GLOBAL ECONOMICS
Patrick Grady
Recently Available 2016 Census Data Still Shows the Troubling Persistence of a Large Average Income Gap for Recent Immigrants
September 11, 2019
The 2016 Census data on average incomes in 2015 by immigration status and period of immigration was recently released. Even though it reflects a 5-per-cent non-response rate, it's the most comprehensive and best data on income available since it is based on the census long form filled out by a very large sample of one in four Canadian households and supplemented by the census itself for purposes of weighting as well as incorporating income information already available from the Canada Revenue Agency. The census data continues to show a large gap between the average income of recent immigrants (those arriving after 1991) who mostly came from non-traditional source countries, and who, on average, do much worse than those from the traditional source countries in Europe and the United States.
The relatively low incomes of recent immigrants have important implications for the financing of Canadian governments and indeed the sustainability of the Canadian welfare state. Low incomes go hand-in-hand with low taxes. Since recent immigrants receive roughly the same per-capita government goods and services as other Canadians, any deficiency in government revenues to pay for government spending must be made up through higher taxes or reduced spending on other Canadians (or in the short-run through increased borrowing).
The average incomes reported in the 2016 Census were low across all age groups of recent immigrants only averaging $38,074 compared to $49,511 earned by all non-immigrants (Chart 1). Even the average income of the age 45-54 group, which covers the immigrants' peak earning years, is low at $48,132 compared to the $66,688 earned by non-immigrants in the same age group. The incomes of older age groups of immigrants drop off sharply to $21,241 for recent immigrants age 65-74 and to a low of $16,714 for those over 75. These are poverty levels of income that would make it very difficult for these older immigrants to get by unless they are supported by their families.
The income gap between recent immigrants and non-immigrants is smallest for those age 25-34, but falls off precipitously to more than half for those over age 65 (Chart 2). Overall, recent immigrants only earn 76.9 per cent of non-immigrants. Recent immigration is thus contributing to an increase in inequality and poverty particularly among the elderly, which is a group that benefitted from substantial reductions in poverty over the years as a result of government and other pension plans. The problem for many senior immigrants is that they don't have a long enough work-life in Canada either to save enough money for retirement or to qualify for very large governmental or private pensions.
The income gap shrinks to less than 20 for those who have been in the country more than ten years (Chart 3). But even so, all cohorts of recent immigrants only earned slightly more than three quarters as much as non-immigrants.
Since the older immigrants are when they arrive in the country, the larger the income gaps they are likely to experience, it is interesting to consider the age structure of the recent immigrants in Canada in 2015, the year when the Census was taken (Chart 4). While the majority of them were under 45, there was still a substantial group of older immigrants. This is because immigrants age too after they enter the country.
It is also because a significant proportion of immigrants admitted to the country are older when they arrive (Chart 5). Even the most recent cohort of immigrants admitted between 2011 and 2014 included more than 180 thousand immigrants over the age of 45. So the much touted benefits from immigration in countering the aging of the Canadian population would seem to be vastly exaggerated given that many of the immigrants themselves are old.
It wouldn't be surprising to see the income gap grow even larger when the data from the next 2021 Census becomes available in 2024. The reason for this is twofold: first the Government has been increasing the number of immigrants admitted towards 350 thousand by 2021, up from 272 thousand in 2015; and second it has been shifting the mix of immigrants away from the economic class, who tend to perform better, to family class and refugees and asylum seekers who perform worse. This is a recipe for an increasingly large average income gap between recent immigrants and other Canadians, at least in the near future.
The full average-income data set is provided in tabular form along with the explanatory notes from Statistics Canada in the Appendix on Census 2016 Income Data.
