Report finds immigrant wage gap costing Canada $50 billion a year in GDP

wage gap

The growing wage gap between immigrants and Canadian-born workers is costing the country $50 billion each year, according to a new report from RBC Economics.

The study, set for release Wednesday, found that new Canadians earn 10 per cent less on average than workers born on Canadian soil, a gulf that spans age, gender, region and occupation.

The problem stems from a failure to adequately recognize credentials and work experience abroad, said Dawn Desjardins, deputy chief economist at RBC Economics.

About 38 per cent of university-educated immigrants aged 25 to 54 work at a job that fits their education level, compared with more than half of their Canadian-born counterparts.

"That means we're not really maximizing that education, but as well we're not necessarily maximizing the experience that some of these workers have," Desjardins said in a phone interview.

"We're not really correctly valuing their contribution to Canada's economy, to the labour market. And therefore we're leaving on the table, I would say, some of this excess return we could be accruing to the economy overall."

More than half of the earnings gap – the shortfall is 18 per cent for immigrants aged 45 to 54 with a bachelor's degree or higher – is due to employers discounting work experience gained in other countries, she said.

The gap in median earnings is nothing new but has risen over the past three decades, climbing to 10.3 per cent in 2016 from 3.8 per cent in 1986.

The study notes that Canada remains popular among – and reliant upon – immigrants. A recent Gallup poll found that the country came in second only to the U.S. as a desired destination.

"Pretty good for a country of 37 million with a long winter," the RBC report states.

Immigrants make up one-fifth of Canada's population, a number that's expected to rise to 28 per cent by 2036, according to the study, titled "Untapped Potential."

"Canada needs to close its immigrant wage gap," it states, arguing that doing so would boost the country's annual GDP by as much as 2.5 per cent, or about $50 billion.

Desjardins said the government should upgrade its credentials assessments, help employers recognize foreign work experience and devote more resources to aiding immigrants' transition into the workforce.