Immigrant earnings profiles in the presence of human capital investment: Measuring cohort and macro effects

We argue that when immigrant earnings are considered in the context of post-arrival human capital investment: cohort quality should be defined in terms of the present value of the whole earnings profile; and, an appropriate definition of “macro” effects is obtained using the earnings profile of the native born cohort entering the labor market at the same time as an immigrant cohort. We illustrate this by using Canadian immigrant earnings, where there were large cross-cohort earnings declines in the 1980s, 1990s and early 2000s. We find that changes affecting all new entrants play an important role in understanding immigrant earnings. In contrast, earlier approaches imply that “macro” events explain little of immigrant earnings patterns.

► Immigrant cohort quality in Canada is analyzed using the present value of earnings.
► Changes affecting all new entrants are important in understanding immigrant earnings.
► Macro events are important when native born entry cohorts are the comparison groups.
► Much of cross cohort decline in immigrant earnings is explained by native born decline.