The international portability of migrant human capital:migrant human capital: Canadian experiences

Arthur SweetmanDepartment of EconomicsDepartment of Economics

(arthur.sweetman@mcmaster.ca)

F b 2014Feb. 2014

“EU/OECD dialogue on internationalmigration and mobility:

Matching Economic migration and labour market needs”

The Portability of Human Capital

What is “portability”? Not simply skills “carried” in migration

Portability concerns host country relevancey y How skills are employed and valued Has both cognitive and non-cognitive aspects g g

Portability is a “two-way street” Immigrants can take actions to increase the value of g

their skills in the receiving country Receiving countries can fight discrimination and

provide settlement services, bridging programs, credential recognition, etc. 2

I. Background

Canada’s annual permanent immigration rate Canada s annual permanent immigration rate 0.7-0.8% of the population

Highly structured and managed system Highly structured and managed system 4 immigration classes; each has sub-classes

Economic (62.4% in 2012) Economic (62.4% in 2012) Principal applicants, plus spouses & dependents About 20-24% PA adjudicated by points systemF il (25 2%) Family (25.2%) Sponsored by Canadian resident

Refugee (9.0%)g ( ) Other (3.5%)

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Decline in new immigrant labour market outcomes (starting in 1970/80s)

Major cause of concern

Key motivation for numerous reformsy

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Annual Earnings of Immigrants Compared to those of Comparable Canadian BornCompared to those of Comparable Canadian-Born,Full-Time Full-Year Workers aged 16 to 64, Males

Source: Canadian Census of Population, Picot and Sweetman (2005)

Predicted values based on a econometric model5

II. Key Issues: One at a time

Human capital portability Central to many aspects of the decline Central to many aspects of the decline Central to many policy changes introduced (or

being introduced) to ameliorate the situationbeing introduced) to ameliorate the situation

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II.1 Changing source countries (& language)

Mostly 1970s-80s, but some later

Bundle of issues including: language, culture, ti l t t t h l toccupational structure, technology gaps, etc.

Ethnic discrimination exists but not simple Ethnic discrimination exists, but not simple Discrimination appears to be tied to “acculturation” Also seems to interact with the way skills are Also, seems to interact with the way skills are

valued in the labour market

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Policy and debate

Immigration in Canada has long gone hand- Immigration in Canada has long gone handin-hand with multiculturalism, human rights, and anti-discrimination policiesp

Provision of settlement services Free/subsidized English/French language training Free/subsidized English/French language training Societal integration Employment/job search assistance Employment/job search assistance

Debate on approaches & sufficiency for both Debate on approaches & sufficiency for both8

Domestic language (English and French)

Much academic evidence that language skills Much academic evidence that language skills are essential to economic integration/success

Probably the one central issue

Self-reported language skills frequently differ f “t t d” l killfrom “tested” language skills

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Policy and debate

Formerly, language was one element of the i t t (i d h f 2002)points system (increased share from 2002)

Poor language skills could be counterbalanced by high scores on other dimensionshigh scores on other dimensions

Currently, language is an independent hurdleFluency in one language now viewed as better Fluency in one language now viewed as better than limited of knowledge both English & French

Formerly, language was not measured on a standardized scale

Currently, language is universally tested10

II.2 Pre-immigration labour market experience:The economic rate of return Currently no (or negative) economic return Currently, no (or negative) economic return Most immigrants with substantial years of

potential pre migration labour market workpotential pre-migration labour market work experience have outcomes akin to those of new domestic labour market entrantsnew domestic labour market entrants

Return to foreign experience often negative Only males with high domestic language skills

from developed countries have, on average, a positive rate of return to work experiencepositive rate of return to work experience But, even for them the return has declined

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Pre- and post-migration occupational p g pmatching is associated with a substantial earnings increase

Oddly, matching occupations is NOT Oddly, matching occupations is NOT associated with an increased return to pre-migration experience unless the person is g p pmale and also has high literacy skills In some work, such a return is only observed for

such individuals from “traditional” source countries

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Policy and debate

Over time work experience has declined in Over time, work experience has declined in importance for immigrant selection – e.g. points

Increased emphasis on pre-migration job offers Increased emphasis on pre-migration job offers

