Immigrant Skill Selection and Utilization: A Comparative Analysis for Australia, Canada, and the United States

Immigrant Skill Selection and Utilization: A Comparative Analysis for Australia, Canada, and the United States Andrew Clarke University of Melbourne Mikal Skuterud University of Waterloo CRDCN National Conference October 2-3, 2013 Waterloo, Ontario

Introduction Large immigrant receiving countries: Australia, Canada, United States Global war for talent skill-biased technical change less likely to rely on social assistance and pay more taxes than less skilled immigrants their children are more successful more innovative Differences in immigrant selection and settlement policies. Which policies: attract highly skilled immigrants? efficiently utilize immigrant s skills?

Difference in Immigrant Selection & Settlement Policies Australia & Canada points system: select economic immigrants on basis of observable skills: age, education, occupation, language Australia: pre-migration mandatory language testing, greater emphasis on pre-arranged employment, formal credential recognition, limited unemployment benefits United States unlimited family immigrants limited employer sponsored immigrants Institutions Australia & Canada generous redistribution systems, public health generous minimum wages United States: higher reward for skill? Immigrant Self-Selection

Research Questions 1 Are the differences in immigrants skill and the labour market returns to these skills in Australia, Canada, U.S. consistent with differences in their policies? 2 Is there evidence that Australia s and Canada s selective points systems have lead to greater immigrant skills than the U.S.? 3 How effective are the Australian & Canadian selective points system in allocating immigrant skills across jobs? 4 Have the Australian immigration reforms of the 1990 s led to better selection & integration of immigrants? 5 Could the US benefit from moving to a selective points system like Australia & Canada?

Family Class Flows, Australia, Canada, and the U.S. Family Class: Share of Recent Permanent Arrivals 1993-2006 0 Share of Recent Permanent Arrivals.1.2.3.4.5.6.7 1993 1995 1997 1999 Year 2001 2003 2005 Share: Australia Share: United States Share: Canada

Assessed Economic Class Flows, Australia and Canada Economic/Employer Class: Share of Recent Permanent Arrivals 1993-2006 0 Share of Permanent Arrivals.1.2.3.4.5.6.7 1993 1995 1997 1999 Year 2001 2003 2005 Share: Australia Share: United States Share: Canada

Refugee Class Flows, Australia and Canada Refugee Class: Share of Recent Permanent Arrivals 1993-2006 0 Share of Permanent Arrivals.1.2.3.4.5.6.7 1993 1995 1997 1999 Year 2001 2003 2005 Share: Australia Share: United States Share: Canada

Earlier Evidence Antecol, Cobb-Clark, Trejo (JHR, 2003) Focus on skill of immigrants to Australia, Canada, and the USA compare language skills, education, income using 1990/1991 population census immigrants in Australia & Canada have better language skills, more education, higher income relative to immigrants in the USA conclusion: source-country composition matters caveats: years of schooling poor proxy for foreign-educated income differences reflect differences in immigrant skill as well as utilization of skill four-point self-reported measure of language skills

Earlier Evidence Ferrer, Green & Riddell (JHR, 2006) IALS 1994: compare literacy/cognitive skills of immigrants & native-born in Canada only differences in literacy explain large portion of wage-gaps of foreign trained immigrants no evidence of different returns to these skills for immigrants and native-born workers cannot make international comparisons This paper: use later Adult Literacy & Life Skills Survey (ALLS) for Australia, Canada, USA updates & corroborates conclusions in Antecol et al. (2003) using continuous measure of skill provide estimates of returns to measured skill in Australia, Canada, USA

Data: Adult Literacy & Life Skills Survey provides measures of literacy & numeracy as well as detailed information on: demographics labour force activities survey designed for international comparisons: each country used the same psychometric test to measure skill domains sampling frame: non-institutionalised civilian population data collection: Australia: July 2006-January 2007 Canada: March 2003-September 2003 United States: January 2003-June 2003 respondent s completed written task to assess their proficiency in several skill domains: prose literacy, document literacy, numeracy

Data: Adult Literacy & Life Skills Survey 1 Prose Literacy: knowledge/skills needed to understand & use information from text (news stories, instructions manuals etc...) 2 Document Literacy: knowledge/skills required to locate & use information contained in various formats (job applications, forms, maps, tables, charts etc...) 3 Numeracy: knowledge/ skills required to effectively manage and respond to the mathematical demands of diverse situations.

