Training and the Earnings of Immigrant

Males: Evidence from the Canadian

Workplace and Employee Survey
n
Yoko Yoshida, McGill University
Michael R. Smith, McGill University
Objective. To improve on the existing research on earnings differentials between
visible minority immigrants and the native-born, and on the role of discrimination
in producing that difference. To do this we introduce into the analysis: (1) access to
training and (2) training effects on earnings growth. Method. Using a panel data
set containing information on training we test cross-sectional models of access to
training, cross-sectional models of wage determination, and panel models of
wage growth. Results. Visible minority immigrants are disadvantaged in both ac-
cess to training and earnings; education reduces the disadvantage; and they do better
than the other two groups in wage growth. Conclusions. Some results are consistent
with a discrimination interpretation but, considered together, the complete sets of
results are difcult to reconcile with any relatively straightforward discrimination
account.
Immigration is a major issue in most rich societies. Fertility is below the
replacement rate so, without immigration, total population will decline in
western Europe, North America, and Japan. This may undermine the -
nancing of social programs in most countries affected.
1
For immigrants to
replace the native-born they must be effectively integrated into employment
in their host societies. Changes in the sources of immigrants may have
hindered that integration. Across Western societies they have been increas-
ingly drawn from racial minority pools. Some research suggests significant
amounts of discrimination on the basis of race (e.g., Mason, 1997, 1999;
n
Direct correspondence to Michael R. Smith, Department of Sociology, McGill Univer-
sity, 855 Sherbrooke West, Montreal, Quebec, Canada, H3A 2T7 hmichael.smith@
mcgill.cai. Professor Smith will provide information on data and coding. The raw data is
regarded by Statistics Canada as condential. Access to it can be secured through application
to one of the Statistics Canada data centers located across Canada. For information on the
data center program, consult hhttp://www.statcan.ca/englihs/rdc/index.htmi. Helpful com-
ments on early work on this article were received from Morton Weinfeld, participants in
McGills Social Statistics Seminar, and at the session Lanalyse des donnees denquetes: acquis
et des pour lavancement des connaissances en sciences sociales held at the meetings of the
Association canadienne franc aise pour lavancement des sciences in Montreal in 2004.
1
See Sleebos (2003). For an alternative view, see McDaniel (2003).
SOCIAL SCIENCE QUARTERLY, Supplement to Volume 86
r2005 by the Southwestern Social Science Association
Coleman, 2003).
2
Insofar as this is the case, it would imply a waste of
immigrant talent; discriminatory employment practices reduce productivity
because those subject to them are to some degree excluded from jobs for
which their talent equips them.
3
Wage-gap decomposition is the standard method for estimating the
effect on earnings of immigrant status and race. It assumes that earnings
ought to vary with human capital. Earnings differences between groups after
controls for education, experience, and language skills are attributed to
discrimination in either access to jobs or within comparable jobs. Differ-
ences in earnings after controls for occupation, industry, and other job
characteristics are attributed to discrimination within comparable jobs.
4
Research using this method nds a significant racial minority immigrant
earnings disadvantage. For example, in the United States, similar earnings of
native-born whites and Asians is seen as evidence of discrimination because,
on average, Asians have more education than native-born whites (Hirsch-
man and Wong, 1984; Hurh and Kim, 1989; Tang, 1993, 2000). Research
in Canada using this method also suggests discrimination against racial
minority immigrantsin Canada, and in the rest of this article, referred to
as visible minority immigrants (e.g., Li, 2000, 2001; Pendakur and Pendakur,
1998; Reitz, 2001).
5
A counterargument says that where markets are competitive, employers
cannot afford to discriminate in either hiring or pay (Becker, 1957; Sowell,
2004:ch. 6). To do so is to forego profits and to risk being forced out of
business by competitors who refrain from discriminating and hire the best
available, at the best price.
6
In fact, recent research in both Canada and the
United States suggests smaller average differences in earnings as compared to
native-born whites than had previously been reported (e.g., Swidinsky and
Swidinsky, 2002; Zeng and Xie, 2004), and differences that are variable
across ethnic groups. Pay discrimination seems to be completely absent in
the highly competitive market for professional athletes (Singh, Sack, and
Dick, 2003).
2
Most of this research in the United States is concerned with historically disadvantaged
groupsAfrican Americans and Latinosbut the argument for discrimination on the basis
of race seems general. Some of this research does deal with immigrants.
3
This is the position of the Conference Board of Canada (2001).
4
The utility of this method for establishing discrimination is contested. Darity and Mason
(2004) argue in favor of evidence from court cases and audit studies. This latter involves
sending matched visible minority and nonvisible minority candidates to apply for jobs and
comparing the results. For a critique of audit studies, see Heckman (1998).
5
This genre of research assumes that discrimination is not present if people with the same
human capital have access to the same jobs and the same pay. Institutional discrimination
is a broader form of disadvantage (e.g., Healey, 2004:8689), often involving historically
accumulated disadvantages (e.g., concentration of residence in declining communities, poor
schools). Exploring the relevance of these to immigrants would require a separate article.
