Decreasing the Recent Immigrant Earnings Gap: The Impact of Canadian Credential Attainment

It is well documented that newly arrived immigrants face a significant earnings gap relative to native-born workers. One way for new immigrants to improve their relative labour market position upon arrival in a host country is to improve their educational credentials. According to signalling theory, a host-country credential should provide employers with a proxy for true productivity on the job, leading to higher earnings. Using data from a Canadian longitudinal survey, we employ longitudinal growth-curve techniques to estimate the effect of receiving a Canadian educational credential on the income growth of racial-minority recent immigrants compared to native-born Canadians. The results indicate that the earnings gap between recent immigrants and native-born Canadians is significantly reduced with the attainment of a Canadian educational credential.