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What Is to Blame for the Widening Racial Earnings Gap? - Globe and Mail Op-Ed

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November 14, 2017
What Is to Blame for the Widening Racial Earnings Gap? - Globe and Mail Op-Ed

Canada's labour force has become more diverse, but visible minorities as a whole still struggle to achieve parity in the labour market. ​

Canada's labour force has become more diverse, but visible minorities as a whole still struggle to achieve parity in the labour market. Even accounting for differences in individuals' characteristics, the data show that the slow process of integration for immigrants merits special attention.

More than one-fifth of Canadians are visible minorities – non-Indigenous and "non-Caucasian" in race or non-white in colour – according to the 2016 Census. Visible minorities earned only 81.2 per cent of what non-visible minorities earned in 2015 – a gap that has widened by 2.6 percentage points since 2000.

Education, work experience and occupation play important roles in earning outcomes, but they are not able to fully explain the earnings gap experienced by visible minorities.

Discrimination is often blamed for the remaining part of the gap. However, that answer is too easy. When we examine the economic outcomes of visible minorities in more detail to identify the root causes of the gap, we see that these outcomes depend more specifically on place of birth as well as race.

The 2016 census shows 63 per cent of visible minorities are immigrants, who earn less than both white non-immigrants and Canadian-born visible minorities. Immigration will continue to be a major contributor to the growth of the visible-minority population: Eighty-two per cent of immigrants who arrived in Canada during the period 2011-16 were visible minorities.

Visible minority immigrants face challenges such as language barriers, absence of Canadian work experience and lack of recognition for foreign education and experience that can affect their earnings. Immigrants' literacy and numeracy skills in Canada also lag non-immigrants', despite the large proportion of immigrants with university degrees. My recent study identified language ability as a major factor in immigrants' skills gap.

Further, a C.D. Howe Institute study showed that foreign-education quality affects the earnings outcomes of immigrants in Canada. Many studies fail to account for skills gaps and quality of foreign education in explaining part of the racial earnings gap, even among immigrants, because of lack of sufficient data. Thus, they may tend to interpret the results as the outcome of discrimination.

Mikal Skuterud at the University of Waterloo found that the process of integration among visible minorities is a long one, often involving multiple generations. But earnings do increase across successive generations of visible minorities, which is not the case among white males. Some non-immigrant visible minorities, black Canadians in particular, experience a pay gap after three generations while the rest achieve parity after the first or second generations.

Further, the geographic distribution of visible minorities can affect earning outcomes differently. Most visible minorities (56 per cent) reside in Canada's three largest metropolitan areas: Toronto, Vancouver and Montreal. The recent census reveals that visible minorities together represent "visible majorities" in some municipalities, such as Toronto (51.5 per cent), Markham (77.9 per cent) and Brampton (73.3 per cent). A study suggests that the growth of visible minority residents in a city has positive impact on their earnings. Conversely, however, another study shows visible-minority enclaves in a neighbourhood slow the integration process.

The overwhelming majority of visible minorities are South Asian (25 per cent), Chinese (21 per cent) and black (16 per cent). Labour market disparities also vary among these ethnic groups. Chinese employment earnings, on average, are 91 per cent of non-visible minority earnings while black earnings are about 73 per cent, according to the 2016 Census.

The visible-minority population will grow faster as Canada admits more migrants – most of whom will be visible minorities – in the coming years to maintain long-term economic growth in light of a rapidly aging demographic.

A strong economy needs a strong labour force with full participation of visible minorities. But this will require speedy integration of visible minority immigrants into the Canadian labour market. Without eliminating the barriers facing marginalized ethnic groups, combined with well-designed selection and settlement policies, such as stricter language screening and more accessible skills and language training, Canada will fail to capture all the potential benefits of a diverse labour market.

Parisa Mahboubi, PhD, is a senior policy analyst at the C.D. Howe Institute.

Published in the Globe and Mail

Author(s):

Parisa Mahboubi , Senior Policy Analyst
Parisa Mahboubi

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