6
Heckman (1998:11112) argues that in the Becker model competition only eliminates
discrimination where normal profit tends to zero. As long as there is income from entre-
preneurial activity, employers can choose to indulge their discriminatory preferences.
Training and the Earnings of Immigrant Males 1219
Still, there is a core general nding across most of the research: in ag-
gregate, visible minority immigrant males are paid less than their native-born
counterparts because education and experience acquired in their country of
origin is less highly rewarded than education and experience acquired by
others (visible minority or white immigrant or native-born) in the host
country. Some studies suggest a rate of return to the overseas experience of
visible minority immigrants that is close to zero. This lower rate of return to
human capital is taken both as a gauge of discrimination and of a loss of
potential productivity.
In assessing the evidence provided in support of the various claims about
the extent of earnings discrimination, a major issue is the adequacy of the
measurement of productivity. Employee productivity is assumed to vary
with human capital. It is clear that the adequacy of measures of human
capital is highly variable and often downright inadequate. A large enough
sample to contain usable numbers of visible minority immigrants, for ex-
ample, usually requires use of the Census or some other large nationwide
survey, but the measures in these data sources were not constructed for the
purposes of testing theories about discrimination.
Consider the Canadian Census. Its measures of education (years, diploma,
eld of study) are excellent, but it has no question on experience, which has
to be measured as a maximum: age minus ve or six minus years of ed-
ucation. This overestimates average experience by a larger magnitude for
visible minority immigrants than for the native-bornand significantly so.
In the data used here, the overestimate is 1.5 years relative to a mean of 18.5
years for native-born white males, but 5 years relative to a mean of 16 years
experience for visible minority immigrant males. Census measures of lan-
guage skills are also unsatisfactory. One question asks whether the respondent
can hold a conversation in English or French. This sets a very low perform-
ance threshold. Simply having conversational skills would not be enough for
most professional and many managerial jobs, which require a capacity to
write.
7
In this article we use a data set with good measures of education
(diploma) and experience (years employed), as well as a measure of language
skills (the coincidence of the language used at work and at home).
However, we focus on a different measurement issue. The wage-gap de-
composition approach assumes that wage gaps explained by human capital
differences do not indicate discrimination but that those associated with job
characteristics (industry and occupation) do. Yet the form through which
experience mostly increases human capital is training. Jobs differ in the
training opportunities they provide. Most professional and many managerial
jobs provide career-long training. Many manual jobs do not. Part of the
differences in earnings explained by occupation, industry, and job charac-
teristics may reect training differences. This is likely to be pertinent in
7
Dustmann and VanSoest (2002), using German data, present evidence of overestimation
of immigrant language skills. It is likely that the problem is a general one.
1220 Social Science Quarterly
comparisons involving visible minority immigrants. Some will arrive with-
out adequate skills in either of Canadas ofcial languages. If so, in their rst
years of employment they are likely to be conned to jobs that make modest
language demandsdisproportionately jobs offering little training. If, be-
cause of language difculties when they arrive in their host country, im-
migrants nd themselves in jobs offering fewer opportunities for training,
the gap between their human capital and that of the native-born will tend to
increase (see Hum and Simpson, 2003).
Training and Discriminatory Pay Outcomes
The effects of training on earnings are not straightforward (Becker, 1964).
General skills are, by definition, portable. To retain those trained in them,
employers must match the going rate for the skill. If they pay for general-
skills training, there is a risk that those trained will be poached by other
employers who, having evaded training costs, can pay more. Employers,
then, will assign the cost of acquiring general skills to employees (possibly
through very low pay during training). Specific skills are, by definition,
nonportable; there is no market for them. Still, employers should act to
protect their investment in specific skills by paying a wage rate above that
available to the employee from alternative employers. They may, further,
concentrate the higher wage in the later part of an employees tenure with
them, thus providing an incentive for the employee to stay with the rm.
Employer-provided training should, then, increase the trainees pay, but
where specific skills are involved, by how much, and when, is less clear.
Careful research on training and on the pay changes that follow it mud-
dies the picture still further. Barron, Berger, and Black (1997) found that
those receiving employer-provided training mostly viewed it as general, that
the employee productivity increases following training greatly exceeded the
accompanying pay increases, and that training was expensive. The clear
implication of this is that employers are likely to worry about their invest-
ment in training because of both its cost and because of the high return it
yields to them.
What might this imply for the visible minority immigrant wage setting?
Discrimination might take one of the following forms. (1) As compared to
others, visible minority immigrants might have less access to training. This
could show up through a negative main effect after controls for human
capital, or through negative interactions with levels of education. We know
that those with more education get more training. It is possible that the
effect of postsecondary education on the probability of being trained is
smaller for visible minority immigrants than for others. (2) In cross-sectional
analyses, discrimination might imply lower returns to training for visible
minority immigrants than for others. In equations with the wage rate as the
dependent variable, these would show up in negative interactions between
Training and the Earnings of Immigrant Males 1221
visible minority immigrant status and training. (3) With the panel data
available to us from the data source we use, discrimination might be inferred
where training is not followed by as large an increase in earnings for visible
minority immigrants as for whites. Again, with wage growth as the dependent
variable, negative interactions between training and visible minority immi-
gration status would indicate this.
