|Views13

Abstract

This paper examines the substitutability or complementarity between Canadian-born and immigrant workers. These are examined by estimating a set of wage equations using a generalized Leontief production function. The paper finds that, in general, there is no displacement of Canadian-born workers by immigrants. Recent immigrants affect th...More

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Introduction
  • The possible effects of immigration on labor market outcomes of native-born workers are a core research agenda in recent years.
  • This concern has a long history, and investigation of this question for different immigrant-receiving countries finds mixed effects of immigration on natives’ employment and wages.
  • A. Islam predictions of theoretical models remain at best well-reasoned speculation and are not suited to guide policy (Dustmann, Fabbai, and Preston 2005)
Highlights
  • The possible effects of immigration on labor market outcomes of native-born workers are a core research agenda in recent years
  • The elasticity of complementarity between Canadianborn workers in the goods sector and recent immigrants in that sector is −1.26, indicating that a decrease in Canadian-born wage in the goods sector of 12.6% is due to an increase in recent immigrants by 10%
  • The argument that personal benefits offsets the economic loss in this case does not necessarily hold because unlike USA, where immigration policy favors family reunification, most of the Canadian immigrants are required to satisfy the points system to be able to become immigrants
  • The substitutability of labor between immigrants and native-born workers has been a key debate for a long period of time
  • The influx of immigrants and their concentration on certain occupations and industries raise the question of how immigration affects the wages of natives
  • Unlike many of the previous studies, this paper examines the labor market substitutability or complementarity within and across the industry according to the classification of Industry Canada
Results
  • The corresponding Hicksian elasticity is 0.16, which implies that a 10-percentage point increase in the supply of recent immigrants will increase the wage earnings of Canadians by 1.6%.
  • The cross-elasticity between the Canadian-born workers in the service industries and old immigrants in the same sector is −0.174
  • This implies that a 10% increase in old immigrants would depress the Canadian-born wage by 1.74%.
  • The cross-elasticity between Canadian-born workers in the goods sector and recent immigrants employed in the service sector is 1.32, implying that for a 10% increase in recent immigrants in the goods sector, there will be a 13.2% increase in the wage of Canadian-born workers.
  • They categorize industry in an arbitrary manner, and they recognize this
Conclusion
  • The results presented above support the conclusion that recent and older immigrants are substitutes in the aggregate and within a given industry
  • This implies that wages of older immigrants tend to suffer from the arrival of recent immigrants.
  • Unlike many of the previous studies, this paper examines the labor market substitutability or complementarity within and across the industry according to the classification of Industry Canada..
  • Unlike many of the previous studies, this paper examines the labor market substitutability or complementarity within and across the industry according to the classification of Industry Canada. This study sheds some light on many debates concerning Canadian immigration
Tables
  • Table1: Descriptive statistics of selected variables
  • Table2: Coefficient estimates and Hicksian elasticity of complementarity
  • Table3: Coefficient estimates and Hicksian elasticity of complementarity disaggregated by broad industrial classification
  • Table4: Symmetry constrained wage equations using OLS (dependent variable: annual wage Earnings)
  • Table5: Symmetry constrained wage equations using the FIML (dependent variable: annual wage earnings)
  • Table6: Employment status by industry and occupation in Canada
  • Table7: Variable definition
Download tables as Excel
Funding
  • The corresponding Hicksian elasticity is 0.16, which implies that a 10-percentage point increase in the supply of recent immigrants will increase the wage earnings of Canadians by 1.6%
  • The cross-elasticity between the Canadian-born workers in the service industries and old immigrants in the same sector is −0.174. This implies that a 10% increase in old immigrants would depress the Canadian-born wage by 1.74%
  • The elasticity of complementarity between Canadianborn workers in the goods sector and recent immigrants in that sector is −1.26, indicating that a decrease in Canadian-born wage in the goods sector of 12.6% is due to an increase in recent immigrants by 10%
  • The cross-elasticity between Canadian-born workers in the goods sector and recent immigrants employed in the service sector is 1.32, implying that for a 10% increase in recent immigrants in the goods sector, there will be a 13.2% increase in the wage of Canadian-born workers
  • The cross-elasticity estimates in Table 3 suggest that a 10% increase in labor employed from the pool of recent immigrants results in a 12.6% decrease in the wages of Canadian-born workers in the goods sector but increases the wage of Canadian-born workers in the service sector by 11.6%
  • A 1% increase in recent immigrants reduces the wages of immigrants employed in that sector by 9.17%, whereas a 1% increase in old immigrants in the service sector reduces the wages of the old immigrants by 4.68% in the same industry
  • 10 Akbari and De Vortez (1992) classify the industry according to concentration of native and foreign-born workers. They categorize industry in an arbitrary manner (they define a high concentration of foreign born industry as any three-digit Standard Industrial Classification industry group with a greater than 23% foreign-born share in the labor force), and they also recognize this
Study subjects and analysis
is students: 24
The age group 24–64 is considered because immigrants who migrate at an earlier age (age below 24 in the sample) are more likely to be different than native-born citizens along a number of observable dimensions (they are more dependent on their parents, and they are more likely to be without any job, for example). A disproportionate share of individuals among recent immigrants of age below 24 is students. Although we exclude students from our sample, it is important that the proportion of the two groups in the sample is similar to that observed in the population

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