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The Role of Foreign Credentials and Ethnic Ties in Immigrants’ Economic Performance

Peter S. LiDepartment of SociologyUniversity of SaskatchewanCanada

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Questions Human Capital in Immigration Research

• Why some immigrants do not perform well in the labour market? Why recent cohorts of immigrants earned less than earlier cohorts relative to the native born despite higher education?

(1) Devaluation of immigrants’ foreign credentials, especially for non-white (interpretation varies)

(2) Compositional shift of new immigrant cohorts made up of an increasingly large proportion of Asians

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Implications

• Credential devaluation and compositional shift imply that earlier immigrant cohorts, mainly from Europe and US, had credentials more valued in Canada, and recent ones, mainly from Asian, African and non-European sources, had undervalued credentials

• A larger composition of immigrants from non-European sources will result in a larger pool of immigrants whose credentials are undervalued

• The above explain to some degree why recent cohorts earn less than earlier ones because more recent immigrants are more likely to carry a “human capital deficit”

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Debates on Social Capital

General agreement• A individual’s social capital or connections to a social

group can provide group-based resources to enable individual economic gains (Bourdieu, Coleman, Granovetter)

Disagreements:• Researchers stress different aspects of social capital:

trust (Putnam), social network or ties (Granovetter, Lin, Burt) group solidarity & reciprocity (Portes)

• The upside and downside of social capital

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The Nature of Social Capital

• Two components: (1) social relations developed in a social context; (2) potential resourcefulness of these relations that can be used like capital

• Social capital is specific to the social context in which individuals are located, effectiveness linked to the particular collective capacity and social structure

• Social capital can be enabling and limiting; it has potential and limit

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Debates on Ethnic Ties or Social Capital

• Some immigrants mobilize social relations to overcome hardships and to advance economic interests (ethnic entrepreneurship theory, enclave thesis)

• Literature also reports penalty of ethnic connectedness – The more ethnically connected, the less assimilated. Also, Wiley’s ethnic entrapment thesis

• Is ethnic connectedness or attachment enabling or disabling? Can ethnic social capital be used to compensate for human capital deficiencies?

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Ethnic Diversity Survey

• Post 2001 Census survey by Canadian Heritage and Statistics Canada

• Telephone interviews between April-August 2002• Respondents selected from those who completed 2001

Census long form (2B)• Target population persons age 15 or over living in private

dwellings in 10 provinces, excluding Aboriginal origins• Sample of 42,476 unweighted cases represents

23,092,642 weighted persons• A Public Use Sample File was released to universities,

and an analytic file was released to RDC

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Working Sample

Excluded• 5.2% did not complete survey or eliminated in interview

(e.g. Aboriginal origin)• Unpaid family workers or those did not answer working

or notIncluded• Only immigrants• 25-64 years of ageWorking sample has 2.56 million weighted cases, 53%

men, 47% women

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Model

Earnings = function of (1) Majority/minority ethnic categories(2) Human capital and work-related features(3) Ethnic social capital(4) Interaction between ethnic social capital and “human capital deficit”

Separate estimations were made for men and women

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Measurements of Some Key Concepts

• Education=years of schooling• Visible Minority (VM)=1 if non-white• Foreign credentials (FC)=1 if earned outside of Canada • Non-white foreign credentials (human capital deficit)

=VM x FC• Ethnic ties or ethnic social capital (dummy variables):

Friends same ethnic ancestry (all/most; half; few)Coworkers same ethnic ancestry (all/most; half; few)Belong to organization members same ancestry (all/most; half; few; don’t belong)

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Measurement of Years in Canada or Work Experience for Immgirants

(1) Years in Canada=Age – Age at immigration(2) Work experience=Age - 5 – Years of schooling(3) Work experience=Foreign Exp (FE)+Can Exp (CE)(4) FE=Age at immigration - 5 – Years of schooling

[If FE is less than 1, then no FE, or FE=0]

(5) Canadian exp (CE)=Work experience – FE=(2)-(4)=Age - 5 – Years of schooling – (age at immigration – 5 –

Years of schooling)=Age – Age at immigration=Years in Canada

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Measurement of Compensatory Effect of Ethnic Ties for Human Capital Deficit: Example

Dummy variables for ethnic friends:D1: all/most friends same ethnic ancestryD2: half friends same ethnic ancestryReference category: few or none Compensatory effect of all/most friends=D1 x VM x FC[If effect is + and significant=support for compensatory

effect; - and significant=further penalty; not significant=no effect]