Data: Adult Literacy & Life Skills Survey Outcome measures: 1 probability of employment: 1 held a job in previous 12 months? 2 employment status in reference week 2 hourly wage in main job held in the previous 12 months Sample restrictions: individuals aged 18-64, exclude students, self employed immigrants: arrived after 1955, age at immigration 14+ country of birth not available for US sample: use first language learnt & understood groups: native mother tongue, foreign mother tongue in US: Spanish foreign mother tongue, other foreign mother tongue

Sample Characteristics: Table Native-Born 2: Sample Characteristics Native-Born Australia Canada USA N Mean N Mean N Mean Female 2,669 0.511 7,567 0.508 1,312 0.527 Age 39.096 40.010 40.560 18-24 590 0.170 1,745 0.138 308 0.133 25-34 1,141 0.234 2,522 0.217 522 0.208 35-44 1,200 0.234 3,486 0.258 583 0.258 45-54 1,039 0.205 3,455 0.237 537 0.233 55-64 894 0.157 2,294 0.150 417 0.169 Education Less than High School 1,653 0.318 3,328 0.172 308 0.115 High School 787 0.183 3,032 0.250 624 0.327 Certificate & Diploma 1,410 0.298 5,004 0.386 793 0.302 University 1,014 0.200 2,138 0.192 642 0.257 Occupation White Collar 1,601 0.329 4,354 0.352 853 0.360 Clerks & Sales 1,129 0.232 3,249 0.253 540 0.228 Skilled Blue Collar 577 0.119 2,255 0.183 375 0.158 Unskilled Blue Collar 257 0.053 888 0.054 153 0.065 Not Employed Last 12 Months 1,300 0.267 2,733 0.158 446 0.188 Notes: For Australia and the United States, individuals are characterised as having a native mother tongue if English was their first language learnt and understood. For Canada, a native mother tongue is defined for either English or French. Recent immigrants are defined as foreign-born individuals that have resided in the destination country for less than 10 years. The sample means are weighted using the available population weights.

Sample Characteristics: Table Immigrants 3: Sample Characteristics Immigrants Australia Canada USA N Mean N Mean N Mean Female 630 0.523 1,195 0.515 137 0.520 Age 44.587 43.510 38.822 18-24 40 0.046 95 0.045 24 0.086 25-34 188 0.183 411 0.207 80 0.296 35-44 311 0.260 649 0.278 83 0.321 45-54 304 0.267 565 0.255 43 0.186 55-64 301 0.244 452 0.216 28 0.111 Education Less than High School 261 0.230 320 0.166 87 0.302 High School 182 0.179 437 0.200 38 0.193 Certificate & Diploma 321 0.264 659 0.312 53 0.192 University 380 0.327 756 0.322 80 0.313 Occupation White Collar 377 0.330 675 0.281 62 0.240 Clerks & Sales 224 0.196 438 0.196 47 0.182 Skilled Blue Collar 115 0.101 362 0.187 52 0.202 Unskilled Blue Collar 71 0.062 161 0.080 26 0.101 Not Employed Last 12 Months 357 0.312 533 0.256 71 0.275 Notes: For Australia and the United States, individuals are characterised as having a native mother tongue if English was their first language learnt and understood. For Canada, a native mother tongue is defined for either English or French. Recent immigrants are defined as foreign-born individuals that have resided in the destination country for less than 10 years. The sample means are weighted using the available population weights.

Sample Characteristics: Immigrants Table 4: Sample Characteristics Immigrants Australia Canada USA N Mean N Mean N Mean Immigrants All Immigrants 1,144 0.205 2,172 0.182 258 0.117 Native Mother Tongue 533 0.405 547 0.228 36 0.157 Other Mother Tongue 611 0.595 1,625 0.772 Spanish Mother Tongue 125 0.443 Non-Spanish Mother Tongue 97 0.400 Recent Immigrants 431 0.388 1,076 0.440 111 0.438 Recent: Native Mother Tongue 178 0.137 180 0.078 15 0.073 Recent : Other Mother Tongue 253 0.251 896 0.364 Recent: Spanish Mother Tongue 56 0.201 Recent: Not-Spanish Mother Tongue 40 0.164 Not Recent: Native Mother Tongue 355 0.267 367 0.152 21 0.084 Not Recent : Other Mother Tongue 358 0.344 729 0.408 Not Recent: Spanish Mother Tongue 69 0.242 Not Recent: Not-Spanish Mother Tongue 57 0.236 Notes: For Australia and the United States, individuals are characterised as having a native mother tongue if English was their first language learnt and understood. For Canada, a native mother tongue is defined for either English or French. Recent immigrants are defined as foreign-born individuals that have resided in the destination country for less than 10 years. The sample means are weighted using the available population weights.

