Income gap between new immigrants and broader public narrowed dramatically: PBO

Total income of new immigrants rose from 55% of the median Canadian income to 78% between 2014-2018

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The income gap between new immigrants and the broader Canadian public narrowed dramatically in the years leading up to the pandemic, according to a report from the parliamentary budget officer that suggests family ties and “pre-admission” work or study experience play a big part in creating better economic outcomes.

Between 2014 and 2018, the total income of new immigrants rose from 55 per cent of the median Canadian income to 78 per cent. Professionals such as engineers, accountants, applied scientists, and physicians are driving the trend.

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“These relative increases in the incomes of immigrants are worth exploring further given the context of increasing future immigration,” said the parliamentary budget officer, Yves Giroux, in the report, released Jan. 12.

The gains outlined in the report are a stark improvement over previous decades; in 2009, new immigrants only earned around half of what the broader Canadian public did.

Recent immigrants have more Canadian experience on average and are drawing increasingly on existing family and community ties.

The number of immigrants to Canada is set to rise by 500,000 in both 2025 and 2026, and the federal government said it would maintain that threshold for the following year. The influx will add to labour supply, immigration minister Marc Miller told reporters in November.

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Miller added that new immigrants will not necessarily aggravate the housing shortage; in fact, they could help alleviate it. The government may adjust the application process to ensure that a greater proportion of incoming immigrants are trained in trades and construction so they can build the homes that Canada so desperately needs.

However, in a joint statement on Jan. 12, Liberal Housing Minister Sean Fraser and Miller were forced to defend the decision to boost immigration levels after The Canadian Press reported Jan. 11 on internal documents from 2022 showing senior public servants had been warned a major increase in immigration could affect access to housing and services.

Fraser and Miller said were it not for increased immigration, the economy would have shrunk after the COVID-19 pandemic and business would have faced labour shortages.

The PBO report also made the case that immigration can help Canada’s productivity levels, but that will take time. As new immigrants integrate into the workforce, their productivity levels tend to be lower, wrote Giroux.

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The increasing prevalence of “pre-admission” experience, which means an immigrant worked or studied in Canada on a temporary basis before they gained permanent status, is in part responsible for boosting incomes, the report said.

“Those who are temporarily in Canada, to study and/or work, gain experience and have relatively good labour market outcomes when they become permanent residents,” Giroux wrote. “This suggests that allowing temporary entry of immigrants and subsequently granting permanent residence is contributing to narrower income gaps for immigrants.”

The number of immigrants with family ties in Canada also increased alongside incomes, “suggesting that pre-existing social networks are important for economic outcomes,” Giroux wrote. “Having access to a network of contacts on arrival likely provides a boost to a good labour market outcome.”

So, family ties might play as significant a role in boosting incomes as prior Canadian work experience does.

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“Temporary residents often transition into permanent status, at which point they have greater work/study experience and/or familiarity with Canada,” the report notes.

“This trend, combined with larger in-situ communities that provides a more supportive social network, means that new immigrants are coming into a more receptive environment, facilitating their labour market transition.”

— with files from The Canadian Press

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