The Labour Market Adjustment Of Foreign-Born Workers In Canada: A Multinomial Logit Model Of Employment Status

Abstract

This paper examines how the employment profile of newcomers to Canada differs from that of the native-born, controlling for human capital and other individual characteristics, and whether that profile converges to that of the native-born as the length of residence in Canada increases. These questions are important for understanding whether (and the extent to which) foreign workers adjust to Canadian labour markets. They also have significant policy relevance, given that demographic trends in the country suggest that immigration will likely be an even more significant contributor to labour force growth in the years ahead. The econometric tool we employ is the multinomial logit model, which is estimated using data from the 2001 Census of Canada. Employment status, which is a categorical variable with several dimensions, is explained in terms of human capital, demographic and other individual characteristics, with additional controls for immigration status and variables intended to capture the impact of the length of residence of foreign workers in Canada. Since foreign workers are themselves a disparate group, entering Canada with very different socio-economic characteristics, with the potential for very different paths of subsequent adjustment to host country labour markets, we consider several foreign-born groups. This is important for capturing differences that reflect the shift in immigration away from traditional sources (e.g. the U.K) to non-traditional sources (e.g. Asia), and the implications for labour market activity and outcomes.