Analysis Based on a Different Data Set
In what follows we compare the access to training of visible minority
immigrants, native-born whites, and immigrant whites, and the effect of
training on their earnings. The immigrant statuses are entered into analyses
as dummy variables, with native-born whites as the default category. These
immigrant/visible minority statuses are our independent variable of inter-
estcalled IVOI in what follows. Our analyses are both cross-sectional and
longitudinal. We exclude aboriginals and native-born visible minority
members from the analysis. In neither case does our sample contain enough
cases to support serious analysis. In any case, immigrants now make up the
bulk of Canadas visible minority population.
Our data source is Statistics Canadas Workplace and Employee Survey
(WES), collected from managers in a stratied sample of workplaces, then
from a probability sample of employees within those workplaces. The em-
ployee and workplace data can be matched. It is a panel survey. The work-
place panel lasts six years. The employee panel is two years. We use cross-
sectional data from both the workplace and employee surveys for 1999, and
the 1999/2000 employee panel with controls from the 1999 workplace
survey. The 1999 survey generated 5,440 employer responses and 24,938
employee responses.
8
The 1999/2000 employee panel is a bit smaller. The
research cited earlier shows little or no earnings disadvantage to visible
minority immigrant women so we conne our analysis to men (e.g., Li,
2000, 2001; Pendakur and Pendakur, 1998; Reitz, 2001; Swidinsky and
Swidinsky, 2002). To eliminate the effects of limited participation in the
labor force, we conne our sample to full-time (34 or more hours per week),
full-year (48 weeks or more of work in the survey year) employees.
9
As a data source the WES has several advantages. First, the sample has
enough visible minority immigrant males (about 650) to sustain a sensible
8
Details of the survey are in Guide to the Analysis of the Workplace and Employee Survey
1999, Statistics Canada and at hhttp://stcwww.statcan.ca/english/sdds/2615.htmi. Linking
the employer and employee responses reduces the usable Ns. There are workplaces for which
no employee responses exist and employees for which no workplace responses exist.
9
Discrimination can also take the form of limited access to jobs, causing higher unem-
ployment or less hours of work on the part of the targets of discrimination. Much more space
would be required for an analysis of the determinants of access to full-time, full-year em-
ployment.
1222 Social Science Quarterly
analysis. Second, response rates are very high indeedabout 93 percent for
the workplaces and 86 percent for the employees. Third, as well as questions
on educational certication, there are direct questions on work experience
both total or with the current employer.
10
Years with the current employ-
erdurationworks best in models predicting training; total experience in
models predicting earnings. Fourth, managers are usually more reliable
sources of information on workplace characteristics (industry, management
policies) than are employees. Fifth, the surveys panel character provides the
standard advantages for the purposes of determining causality; it improves
the plausibility of causal inferences without transforming them into cer-
tainties. Sixth, and particularly relevant for our purposes, the survey contains
direct questions on training in the previous year: on whether employees
received employer-provided classroom training and/or on-the-job training,
and on the number of courses the respondent took.
11
These remain quite
crude measures of training. There is some risk that they underestimate
training effects on earnings.
To correct for sampling design effects, the standard errors used for in-
ferential purposes were estimated using bootstrap weights supplied by Sta-
tistics Canada. All p values in the tables are for a two-tailed test, whether
there is a hypothesis or not. We take this into account in our discussion. The
default categories for the dummy variables are as follows: educationhigh
school graduate; location of educationfully within Canada; IVOI
native-born whites.
Analysis
In what follows we address two questions. (1) What role does visible
minority immigrant status play in determining access to training? (2) What
is the payoff to the training of visible minority immigrants as compared to
that of whites? Our analysis differs from the more common approach de-
scribed earlier. Previous analyses use cross-sectional regression to estimate
10
The experience question is: Considering all the jobs you have held, how many years of
full-time working experience do you have? Clearly, this question will generate measurement
error. Still, the respondent is invited to sum work experience across jobs. Immigrants who
were out of the labor force while receiving language training and job hunting will adjust their
responses. Duration is estimated from: When did you start working for this employer?
11
The wording of the four questions we use is as follows. A preamble states: The next few
questions deal with job-related training provided or paid by your employer. Then, 25. In
the past 12 months, have you received any classroom training related to your job? It
accompanies this question with the following interviewer definition of what is included in
classroom training: All training activities which have pre-determined format, including a
pre-dened objective. Specific content. Progress may be monitored and/or evaluated. Then,
25(a) In how many different training courses have you taken in the last 12 months? [sic]
And 25(d), In the past 12 months, have you received any on-the-job training related to your
job?
Training and the Earnings of Immigrant Males 1223
the earnings disadvantage of visible minority status. We estimate similar
equations (with similar results), but we set the coefcients from those
equations in the broader context provided by our analyses of access to
training (including variations in access by education) and regressions of wage
growth that exploit the fact that we have panel data. Doing so, as will
become clear, complicates any relatively straightforward discrimination in-
terpretation.
