IMMIGRANTS DEPRESS DOMESTIC WAGES ... BUT ...

Immigration lowers domestic wages
ROMA LUCIW

Globe and Mail Update

May 25, 2007 at 11:35 AM EDT

The arrival of immigrants depresses domestic wages in both Canada and the United States, but because newcomers to Canada are better educated, the gap between the richest and poorest Canadian families is narrower than in the U.S.

A Statistics Canada report released Friday found that when an influx of migrants raises a country's labour supply by 10 per cent, wages fall between 3 per cent and 4 per cent. "Economic theory suggests that, at least in the short term, immigrants will boost the supply of labour in matched skill groups in the host country, increasing competition for jobs and thereby depressing the wages of the similarly-skilled in the market."

However, the Statscan study concluded that the skill-set of the immigrants played a key role in determining the impact their arrival will have on the wages of domestic workers. About four in 10 newcomers to Canada in 2001 had more than an undergraduate degree, compared to about one in five in the United States. The varied skill sets stems from differences in the immigration policies of the two countries over the last four decades.

Because immigrants to Canada tend to be more highly-skilled, they are more likely to get paid a better wage. This factor has curtailed the earnings growth of the most educated Canadians relative to the least educated.

"In the United States, however, the opposite has happened," Statscan said. A significantly higher proportion of immigrants to the United States are unskilled, so these newcomers have depressed the earnings of low-paid Americans and widened the gap relative to the highest paid.

The Statscan study looked at census data on working people between the ages of 18 and 64 from Canada, the U.S. and Mexico in order to access the impact of the immigration on each nation's labour market.

While the U.S. and Canada are two major destinations for North American immigrants, Mexico is losing its work-force in droves, with a vast majority of Mexicans heading to the U.S.

Between 1980 and 2000, immigration increased the male labour force by 13.2 per cent in Canada and 11.1 per cent in the United States. In Mexico, however, the male work force shrunk by 14.6 per cent.

The Statscan report says the Mexican situation illustrates the impact that emigration has on the source country. In Mexico, a drop in the supply of labour has triggered a corresponding increase in wages. "The impact of emigration on the wages of those who stay in Mexico also depends on the skill mix of those who leave the country," the report said.

Statscan noted that the types of immigrants coming Canada and the U.S. have been determined by each country's immigration policies.

"Canadian immigration policies since the 1960's have encouraged high-skilled workers to come to the country," the report said. "During the same period, American immigration policy has emphasized family reunification, which resulted in a disproportionate number of low-skilled immigrants."

The arrival of a large number of illegal immigrants to the U.S. - an estimated 10.3 million as of 2005 - has also contributed to the tendency for new comers to that country to have less or lower skills, Statscan said. More than half of the illegal immigrants in the U.S. are from Mexico.

"Immigration to the United States, moreover, has tended to increase the supply of young workers; the opposite has been observed in Canada," Statscan said.

The study also found that in the long-run, low-skilled workers in Canada have benefited more than high-skilled workers. That is because the overall presence of lower-skilled workers has declined and a disproportionate number of highly-educated immigrants to Canada have dampened upward pressure for the wages of high-skilled workers.

"The net result is that migration-induced effects on the Canadian labour supply have served to reduce measured wage inequality between low-skilled and high-skilled workers," Statscan said.