The Colour of Money: Earnings Differentials among Ethnic Groups in Canada

Abstract

Abstract. The literature on ethnically based earnings differentials in Canada has focused on differences either between whites and visible minorities or between particular ethnic groups. In this paper we examine both earnings differentials between whites and visible minorities, and earnings differentials within the white and visible-minority groupings. Among both men and women we þnd substantial earnings differentials both between and within the white and visible-minority groupings. Differentials between whites and visible minorities suggest that the visible-minority category is a useful indicator of economic discrimination. Differentials within these groupings, however, suggest that it is only a rough indicator.

The Relative Earnings of Visible Minorities in Canada

“…Our aggregated sample results are consistent with the earnings-gap decomposition results reported in the earlier Pendakur and Pendakur (1998) study which draws on data from the 1991 Census. In 1991, visible minority immigrant men reportedly had an earnings deficit of 14.2 percent relative to their white counterparts, 14 a finding virtually identical to that in the present study based on 1996 Census data.…”

“…However, the two studies yield vastly different estimates of the earnings deficit for native-born South Asians: While we find that the earnings of native-born South Asians converge sharply with the earnings of whites, Baker and Benjamin (1997) find a sharp divergence. The findings in Pendakur and Pendakur (1998) are more consistent with our findings, but it should be noted that all three estimates are based on very small sample sizes.…”

“…Although this nonequivalence may simply reflect discriminatory employer behaviour, it may also be a recognition that the human capital acquired in the home-country may have a country-specific component that would be lost on arrival in Canada (Baker and Benjamin 1994: 396). Pendakur and Pendakur (1998) find that employers indeed differentiate between foreign and Canadian schooling, but such differentiation appears very erratic and does not necessarily focus on visible minorities. 7 However, Hum and Simpson (1999), using data that enables them to distinguish between work experience and schooling acquired in Canada and the home country, find that while education matters regardless of its source, work experience has a positive effect on earnings only if it is obtained in Canada.…”

“…Such analysis is beyond the scope of this article. However, Pendakur and Pendakur (1998) take such heterogeneity into account. They find significant variations in earnings deficits among individual white ethnic groups.…”

“…Baker and Benjamin (1997) (specification 3) estimate earnings deficits of 19.4 and 15.7 percent, respectively, for immigrant and nativeborn men, Pendakur andPendakur (1998), 22.2 and17.4 percent, respectively, andHum andSimpson (1999), 21.3 and 24.1 percent, respectively. It thus appears that there has been little change between 1991-96 in the relative returns Black men receive for their productivity-related characteristics.…”