Table 1 contains descriptive information on the variables used in the
study. There are also tests of significance comparing the means and pro-
TABLE1
Descriptive Statistics
White
Native
White
Imm.
w
VisMin
Imm.
w
Mean hourly wage, 1999 21.229 23.027
n n
19.642
n
Mean growth in ln(hourly wage), 19992000 0.002 0.027 0.054
n n
Mean years of experience 18.472 21.736
n n n
16.167
n n n
Mean duration of current employment
1
9.944 10.371 7.921
n n n
Educational levels (percent)
Less than high school 12.59 9.01
n n
10.35
High school (ref. level) 21.51 14.84
n n
15.47
n
Some college 47.65 50.22 37.16
n n n
University 18.24 25.94
n n n
37.02
n n n
Home and work language match (percent)
2
91.560 92.050 93.400
On-the-job training (percent) 29.480 23.060 25.090
Classroom training (percent) 40.200 36.210 31.570
n
Mean number of courses 0.976 0.767
n n n
0.741
Place of education (percent)
Domestic (Canadian) education 100 36.53 12.26
Mixed education
3
0 28.13 39.5
Foreign education 0 35.34 48.24
Occupation (percent)
Managers 22.03 23.28 20.22
Professionals 12.4 17.81
n
19.37
n n
Technical/trades 49.76 43.68
n
39.75
n n
Marketing/sales 1.74 4.58
n n
5.68
n n
Clerical/administrative 7.2 2.84
n n n
9.02
Production workers (ref. level) 6.87 7.81 5.97
Industry (percent)
Forestry, mining, oil, and gas extraction 3.01 1.66 0.93
Labor-intensive tertiary manufacturing 5.28 7.24 8.63
Primary product manufacturing 7.4 4.62 4.71
Secondary product manufacturing 5.37 5.72 5.26
Capital-intensive tertiary manufacturing 8.54 13.21 10.2
Construction 6.42 7.59 1.17
Transportation, warehousing, wholesale 16.21 13.14 11.74
Communication and other utilities 3.8 1.97 1.58
1224 Social Science Quarterly
portions of both immigrant categories to those of native-born whites.
12
As
expected, native-born whites have a higher wage rate than do visible mi-
nority immigrants (0.05 level with a one-tailed test). White immigrants have
the highest rate of pay. They also have the most experience, reecting the
concentration of white immigration in the earlier postwar decades, and are
better educated than native-born whites. Visible minority immigrants have
less experience than the other two categories, but are more likely to have a
university degree. They are less likely to have been trained in the previous
TABLE1continued
White
Native
White
Imm.
w
VisMin
Imm.
w
Information and cultural industries 4.16 4.58 1.45
Finance and insurance 2.78 3.39 5.68
Real estate, rental and leasing operations 1.44 1.53 1.84
Business services 8.67 14.65 16.06
Education and health services 9.6 9.66 6.58
Retail trade and consumer services
(ref. level)
17.32 11.02 24.14
Marital status (percent)
Single never married nor in CL (ref. level) 18.42 11.39
n n n
20.18
Legally married 59.9 74.24
n n n
73.1
n n n
Common law 15.01 7.75
n n n
1.75
n n n
Separated, divorced, widowed 6.66 6.62 4.98
Company size (percent)
Less than 20 employees (ref. level) 27.81 28.2 29.81
2099 employees 29.9 24.61
n
29.69
100499 employees 21.46 24.64 26.13
5001 employees 20.84 22.54 14.38
n
Foreign assets at workplace (percent)
Foreign owned (foreign assets 450) 11.29 11.85 9.99
Incentive pay policy at workplace (percent)
Incentive pay system 45.4 52.06
n
53.44
n
Mean training expenditure per employee 372.21 287.61
n
204.22
n n n
Collective bargaining agreement (percent)
Covered by CBA 29.49 25.41 16.5
n n n
w
Group means and percent are compared to those for white-native group (two-tailed test),
except place of education and industry.
1
Duration is the number of years that the respondents are working for the current employer.
2
Language match measures whether they use the same language at home and at work.
3
Mix education applies to those who had the early part of their education outside Canada.
n
Significant at alpha 50.1;
nn
significant at alpha 50.05;
nn n
significant at alpha 50.01.
12
The two exceptions are location of education and industry of employment. All the
native-born whites were completely educated in Canada. That was not the case for either of
the two immigrant categories. We have not tested for significance by industry since some of
the categories contain very small Ns.
Training and the Earnings of Immigrant Males 1225
year. There is, then, prima facie evidence of earnings disadvantage and,
perhaps, discrimination. But there is one anomalous result: visible minority
immigrants had the highest rate of wage growth over the previous two years.
Access to Training
Table 2 contains coefcients predicting the probability of on-the-job
training, classroom training, and the number of classroom courses taken.
The goodness-of-t measures indicate that most of the variance in the de-
pendent variables is not explained by the independent variables, something
that is fairly common in logistic regressions.
Start with the main effectsthe effect of IVOI for high school graduates.
