Education and Wage Gaps: A Comparative Study of Immigrant and Native Employees in the United States and Canada

TitleEducation and Wage Gaps: A Comparative Study of Immigrant and Native Employees in the United States and Canada
Publication TypeReport
Year of Publication2015
AuthorsSmith, William C., and Fernandez, Frank
Date Published2015///
InstitutionAmerican Institute for Research (AIR)
CityWashington, D.C.
KeywordsCanada, education, immigrants, wage gap

The United States and Canada are destination countries for immigrants, attracting more than half of all Organization for Economic Cooperation and Development (OECD) immigrants and two-thirds of the OECD immigrants who have received tertiary education. Initial comparisons of immigrant wages to their native peers using data the Program for the International Assessment of Adult Competencies (PIAAC) reveal within country immigrant wage gaps in these two countries with immigrants making, on average, over $200 less per month than their native peers. This study uses PIAAC to examine potential explanations for these immigrant wage gaps using an additive path analysis approach that allows us to match populations by occupational field and segment out the direct effect of immigrant status on wage from the indirect effect of immigrant status on wage through education and literacy and numeracy skills. Results suggest that factors attributing to the immigrant wage gap differ by country. In the U.S. immigrants are disproportionately concentrated in low wage jobs. Wage gaps disappear, however, once immigrants and natives in the U.S. are matched by occupational field. The strong link between education and wage in the U.S., combined with the immigrant educational attainment gap present in the country, suggests that to reduce the within country wage gap policies should be adopted that (a) aid persistence in education by supporting the transition of immigrants into the American education system, and (b) train educators to properly support learners that are culturally and linguistically diverse. The initial wage gap in Canada remains present in nearly all occupational fields suggesting that immigrants in Canada that work in the same field and have equivalent education and literacy and numeracy skills as their native peers earn significantly less money, controlling for key demographic variables. We conclude that in Canada, the wage gap results from underemployment, marginal returns on education and discriminatory wage practices.. These findings suggest that the point-based immigrant policy in Canada is successful in attracting highly educated immigrants but may fail to properly support them once they arrive in-country.