Mean AverageTable Skill: 6: Mean Native-Born Skill Across Selected Sample Characteristics Native-Born Australia Canada USA Mean Jackknife Mean Jackknife Mean Jackknife Std. Err Std. Err Std. Err Full Sample 282.285 0.935 283.856 0.729 271.737 1.214 Gender Male 282.788 1.432 284.075 1.405 273.478 1.775 Female 281.803 1.078 283.643 0.866 270.176 1.555 Age 18-24 282.262 2.175 289.227 2.223 267.011 3.286 25-34 290.513 1.635 296.334 1.477 279.877 2.039 35-44 288.973 1.368 286.559 1.760 274.895 2.180 45-54 281.305 1.709 280.512 1.271 271.371 1.792 55-64 261.338 2.228 261.506 2.001 261.107 2.613 Education Less than High School 249.994 1.439 236.981 1.666 218.061 3.293 High School 295.191 1.563 276.874 1.225 257.225 2.102 Certificate & Diploma 282.223 1.329 291.581 0.920 274.057 1.457 University 321.866 1.358 319.410 1.439 311.443 1.707 Occupation White Collar 306.961 1.119 307.053 0.824 294.622 2.219 Clerks & Sales 281.750 1.348 282.960 1.254 267.450 1.910 Skilled Blue Collar 266.390 2.159 275.351 2.077 256.720 2.993 Unskilled Blue Collar 256.253 3.496 254.009 3.094 245.432 5.074 Not Employed Last 12 Months 264.563 253.335 2.324 254.810 Notes: The sample means are weighted using the available population weights. Some notes here about the replicate weights.

Mean Average Skill: Immigrants Table 7: Mean Skill Across Selected Sample Characteristics Immigrants Australia Canada USA Mean Jackknife Mean Jackknife Mean Jackknife Std. Err Std. Err Std. Err Full Sample 252.856 2.540 245.395 2.431 224.687 3.845 Gender Male 263.045 3.599 252.416 3.759 227.911 7.183 Female 243.567 3.023 238.789 2.750 221.710 5.398 Age 18-24 261.957 8.852 249.568 6.919 219.792 10.907 25-34 271.966 4.732 262.451 4.683 219.771 6.697 35-44 259.131 3.832 249.974 3.303 236.498 8.122 45-54 247.762 4.569 241.285 4.589 219.950 7.651 55-64 235.724 5.612 227.111 3.649 215.303 10.710 Education Less than High School 202.297 4.805 182.015 3.299 179.349 3.989 High School 233.177 4.803 222.876 3.332 208.654 7.400 Certificate & Diploma 258.298 3.312 254.875 2.581 218.214 6.455 University 294.780 2.326 282.932 2.722 282.202 6.341 Occupation White Collar 291.601 2.882 287.971 2.874 272.461 5.347 Clerks & Sales 259.483 3.024 251.987 3.612 218.303 8.878 Skilled Blue Collar 229.099 6.845 220.576 5.303 181.981 3.721 Unskilled Blue Collar 213.680 9.316 204.854 4.559 191.608 10.649 Not Employed Last 12 Months 223.227 224.225 4.390 230.586 Notes: The sample means are weighted using the available population weights. Some notes here about the replicate weights.

Mean Average Skill: Immigrants Table 8: Mean Skill Across Selected Immigrant Sample Characteristics Australia Canada USA Mean Jackknife Mean Jackknife Mean Jackknife Std. Err Std.Err Std. Err All Immigrants 252.856 2.540 245.395 2.431 224.687 3.845 Native Mother Tongue 284.601 2.291 269.785 4.895 270.717 8.600 Other Mother Tongue 231.283 3.352 238.202 2.606 Spanish Mother Tongue 188.699 4.071 Non-Spanish Mother Tongue 246.497 7.682 Recent Immigrants 267.551 3.582 249.539 3.600 225.887 4.825 Not Recent Immigrants 243.525 3.621 242.144 2.741 223.751 5.006 Recent: Native Mother Tongue 297.866 3.083 270.323 9.969 284.098 10.254 Recent : Other Mother Tongue 250.994 5.038 245.213 4.142 Recent: Spanish Mother Tongue 183.848 6.554 Recent: Not-Spanish Mother Tongue 251.341 10.185 Not Recent: Native Mother Tongue 277.795 3.301 269.517 5.157 258.997 9.320 Not Recent : Other Mother Tongue 216.898 4.742 231.957 2.832 Not Recent: Spanish Mother Tongue 192.722 4.332 Not Recent: Not-Spanish Mother Tongue 243.125 9.273 Notes: For Australia and the United States, individuals are characterised as having a native mother tongue if English was their first language learnt and understood. For Canada, a native mother tongue is defined for either English or French. Recent immigrants are defined as foreign-born individuals that have resided in the destination country for less than 10 years. The sample means are weighted using the available population weights. Some notes here about the replicate weights.