Where the difference is significant, visible minority immigrants had less
access to training than native-born whites, after controls for human capital
TABLE2
Determinants of Training
n
Logistic Regression Poisson Regression
On-the-Job
Training
Classroom
Training
Number of
Courses
N 9,935 9,935 9,935
Pseudo-R
2
0.0678 0.1033
Log pseudo-likelihood 5478.56 5916.63 14723.62
Coeff. P Value Coeff. P Value Coeff. P Value
Intercept 0.4719 0.085 2.2076 0.000 1.6481 0.000
Duration 0.0729 0.133 0.0064 0.882 0.0062 0.604
Duration
2
0.0016 0.147 0.0008 0.271 0.0002 0.655
Mixed education 0.4462 0.552 0.1427 0.891 0.0031 0.977
Foreign education 0.4394 0.363 0.4737 0.576 0.0723 0.619
Language 0.2852 0.470 0.2704 0.765 0.0930 0.901
Less than HS 0.3097 0.535 0.3830 0.455 0.3380 0.548
College, etc. 0.0607 0.507 0.1700 0.670 0.2075 0.000
University plus 0.2324 0.015 0.3976 0.031 0.2106 0.352
VisMinImm 0.5530 0.634 0.9967 0.096 0.7979 0.002
WhiteImm 0.5489 0.005 1.1318 0.260 1.1987 0.218
Less than HS
*
VisMinImm 0.7723 0.569 2.1097 0.669 2.2805 0.709
Less than HS
*
WhiteImm 0.0632 0.834 0.0831 0.976 0.0793 0.977
College, etc.
*
VisMinImm 0.7570 0.212 0.7766 0.699 0.3591 0.034
College, etc.
*
WhiteImm 0.4563 0.000 1.4832 0.556 1.0224 0.356
University plus
*
VisMinImm 0.3815 0.808 1.3823 0.376 0.8132 0.000
University plus
*
WhiteImm 0.4997 0.690 1.2549 0.601 1.2028 0.463
n
P values for two-tailed test.
w
Other controls in the models are occupation, industry, company size, foreign assets, incentive
pay policy, training expenditure per employee, and region.
1226 Social Science Quarterly
and workplace characteristics. This is consistent with a discrimination in-
terpretation. The results for white immigrants qualify this. All three coef-
cients are negative, one significantly so. In two cases, the white immigrant
negative coefcient is larger than the corresponding visible minority immi-
grant coefcient. The other is about the same. This suggests an immigrant
disadvantage in access to training, irrespective of race.
The interaction terms suggest, though not overwhelmingly, that more
educationeither college or universitypartially offsets the immigrant
disadvantage. For OJT there is a positive interaction between white immi-
grant status and junior college or vocational training (College, etc.) and
for visible minority immigrants there are positive interactions between
numbers of courses taken and both college and university education.
These effects can be seen more clearly in Table 3, which presents the
probabilities of access to on-the-job and classroom training, and the mean
number of courses taken, derived from the equations summarized in Table
2. For native-born whites, there is a positive linear relation between edu-
cation and training incidence. For visible minority immigrants, access to on-
the-job training is lower for those with a high school diploma than for those
without one, as well for those with a university degree than for those with
junior college or vocational training. White immigrants certied at the
College, etc. level have the same probability of being classroom trained as
do those with a university degree. Additional education of immigrants seems
less straightforwardly related to training than is the case for native-born
whites.
Equally interesting are the differences in probabilities of those with a
university education as compared to those with secondary school or less. For
native-born whites, the increases in probabilities from a secondary school
diploma to a university degree are 5, 4, and 4 percent across the three forms
of training. For white immigrants, the corresponding increases are 14, 12,
and 17 percent, and for visible minority immigrants 11, 16, and 15 percent.
The relative disadvantage of both immigrant categories falls as their level of
education rises.
Cross-Sectional Wage-Rate Differentials
The dependent variable in Table 4 is the log hourly wage rate. Each panel
contains main effects and interactions involving the IVOI and the training
variables. The coefcients in the rst panel were generated after controls for
human capital; those in the second panel after the addition of controls for
workplace and job characteristics. The usual earnings disadvantage of visible
minority immigrants is evident in the IVOI main effects. All the coefcients
are negative and significant with a one-tailed test. They show that among
those not having been trained with similar levels of education and expe-
rience, visible minority immigrants have lower pay. Their human capital is
Training and the Earnings of Immigrant Males 1227
TABLE3
Predicted Probability of Access to Training by Education and Visible Minority/Immigration Status
n
On-the-Job Training Classroom Training Number of Courses
LT HS HS COL UNIV 1 LT HS HS COL UNIV 1 LT HS HS COL UNIV 1
WhiteNative 0.2344 0.2945 0.3072 0.3449 0.0702 0.0997 0.1161 0.1415 0.1308 0.1834 0.2257 0.2264
WhiteImm 0.1585 0.1942 0.2879 0.3339 0.0258 0.0345 0.1572 0.1572 0.0427 0.0553 0.1892 0.2273
VisMinImm 0.2760 0.1936 0.3523 0.3073 0.0034 0.0393 0.0953 0.1951 0.0060 0.0826 0.1455 0.2298
n
Generated from equations in Table 2.
1
2
2
8
S
o
c
i
a
l
S
c
i
e
n
c
e
Q
u
a
r
t
e
r
l
y
not as well rewarded as that of native-born whites or of white immigrants.
