The Decomposition of Wage Differentials between Immigrants and Natives in Canada

Abstract

This paper brings new evidence to the existing literature on earnings differentials and decomposition of wage difference for immigrants and natives. The paper exploits the most recent September 2020 Labor Force Survey, which is the nationally representative sample of both foreign and Canadian employees. The Blinder-Oaxaca decomposition technique is applied to a sample of 37,708 (of which 6,516 are immigrants). Wage differentials between immigrants and natives are decomposed into the gap related to characteristics and the one due to different returns on endowments and unexplained difference. Controlling for provinces and specified occupations, the average hourly wage of immigrants is $1.617 less than native Canadians, the explained variables coefficient of $1.633 can explain almost all the wage differentials; while the unexplained variables widen the wage gap to -$3.23 and it cannot be explained by difference in observed characteristics and this large proportion is explained due to geographic discrimination assessed by native and immigration workers.