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SpecificationD.V. Immigrants’ employment earnings in 2000I.V. 1. Ethnic origin (6 dummy variables, ref. group--British2. Number of weeks worked in 20003. Worked full-time or part-time (1,0)4. CMA (Census Metropolitan Area-- 1,0)5. Total years of schooling6. Foreign credentials (1,0)7. Foreign credentials x visible minority status8. Speak official languages (1,0)9. Years of Foreign experience10. Years in Canada11. All/most friends with same ethnic ancestry

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12. Half friends with same ethnic ancestry13. All/most coworkers with same ethnic ancestry 14. Half coworkerss with same ethnic ancestry15. All/most members in organization same ethnic ancestry16. Half members in organization same ethnic ancestry17. Few/none members in organization same ethnic

ancestry18. VM, foreign credential x All/most friends 19. VM, foreign credential x Half friends 20. VM, foreign credential x All/most coworkers 21. VM, foreign credential x Half coworkers 22. VM, foreign credential x All/most members21. VM, foreign credential x Half members22. VM, foreign credential x Few/none members

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Four Models for Men and Women

(1) Effect of ethnic/racial origin on earnings(2) Effect of ethnic/racial origin + human capital on

earnings(3) Effect of ethnic/racial origin +human capital + social

capital on earnings(4) Effect of ethnic/racial origin +human capital + social

capital on earnings + interaction effects on earnings

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Table 1: Effect of Human Capital and Ethnic Social Capital on Employment Earnings.For Majority and Minority Male Immigrants

Number ModelIndependent Variables [1] [2] [3] [4]Ethnic origin (reference group:Majority member British)

Visible minority: Chinese 166,376 -18,792 * -4,863 -5,383 -5,754Visible minority: South Asian 169,692 -12,934 * 144 -1,966 -2,144Visible minority: Black 48,409 -18,838 * -5,872 -9,549 * -9,975 *Visible minority: Other 176,090 -13,534 * -2,879 -3,983 -4,169Majority member: North and West Europe 129,653 -3,249 -753 -1,819 -1,894Majority member: Other 324,875 -8,068 * -1,731 -4,118 -4,643Majority member: British 137,884

No. of weeks worked in 2000 848 * 859 * 854 *Worked full-time 20,467 * 20,142 * 19,953 *CMA 4,945 4,284 4,519Total years of schooling 2,712 * 2,557 * 2,560 *Foreign credentials 6,803 * 6,809 * 7,033 *Foreign credentials x visible minority -8,105 * -8,484 * -9,978Speak official language 450 445 784Years of Foreign work experience 50 64 54Years in Canada 509 * 453 * 453 *Friends with same ethnic ancestry (reference group: Few or none)

All/Most friends with same ethnic ancestry -2,963 -3,358Half friends with same ethnic ancestry 1,290 372

Co-workers with same ethnic ancestry (reference group: Few or none)All/Most co-workers with same ethnic ancestry -6,022 * -8,150 *Half co-workers with same ethnic ancestry -4,720 * -5,988 *

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Table 1: Effect of Human Capital and Ethnic Social Capital on Employment Earnings.For Majority and Minority Male Immigrants

Number ModelIndependent Variables [1] [2] [3] [4]Belong to organizations with members same ancestry

(reference group: Not belong to any organization)All/Most members in organization same ethnic ancestry 11,370 * 15,937 *Half members in organization same ethnic ancestry -6,708 -9,688 *Few/None in organization same ethnic ancestry/Ethnicity unimportant 2,880 2,405

Foreign credentials, visible minority status x All/Most friends with same ethnic ancestry 2,354

Foreign credentials, visible minority status x Half friends with same ethnic ancestry 3,655

Foreign credentials, visible minority status x All/Most co-workers with same ethnic ancestry 6,238

Foreign credentials, visible minority status x Half co-workers with same ethnic ancestry 2,787

Foreign credentials, visible minority status x All/Most members in organization same ethnic ancestry -12,427 *

Foreign credentials, visible minority status * Half members in organization same ethnic ancestry 8,718

Foreign credentials, visible minority status x Few/None in organization/Ethnicity unimportant 3,067

Intercept 53,660 * -70,303 * -64,947 * -64,511 *R Square 0.022 * 0.205 * 0.220 * 0.224 *Note: * p< or = 0.05Source: Ethnic Diversity Survey, Analytical File, Research Data Centre. Sample weights were applied toobtain point estimates, and bootstrap weights provided by Statistics Canada were used to estimate variance.