Mean Average Skill: Immigrants Distribution of Immigrant Literacy Skills All immigrants Recent immigrants 100 150 200 250 300 350 0 20 40 60 80 100 Percentile 100 150 200 250 300 350 0 20 40 60 80 100 Percentile Australia Canada USA 100 150 200 250 300 350 Immigrants with a foreign mother tongue 0 20 40 60 80 100 Percentile 100 150 200 250 300 350 Recent immigrants with a foreign mother tongue 0 20 40 60 80 100 Percentile Australia Canada USA - Spanish USA - Other

Summary: Immigrant Skill little to distinguish immigrants with a foreign mother tongue in the three countries no evidence that selective points system led to higher immigrant skills in Australia & Canada some evidence Australian immigration reforms improved skills between 20th-40th percentiles (where reforms are binding) Lessons for the United States: current policy successful in attracting high quality non-spanish immigrants, particularly above the 70th percentile move to points system would mainly be binding for Spanish immigrants but unlikely to raise skills of non-spanish (not-binding) points system for legal immigrants: unable to raise skills of undocumented immigrants from Mexico?

Relative Log Wages: Immigrants & Native-Born Econometric Model ln w i = β 0 + β s skill i + β sm (skill i M i ) + β m M i + X β + ε i Note: No controls for education. Why? Four Models 1 immigrant dummy 2 recent/not-recent immigrants 3 native/foreign mother tongue 4 recent/not recent interacted with native/foreign mother tongue

Relative Log Wages: Immigrants & Native-Born Unconditional Wage Gap no evidence of wage gap for non-spanish foreign mother tongue in US largest wage gap for Spanish foreign mother tongue in US foreign mother tongue: wage gap larger in Canada than Australia Returns to Average Skill returns to a average skill highest in US, lowest in Australia consistent with labour market institutions Immigrant Return to Average Skill lower relative return to skill for foreign mother tongue to Australia higher relative return to average skill for non-spanish foreign mother tongue to USA Canada in the middle but imprecisely estimated

Relative Log Wages: Immigrants & Native-Born Table 10: (Log) Wages Australia Canada United States Spanish Not Spanish coeff. coeff. coeff. coeff. coeff. All Immigrants Average Skill 0.0374 a 0.0438 a 0.0492 a Average Skill*Immigrant 0.0057 0.0058 0.0135 c Immigrant 0.0335 0.0606 c 0.1174 c Intercept 2.9948 a 2.6794 a 2.6862 a (Unconditional Wage Gap) 0.0636 b 0.2325 a 0.1747 a R 2 0.1723 0.2477 0.2852 No. Observations 4,351 12,729 2,108 Immigrants with Foreign Mother Tongue Average Skill 0.0373 a 0.0437 a 0.0492 a Average Skill*Immigrant 0.0112 b 0.0093 0.0034 0.0199 b Immigrant 0.0081 0.0873 b 0.0148 0.1248 c Intercept 3.0001 a 2.6830 a 2.6871 a (Unconditional Wage Gap) 0.1611 a 0.2897 a 0.4156 a 0.0438 R 2 0.1743 0.2488 0.2860 Recent Immigrants with Foreign Mother Tongue Average Skill 0.0372 a 0.0433 a 0.0492 a Average Skill*Immigrant 0.0134 b 0.0129 0.0326 0.0256 b Immigrant 0.0637 0.2047 c 0.1796 0.1485 Intercept 3.0031 a 2.6911 a 2.6873 a (Unconditional Wage Gap) 0.1932 a 0.4015 a 0.4250 a 0.0185 R 2 0.1758 0.2549 0.2873

Predicted Relative Wage Gap by Skill Score Recent immigrants with a foreign mother tongue -.6 -.4 -.2 0.2.4 100 150 200 250 300 350 Skill Australia Canada USA - Spanish USA - Other

Predicted Relative Wage Gap by Skill Score Less Skilled Immigrants US (and to a lesser extent Australian) labour markets successful in matching low skilled immigrants to low skilled jobs with low returns to skill Non-Spanish Foreign Mother Tongue why do these immigrants earn a higher return to skills, compared to natives or compared to Aus & Cdn immigrants? 1 matching: similar skills in all three countries but US labour market better at matching immigrant skills to jobs 2 selection on unobservables: Australian Immigration Reforms in the 1990 s no evidence that reforms improved utilisation of immigrant skill

Summary 1 very little to distinguish skills of immigrants with a foreign mother tongue. 2 some evidence Australian reforms have improved immigrant skills in the bottom tom of the skill distribution. 3 robust evidence that immigrants to the USA with a non-spanish foreign mother tongue receive a greater reward for their skills, relative to a similarly skilled native-born worker, and relative to a similarly skilled immigrant in Australia and Canada from a similar source country. consistent with selection on unobservables Lessons for US Immigration Reform move to points system unlikely to be successful in improving skills. Why?