New immigrants' incomes 'improved considerably' in recent years in Canada: report

New permanent residents' incomes compared to the general population have "improved considerably" over four years in Canada, according to Parliamentary Budget Officer Yves Giroux.

The Office of the Parliamentary Budget Officer (PBO) released its independent report Friday on how the median income of new immigrants changed and some of the underlying factors behind it. The PBO provides independent economic and financial analysis to Parliament aimed at budget transparency and accountability.

"The closing of the income gap corresponds with an increase in the number of temporary residents and better Canadian experience … that these recent immigrants have gained, either in the workplace in the labour market or through studying in Canada," said Giroux in a phone interview with CTVNews.ca on Friday. "So there seems to be a strong correlation there."

The report comes as Canada has increased its immigration targets substantially to 500,000 people yearly for 2025 and 2026, which is expected to boost its labour supply and economy over the long term.

The report uses income data on new immigrants a year after they acquired permanent resident status.

The new permanent residents saw their median income climb from 55 per cent of all Canadian tax filers to 78 per cent from 2014 to 2018.

Prior to this, median income rose from about 49 per cent of all residents in 2006 to about 89 per cent in 2013.

The increases were notable in 2015 and 2018 at 11 percentage points and nine percentage points, respectively. Moreover, temporary residents have seen rising wages since 2006.

"The labour market outcomes of new immigrants to Canada improved considerably during the 2010s," Giroux said in a news release. "This reverses some of the relative losses that new immigrants experienced during the 1980s and afterwards."

From around the 1960s through the 1970s, newcomers in Canada earned "somewhat similar" wages to Canadian-born residents, but their relative income began to decline in the 1980s. Data show immigrants had a median income that was consistently below 60 per cent of the income for all residents from 1990 to 2014.

REPORT FINDS TRENDS IN DATA

The underlying causes of the income gains were unclear, but the PBO found trends in the data that hinted at potential reasons.

One example is that some of these income gains occurred during a period when the number of immigrants with family connections in Canada grew, suggesting social networks were important factors.

Stephanie Bangarth, a history professor at King’s University College at Western University and a faculty research associate with the collaborative graduate program in migration and ethnic studies at Western University in London, Ont., said researchers have long noted that family links have a "great effect" on immigrant integration and retention.

"The latter is an important point – retention – as Canada has traditionally been valued as a gateway to the United States," Bangarth said in an email to CTVNews.ca. "By capitalizing on, and promoting more family connections in immigration, our retention of newcomers will be more successful. This is an area that the federal government needs to work on in a more concerted fashion."

Of the income gains between 2014 and 2018, about 85 per cent of them were attributed to prior work and study experience in Canada, according to the PBO report.

"Those already working in Canada before landing (becoming permanent residents) have a significant income advantage," the report noted. "This means that Canada has been attracting more individuals who are here temporarily … and gain higher levels of income while working. They then go on to become permanent residents."

The study found Canada welcomed growing numbers of temporary residents, which rose 44 per cent or by 112,000 people, excluding students and refugees, between 2014 and 2018. These residents often gain more work and study experience and become permanent residents, the report said.

The report found the new immigrants from 2014 to 2018 were mainly from India and were professionals such as engineers, teachers, accountants, physicians and applied scientists. Substantial numbers of newcomers also came from the Philippines and China. The source of immigrants from Asia shows a shift in immigration trends as Canada has historically welcomed immigrants mostly of European and American origins.

Additionally, residents from Ontario and British Columbia contributed the most to shrinking the income gap, the report noted.

RISING INCOMES MAY IMPROVE PRODUCTIVITY

The report identified Express Entry, a process that focuses on bringing skilled workers to Canada, as another possible source behind the increase in incomes.

Canada introduced Express Entry on Jan. 1, 2015. In 2017, the cut-off scores needed to qualify were reduced and the rise of then-U.S. president Donald Trump may have changed migration patterns in the United States and diverted immigrants to Canada, Giroux added.

"Events like the establishment of Express Entry system was not a game-changer per se, instead it was part of an evolution that has facilitated the integration of immigrants into the workforce," according to the report.

In the report, the PBO noted that immigration tends to hurt the measurement of economy-wide productivity over the short term. It estimated that immigration potentially contributed to lowering annual Canadian productivity growth by 0.21 percentage points between 1990 and 2014.

"When relative incomes of new immigrants are lower, their measured productivity is likely to be lower, especially in the initial years when they are not yet fully integrated into the Canadian workforce," the report said.

However, the rising incomes of newcomers could improve productivity growth, the findings suggest, since there is a connection between income and the market value of work.