Decreasing the recent immigrant earnings gap: the impact of Canadian credential attainment

It is well documented that newly arrived immigrants face a significant earnings gap relative to native‐born workers. One way for new immigrants to improve their relative labour market position upon arrival in a host country is to improve their educational credentials. According to signalling theory, a host‐country credential should provide employers with a proxy for true productivity on the job, leading to higher earnings. Using data from a Canadian longitudinal survey, we employ longitudinal growth‐curve techniques to estimate the effect of receiving a Canadian educational credential on the income growth of racial‐minority recent immigrants compared to native‐born Canadians. The results indicate that the earnings gap between recent immigrants and native‐born Canadians is significantly reduced with the attainment of a Canadian educational credential.