Decomposing Immigrants’ Economic Integration in Earnings Disparity: Racial Variations in Unexpected Returns

The discourse on immigrants’ economic integration often assumes that the human capital of immigrants determines the outcome of successful integration, measured as income parity with the native-born population. This paper decomposes the employment earnings of immigrants and native-born Canadians in Canada to see how much of income disparity may be attributed to human capital factors and how much to other factors. The findings indicate that immigrants have brought high levels of human capital to Canada, often surpassing those of the native-born, but immigrants under-perform in earnings because of other unexplained returns. The findings suggest that there are limits in using immigrant selection policy to increase the human capital content of immigrants as a means to achieve successful economic integration, and that other policies that influence how immigrants, especially those of minority origin, are treated in the labour market should be considered as a means to bridge income disparity.