The Economic Performance of Children of Immigrants Relative to Children of Natives in Canada

This paper examines that labour market performance of children of immigrants (second generation) relative to that of children of natives (third generation) in Canada using a Blinder-Oaxaca decomposition method. The methodology allows for the difference in the average wage of second generation Canadians and that of third generation Canadians to be decomposed into explained component (that reflects differences in human capital characteristics such as experience and educational attaintment) and an unexplained component (that reflect difference in returns to human capital). On the whole, the results indicate that second generation Canadians (both sexes) earn about 6% to 10% more than third generation male and female Canadians. Most of the positive earning gap is attributed to difference in observable characteristics such as higher educational attainment and the higher concentration of second generation Canadians in Census Metropolitan Area's (CMA's) and high wage provinces such British Columbia. Also observed is that second generation Canadians enjoy a work experience premium relative to third generation Canadians of the same age