For the other main effect, two of the training measures are positively as-
sociated with earnings. On-the-job training is not. Finally, the relevant
interaction term shows that where human capital is controlled, the payoff to
training for visible minority immigrants is no different from that of native-
born whites. The rst panel of Table 4 shows that visible minority immi-
grants earn less than white Canadians with similar education and experience,
but differential returns to training seem not to be the source of that dis-
advantage.
Consider, now, the second panel of Table 4, which contains coefcients
after controls for human capital, workplace, and job characteristics. The rst
and most striking change is the shift to insignificance of the negative visible
minority immigrant main effect. Second, the magnitude of the two pre-
TABLE4
Interactive Wage Models: Training and IVOI (Males)
n
Controls for Human Capital
w
OJT
*
IVOI Classroom
*
IVOI Courses
*
IVOI
N 10,916 10,916 10,916
R
2
0.2139 0.2347 0.2255
Coeff. P Value Coeff. P Value Coeff. P Value
Intercept 2.3762 0.000 2.3346 0.000 2.3730 0.000
VisMinImm 0.1030 0.092 0.0939 0.004 0.1185 0.112
WhiteImm 0.0246 0.507 0.0858 0.622 0.0285 0.753
Train 0.0151 0.871 0.1541 0.000 0.0234 0.000
VisMinImm
*
Train 0.0473 0.840 0.0555 0.623 0.0433 0.691
WhiteImm
*
Train 0.0160 0.913 0.1436 0.659 0.0044 0.919
All Controls Included
ww
OJT
*
IVOI Classroom
*
IVOI Courses
*
IVOI
N 9,935 9,935 9,935
R
2
0.4263 0.4284 0.4282
Coeff. P Value Coeff. P Value Coeff. P Value
Intercept 1.9924 0.000 1.9755 0.000 1.9933 0.000
VisMinImm 0.0035 0.975 0.0051 0.947 0.0362 0.608
WhiteImm 0.0445 0.373 0.0759 0.328 0.0310 0.338
Train 0.0229 0.816 0.0548 0.000 0.0080 0.685
VisMinImm
*
Train 0.0101 0.954 0.0124 0.860 0.0396 0.000
WhiteImm
*
Train 0.0249 0.777 0.0986 0.748 0.0080 0.580
n
P values for two-tailed test.
w
Other controls are educational degree, experience, experience squared, and language.
ww
Other controls are experience, experience squared, language, place of education, industry,
company size, marital status, occupation, foreign ownership, incentive pay policy, training ex-
penses per employee, collective bargaining, and region.
Training and the Earnings of Immigrant Males 1229
viously significant training main effects (classroom training, number of
courses) falls or both falls and becomes insignificant. This panel tells us that
visible minority immigrants earn less than their white counterparts because
they are employed in industries, occupations, and workplaces with lower
than average pay that provide less training. Within those industries, occu-
pations, and workplaces there is, on average, no visible minority immigrant
disadvantage. Moreover, the one significant interactionvisible minority
immigrant status and number of coursesis positive. It seems that, within
jobs that provide training, the training increases visible minority pay by as
much or more than it increases the pay of native-born whites.
Tables 5a and 5b present rates of return by IVOI category. The rst panel
of Table 5a shows that, with comparable measured human capital, visible
minority immigrants receiving on-the-job or classroom training earned
about 5 percent less than native-born whites. Those enrolled in one course
in the previous year earned about 7 percent less. Interestingly, this difference
disappears as the number of courses increases. Among (the small number)
taking four or more courses, visible minority earnings exceed those of native-
born whites by 5 to 10 percent. The second panel of Table 5a shows that
significant effects disappear after industry, occupation, and workplace con-
trols are added. With or without training, visible minority immigrants earn
about as much as native-born whites. However, the relative advantage of
visible minority immigrants taking a lot of courses becomes even more
markedrising to almost 18 percent for the largest number of courses.
Table 5b presents the same information differently. Given the initial pay
level without training (which we know to be lower among visible minority
immigrants), it tells us how much higher is the pay in jobs that involve
training. The result is fairly striking. Almost uniformly, across all combi-
nations of controls and training kinds, visible minority immigrant training
payoffs are as large or larger than those of their white counterparts. For those
taking two or more courses, the increases are very large indeed (between 10
and 40 percent!).
This cross-sectional analysis informs us about the character of the jobs
occupied by visible minority immigrants. They are concentrated in indus-
tries, occupations, and workplaces with below-average pay. This may be
because their human capital is discounted, possibly indicating discrimina-
tion, but the evidence on the payoff to training suggests that within in-
dustries, occupations, and workplaces, discrimination is less evident, or may
be absent altogether. Once hired into jobs that provide training, their earn-
ings equal or exceed those of both native-born and immigrant whites.
