Labor Market Discrimination

Answer

• Labor Market Discrimination

  Summary

  Philip Oreopoulos, in his study “Why Do Skilled Immigrants Struggle in the Labor Market? A Field Experiment with Six Thousand Resumes,” evaluates why immigrants to Canada struggle in the job market as well as the reasons that cause the unemployment rate among immigrants to be twice as higher as that of non-immigrants. The study, which evaluates resumes sent in response to an online job posting, revealed labor market discrimination, especially from employers. Notably, after control for education, labor market experience, training, hours worked, industry, and occupation, Oreopoulos finds out that request rates for an interview for applicants with English names, Canadian education, and experience were higher by three times than those with non-English names, foreign education, and experience. Therefore, there is a considerable rate of employer discrimination against applicants with ethnic names in the Canadian labor market.

  Preference-Based Economic Discrimination

  Economic discrimination in the labor market takes a preference approach. In this regard, individual preferences affect their choices and decision in hiring or integrating other individuals into the workforce. In Canada, after correcting for training, education, labor market experience, industry, occupation, and hours worked, preference-based economic discrimination types that continue to exist comprise employer discrimination, co-worker, and customer preferences.

  Employer discrimination explains circumstances in which employers prefer to work with specific workers that differ from others based on observable characteristics such as gender, age, ethnicity, or race. In this regard, employers will hire workers from categories they prefer and offer them the right conditions, such as better pay and fringe benefits. On the other hand, workers from unpopular categories will rarely get hired by discriminative employers. In case they get hired, they will be offered less attractive features such as lower salaries, no fringe benefits, or even limited promotion.

  Co-worker discrimination emerges from a situation where employers prefer to work with individuals having specific characteristics. For instance, workers may choose to work with others from a dominant category, such as males. As such, they will be happy if more males are hired as compared to females. The preference can affect employment decisions as the managers recognize that hiring employees who will sync easily with the current workforce thereby leads to increased productivity compared to forcing them to work with employees they do not prefer.

  Customer-based discrimination emerges from the preferences of clients. In this regard, some clients may prefer to make purchases from specific sellers or service providers only. For instance, customers in category A may only like to buy from group A sellers. In this regard, when they buy from group B sellers, they feel that the level of utility they receive is less even if the products are the same. The experience affects the profitability and sales in the market, translating to having adverse long-term impacts.

  The finding by Oreopoulos regarding why immigrants struggle in the labor market is a reflection of employer discrimination. In this regard, employers appear to prefer individuals with English names over those with on-English names. As such, they hire the majority of non-immigrants. Similarly, they prefer the Canadian labor market experience.

  Earning Differentials

  Oreopoulos details that median wages for recent immigrants in Canada are 35% less than that of non-immigrants. Moreover, there is evidence indicating little possibility of these variance reducing. Before 1970, the wage gap between immigrants and natives was at a maximum of 15%, and the gap would eventually fill up. However, since 1990, the wage gap has expanded to about 25%. The growth continued, and now it’s around 35%, with projections inducting that it could go as high as 45%. Notably, the highest ratio of income between recent immigrants to non-immigrants is 2:3, indicating that for every dollar earned by an immigrant, a non-immigrant earned $1.49.

  Immigration Policy

  Canada’s immigration policy currently focuses on attracting immigrants with the highest levels of education, industry demand, and experience. The policy aims to offset the expected labor shortages in the future, which will be vital in maintaining and fostering economic growth. As such, the nation mainly utilizes a point system when evaluating immigrants. In this regard, they are ranked based on language ability. Highest educational qualification, previous work experience, age, experience working or studying in Canada, and if they have any cash at hand. Whereas this approach helps the nation attract educated, skilled, and qualified immigrants, conditioning based on the highest degree, Canadian education and experience creates a wage gap between immigrants and non-immigrants. Notably, there appears to be a prejudiced preference for Canadian labor experience and education by employers. Similarly, there is mistrust of outside labor experience as details about the employers and tasks performed remain scanty.

  Based on these factors, it will be prudent for Canada to change its settlement policy. In this regard, the immigration policy should remain the same as it is ideal in attracting individuals with superior skills and experience. However, the settlement policy should change to eliminate perceived differences between immigrants and non-immigrants based on their education and experiences. In this regard, the settlement policy should require immigrants to either pursue additional training or seek internships for some period after getting into Canada. The approach will allow them to have Canadian education, labor market experience, and industry exposure that is similar to non-immigrants. As such, conditioning will not exist in the labor market, a factor that will have a reducing effect on the current wage gap.