N i i ti t h b New immigration streams have been introduced where pre-migration Canadian work experience is a central criteriaexperience is a central criteria E.g., Canadian Experience Class, Provincial

Nominee ProgramsNominee Programs

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Experience from another perspective

Increasing labour market penalty to Increasing labour market penalty to immigrating at an older age Decline starts in middle 30s Decline starts in middle 30s

P li ChPolicy Change: Points for age changed to emphasize youth Also demographic rationale

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II.3 Economic rate of return to dpre-migration education

Complicated Complicated Relative stability until late-1990s

Return to education lower for immigrants than for Canadian born, but not declining

From late-1990s, among skilled worker principal applicants (i e under points system) the earningsapplicants (i.e., under points system) the earnings advantage at entry of university educated over less educated declined But, earnings increase at a much faster rate post-

migration for university graduates

Little change among non-principal applicants15

Policy and debate

Increase in the share of immigrants pre-2000 In the economic class With university degrees

But, emphasis on “high skill” engineering and IT ti i l t 1990 d l 2000IT occupations in late 1990s and early 2000s Led to major disaster with “IT-Bust” of mid-2000s

P bl Di t b t h t t / li l Problem: Disconnect between short-term/cyclical needs of industry and the long-term nature of immigration/citizenshipimmigration/citizenship

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Foreign Qualification Recognition Foreign Qualification Recognition For BOTH education and experience/skills

Move to credential evaluation pre-migration Understanding (non-)equivalencies between

f i d C di lifi ti d killforeign and Canadian qualifications and skills Quality of average source country educational

outcomes (test scores) correlated with return tooutcomes (test scores) correlated with return to education in Canada

Increased pre-migration information provision p g p Shift to employers having (larger) role in selection

Increased educational bridging programs c eased educa o a b dg g p og a s

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Regulated professionsAb t 20% f C di kf About 20% of Canadian workforce

Overall, immigrants under-represented But over represented in some occupations But, over-represented in some occupations Under-represented in nursing Over-represented in medicine

Pressure on regulatory bodies to ensure that g yprocesses are not biased against immigrants Some provinces have established “Fairness p

Commissioners” with a mandate to investigate and recommend changes

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III. Interactions Recent research has considered the

interactions of various skills, e.g., , g , Immigrants, on average, have a lower rate of

return to education But, the return is the same once English/French

literacy is taken into account Language skills mediate the return to education

For both males and females, the rate of ,return to education is approximately zero without English/French language skillsg g g Return increases with increasing literacy

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Among the skills normally studied language Among the skills normally studied, language is the only skill that has universal value in the labour marketlabour market Language may, in part, proxy for other

cultural/social/educational issues

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Policy and debate Language skill level requirements have been

altered in immigrant selectionaltered in immigrant selection Higher education levels now need higher

language skills to pass selection thresholdg g p Recognizes interaction between language & education

Employers to have greater role in selection Implicitly transferring credential evaluation p y g Pending introduction of “Expression of Interest”

approach (akin to New Zealand & Australia) Employers select from pool - government pre-screens

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IV. Conclusion

Canada has undertaken, and is undertaking, j li f i ff t t imajor policy reforms in an effort to improve

immigrant labour market outcomesS l ti li (i l di i ti Selection policy (including pre-migration information provision) directly targets skills portability and explicitly recognizes interactions p y p y gamong various types of skills

Settlement service provision, the operation of important labour market institutions, and policies regarding racial/ethnic/immigrant discrimination, are being adjusted to facilitate the portability ofare being adjusted to facilitate the portability of newcomers’ human capital

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END

23

Temporary residents Temporary residents 2012 count of temporary residents was about 4

times the 2012 permanent flow p Just under half are temporary foreign workers Many of the remainder have permission to work

including: refugee claimants & foreign studentsincluding: refugee claimants & foreign students

24

Having incomes below the “poverty line” (LICO) i i i l f i iis increasingly common for immigrants

Pre‐tax, Post‐transfer Low‐Income (LICO) Rates

2426 Business Cycle Peaks

in 1980, 1990 & 2000

182022

Percen

t

Not Cdn‐Born

CdnBorn

10121416P Cdn Born

10

1980 1985 1990 1995 2000 2005

Year

25Source: Reformatted from Statistics Canada, Picot, Lu & Hou (2009)