Training and Wage Growth
The coefcients in Table 6 were estimated from equations that exploit the
panel character of the data. The dependent variable is the log growth in
1230 Social Science Quarterly
TABLE5a
Predicted Earnings Relative to Those of White Natives by Training Form
Controls for Human Capital
n
OJT Classroom Courses
No Yes No Yes 0 1 2 3 4 5
White
Native
1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
WhiteImm 1.0249 1.0414 1.0896 0.9438 1.0289 1.0334 1.0379 1.0425 1.0470 1.0516
VisMinImm 0.9021 0.9458 0.9104 0.9623 0.8883 0.9276 0.9686 1.0115 1.0563 1.1030
All Controls Included
n n
OJT Classroom Courses
No Yes No Yes 0 1 2 3 4 5
White
Native
1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
WhiteImm 1.0455 1.0197 1.0788 0.9776 1.0314 1.0398 1.0482 1.0566 1.0651 1.0737
VisMinImm 0.9965 0.9864 0.9949 1.0073 0.9644 1.0033 1.0438 1.0859 1.1298 1.1753
n
Generated from equations in the rst panel of Table 4.
n n
Generated from equations in the second panel of Table 4.
T
r
a
i
n
i
n
g
a
n
d
t
h
e
E
a
r
n
i
n
g
s
o
f
I
m
m
i
g
r
a
n
t
M
a
l
e
s
1
2
3
1
TABLE5b
Predicted Earnings Relative to Those Without Training by IVOI
Controls for Human Capital
n
OJT Classroom Courses
No Yes No Yes 0 1 2 3 4 5
White
Native
1.0000 1.0152 1.0000 1.1666 1.0000 1.0237 1.0479 1.0727 1.0981 1.1241
WhiteImm 1.0000 1.0316 1.0000 1.0105 1.0000 1.0282 1.0571 1.0869 1.1175 1.1489
VisMinImm 1.0000 1.0644 1.0000 1.2332 1.0000 1.0690 1.1427 1.2216 1.3058 1.3959
All Controls Included
n n
OJT Classroom Courses
No Yes No Yes 0 1 2 3 4 5
White
Native
1.0000 0.9774 1.0000 1.0563 1.0000 1.0081 1.0162 1.0244 1.0327 1.0410
WhiteImm 1.0000 0.9533 1.0000 0.9572 1.0000 1.0162 1.0327 1.0494 1.0664 1.0837
VisMinImm 1.0000 0.9675 1.0000 1.0695 1.0000 1.0487 1.0999 1.1535 1.2097 1.2687
n
Generated from equations in the rst panel of Table 4.
n n
Generated from equations in the second panel of Table 4.
1
2
3
2
S
o
c
i
a
l
S
c
i
e
n
c
e
Q
u
a
r
t
e
r
l
y
earnings from 1999 to 2000. As before, the coefcients in the rst panel
were generated after controls for human capital (and the 1999 wage); those
in the second panel after adding controls for industry, occupation, and
workplace characteristics. Across the two specications, not surprisingly,
training increases pay, with the sole exception of the classroom-training
variable.
More interestingly, the two specications also show that over the one-year
period, the pay of visible minority immigrants tended to rise relative to that
of native-born whites. This higher rate of increase was evident in the basic
descriptive information in Table 1. Adding controls does not eliminate it.
The coefcients do not change much across the two specications. Irre-
TABLE6
Training and the Growth in Log Earnings, 19992000 (Men)
n
Controls for Human Capital
w
OJT Classroom Courses
N 10,496 10,496 10,496
R
2
0.4236 0.4232 0.4234
Coeff. P Value Coeff. P Value Coeff. P Value
Intercept 0.9551 0.000 0.9589 0.000 0.9591 0.000
Train 0.0058 0.031 0.0011 0.652 0.0022 0.000
VisMinImm 0.0249 0.000 0.0224 0.000 0.0272 0.000
WhiteImm 0.0016 0.729 0.0017 0.756 0.0070 0.143
Train
*
VisMinImm 0.0036 0.697 0.0116 0.165 0.0007 0.686
Train
*
WhiteImm 0.0365 0.000 0.0209 0.001 0.0038 0.030
All Controls Added
ww
OJT Classroom Courses
N 9,554 9,554 9,554
R
2
0.4322 0.4323 0.4318
Coeff. P Value Coeff. P Value Coeff. P Value
Intercept 0.9313 0.000 0.9356 0.000 0.9350 0.000
Train 0.0067 0.016 0.0088 0.000 0.0009 0.093
VisMinImm 0.0248 0.001 0.0169 0.022 0.0257 0.000
WhiteImm 0.0047 0.506 0.0041 0.576 0.0082 0.223
Train
*
VisMinImm 0.0039 0.696 0.0144 0.064 0.0013 0.500
Train
*
WhiteImm 0.0314 0.000 0.0387 0.000 0.0047 0.010
n
P values for two-tailed test.
w
Other controls in the models are hourly wage in 1999, educational degree, experience, ex-
perience squared, and language.
ww
Other controls are hourly wage in 1999, educational degree, experience, experience squared,
language, place of education, marital status, occupation, industry, company size, foreign own-
ership, incentive pay policy, training expenses per employee, and region.
Training and the Earnings of Immigrant Males 1233
spective of the nature of their jobs or their qualications, visible minority
immigrant wages grew faster than those of native-born whites. This might
indicate employer uncertainty on the quality of the overseas education and
work experience of visible minority immigrants and consequent caution in
hiring decisions. Because of that caution, the quality of those that get hired
may be higher than that of their native-born white counterparts, causing
faster pay increases after hiring. Note that the return to training for visible
minority immigrants is equivalent to that of native-born whites, with the
exception of classroom training, after the inclusion of all controls. In that
case, the return to training of visible minority immigrants is significantly
higher.
