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

1. Peter S. Li Department of Sociology University of Saskatchewan Canada The Role of Foreign Credentials and Ethnic Ties in Immigrants’ Economic Performance

2. 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

3. 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”

4. 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

5. 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

6. 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?

7. 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

8. 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 not Included • Only immigrants • 25-64 years of age Working sample has 2.56 million weighted cases, 53% men, 47% women

9. 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

10. 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)

11. 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

12. Measurement of Compensatory Effect of Ethnic Ties for Human Capital Deficit: Example Dummy variables for ethnic friends: D1: all/most friends same ethnic ancestry D2: half friends same ethnic ancestry Reference 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]

13. Specification D.V. Immigrants’ employment earnings in 2000 I.V. • Ethnic origin (6 dummy variables, ref. group--British • Number of weeks worked in 2000 • Worked full-time or part-time (1,0) • CMA (Census Metropolitan Area-- 1,0) • Total years of schooling • Foreign credentials (1,0) • Foreign credentials x visible minority status • Speak official languages (1,0) • Years of Foreign experience • Years in Canada • All/most friends with same ethnic ancestry

14. 12. Half friends with same ethnic ancestry 13. All/most coworkers with same ethnic ancestry 14. Half coworkerss with same ethnic ancestry 15. All/most members in organization same ethnic ancestry 16. Half members in organization same ethnic ancestry 17. Few/none members in organization same ethnic ancestry 18. 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 members 21. VM, foreign credential x Half members 22. VM, foreign credential x Few/none members

15. Four Models for Men and Women • Effect of ethnic/racial origin on earnings • Effect of ethnic/racial origin + human capital on earnings • Effect of ethnic/racial origin +human capital + social capital on earnings • Effect of ethnic/racial origin +human capital + social capital on earnings + interaction effects on earnings

20. 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)

21. Empirical Conclusions • Literatures identified 2 factors to explain declining earnings of immigrants: devaluation of foreign credentials and shifting origin • Substantial variations in gross earnings among different origins, but much difference due to human capital and work features • Foreign credentials of majority members brings a premium, those of VM, a penalty • Effects of forms of social capital on earnings weak; overall suggest an assimilation effect • No evidence of negative effect of foreign credentials held by VM can be mitigated by social capital

22. 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