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Table 2: Effect of Human Capital and Ethnic Social Capital on Employment Earnings.For Majority and Minority Female Immigrants

Number ModelIndependent Variables [1] [2] [3] [4]Ethnic origin (reference group:Majority member British)

Visible minority: Chinese 141,715 -5,732 * 3,529 4,041 4159Visible minority: South Asian 129,579 -5,620 * 2,873 1,930 2334Visible minority: Black 62,482 -6,198 * -3,536 -3,099 -2787Visible minority: Other 190,184 -7,249 * 2,105 -549 -205Majority member: North and West Europe 90,034 -5,127 * -385 -3,853 -3861Majority member: Other 270,941 -2,855 3,186 999 1194Majority member: British 127,284

No. of weeks worked in 2000 449 * 435 * 432 *Worked full-time 14,861 * 14,571 * 14623 *CMA 2,849 2,561 2501Total years of schooling 2,217 * 1,991 * 1988 *Foreign credentials 1,783 3,770 * 3956 *Foreign credentials x visible minority -3,030 -4,183 -5192Speak official language 4,891 1,508 1468Years of Foreign work experience 329 105 109Years in Canada 431 * 412 * 414 *Friends with same ethnic ancestry (reference group: Few or none)

All/Most friends with same ethnic ancestry -3,110 * -4249 *Half friends with same ethnic ancestry -2,345 -2218

Co-workers with same ethnic ancestry (reference group: Few or none)All/Most co-workers with same ethnic ancestry -1,975 -1293Half co-workers with same ethnic ancestry 2,737 2747

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Table 2: Effect of Human Capital and Ethnic Social Capital on Employment Earnings.For Majority and Minority Female Immigrants

Number ModelIndependent Variables [1] [2] [3] [4]Belong to organizations with members same ancestry

(reference group: Not belong to any organization)All/Most members in organization same ethnic ancestry 1,447 2415Half members in organization same ethnic ancestry -69 1112Few/None in organization with same ethnic ancestry/Ethnicity unimportant 4,424 * 4650 *

Foreign credentials, visible minority status x All/Most friends with same ethnic ancestry 2948

Foreign credentials, visible minority status x Half friends with same ethnic ancestry -402

Foreign credentials, visible minority status x All/Most co-workers with same ethnic ancestry -1461

Foreign credentials, visible minority status x Half co-workers with same ethnic ancestry -337

Foreign credentials, visible minority status x All/Most members in organization same ethnic ancestry -2272

Foreign credentials, visible minority status * Half members in organization same ethnic ancestry -4852

Foreign credentials, visible minority status x Few/None in organization/Ethnicity unimportant -752

Intercept 33,365 * -52,235 * -43,980 * -43,986 *R Square 0.008 * 0.225 * 0.280 * 0.281 *Note: * p< or = 0.05Source: Ethnic Diversity Survey, Analytical File, Research Data Centre. Sample weights were applied toobtain point estimates, and bootstrap weights provided by Statistics Canada were used to estimate variance.

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Key Findings

• VM immigrant men earned less than British immigrants, 18K less for Chinese and Black and 13K less for S Asian

• When human capital, work features controlled, disparities reduced, but VM men still earned less

• When social capital controlled, earnings rank order the same but smaller differences. Net effect of social capital varies---association with levels of friends same ancestry has no effect, but men with all/most coworkers suffer worst earnings penalty. But those belonging to organization with all/most members same ancestry earned more than those not belong to organization

• Most interactions have no effect, except VM foreign credentials x all/most member same ancestry (-12K)

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Empirical Conclusions1. Literatures identified 2 factors to explain declining

earnings of immigrants: devaluation of foreign credentials and shifting origin

2. Substantial variations in gross earnings among different origins, but much difference due to human capital and work features

3. Foreign credentials of majority members brings a premium, those of VM, a penalty

4. Effects of forms of social capital on earnings weak; overall suggest an assimilation effect

5. No evidence of negative effect of foreign credentials held by VM can be mitigated by social capital

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Theoretical Conclusions

• Foreign credentials of immigrants are racialized in that the racial background of holders of foreign credentials is being evaluated along with credentials

• Despite the emphasis on the positive economic effects of social capital in the literature, this study fails to find evidence to indicate that ethnic social capital can be used as a substitute for human capital in the process of immigrants adjusting to Canadian labour market