The case of white immigrants is different. Their pay did not grow relative
to that of native-born whites. Consistent with the interpretation above, this
might mean that employers have more condence in their education and
experience and thus exercise less caution in their hiring so that their per-
formance does not warrant a higher rate of wage growth. But their payoff to
training is higher than that of native-born whites. How might this be ex-
plained? Even the unusually high-quality industry and workplace data pro-
vided by the WES is unlikely to capture all important attributes of different
jobs. It is possible that their higher payoff to training reects the character of
the jobs in which white immigrants are concentrated. But that is simply
speculation.
Table 7 summarizes the net effects on earnings growth of the factors
discussed above. In the models in which only human capital is controlled,
visible minority immigrants who had not been trained had a higher rate of
wage growth than their white counterparts. This advantage is a bit larger
when the comparison is between those from each group who had received
training. Adding controls for industry, occupation, and job characteristics
does not eliminate the earnings growth advantage of visible minority im-
migrants when the comparison is among those who had not received train-
ing. In that specication, visible minority immigrants receiving training had
lower wage growth than white immigrants, but better wage growth than
native-born whites.
Discussion
Human capital should not be viewed as a simple function of years of
experience and level of education (even were the two factors typically meas-
ured adequately). Employers deliberately upgrade human capital through
the training process. The data that has been available for almost all analyses
of the pay determination of visible minority immigrantsanalyses upon
which conclusions about discrimination resthas not allowed examination
of the effects on pay of training differences. It is common to infer discrim-
ination from those analyses. The premise of the analysis presented here is
1234 Social Science Quarterly
TABLE7
Predicted Growth in Earnings by Training Form
Controls for Human Capital
n
OJT Classroom Courses
No Yes No Yes 0 1 2 3 4 5
White Native 0.0148 0.0206 0.0160 0.0171 0.0138 0.0101 0.0106 0.0110 0.0114 0.0119
WhiteImm 0.0164 0.0587 0.0177 0.0398 0.0208 0.0268 0.0328 0.0388 0.0448 0.0508
VisMinImm 0.0397 0.0491 0.0384 0.0511 0.0410 0.0425 0.0439 0.0454 0.0469 0.0483
All Controls Included
n n
OJT Classroom Courses
No Yes No Yes 0 1 2 3 4 5
White Native 0.0208 0.0141 0.0155 0.0243 0.0196 0.0187 0.0177 0.0168 0.0158 0.0149
WhiteImm 0.0161 0.0220 0.0196 0.0103 0.0115 0.0058 0.0001 0.0055 0.0112 0.0168
VisMinImm 0.0040 0.0068 0.0013 0.0070 0.0061 0.0057 0.0053 0.0050 0.0046 0.0043
n
Generated from equations in the rst panel of Table 6.
n n
Generated from equations in the second panel of Table 6.
T
r
a
i
n
i
n
g
a
n
d
t
h
e
E
a
r
n
i
n
g
s
o
f
I
m
m
i
g
r
a
n
t
M
a
l
e
s
1
2
3
5
that it is useful to further explore this issue by incorporating the training
process within it.
These are our main ndings.
1. In aggregate, immigrants, whatever their race, get less training than the
native-born. Visible minority immigrants get the least.
2. This disadvantage in access to training falls considerably for those with
college or university education. In fact, both the probability of class-
room training, and the number of courses taken, are greater for visible
minority immigrants with a university education than for either
equivalent white category.
3. As in other studies, controlling for human capital, in 1999 visible
minority immigrants earned less than their white counterparts. Their
wage disadvantage originates in lower returns to education and expe-
rience. The cross-sectional analysis, however, provides no evidence of a
lower return to training.
4. In the cross-sectional analysis, controlling for industry, occupation,
and workplace eliminates the earnings disadvantage of visible minority
immigrants.
5. Panel analysis of wage growth indicates that, once employed, visible
minority immigrants pay tended to rise faster than was the case for
native-born whites.
6. The payoff to training for visible minority immigrants was as large or
larger than it was for native-born whites.
What is to be made of all this?
Research on earnings by race and immigration status has largely been
animated by an interest in discrimination. For the most part, it nds dif-
ferences consistent with discrimination. Two distinctions are useful in
thinking about discrimination against visible minority immigrants, distinc-
tions that are sometimes muddled together. First, there is the point at which
discrimination takes place. Employers may be reluctant to hire members of
visible minorities in the rst place. There can also be a tendency to dis-
advantage them once hired with smaller pay increases and a reduced like-
lihood of promotion. Second, there are the reasons for discrimination.
Employers may discriminate on the basis of taste. That is to say, they may
make decisions on grounds that are unrelated to a job candidates capacity to
do a job. Or, discrimination may take the form of an unwarranted depre-
ciation of the human capital acquired by immigrants in their countries of
origin, perhaps because of lack of information about the education and
experience that produced the human capital.
13
This latter form of discrim-
ination has been a particular focus of attention in Canadian research on the
13
This would be a form of statistical discrimination. For a good short review of this and
other rationales for rejecting the Becker approach to discrimination, see Prasch (2004:170
77).
1236 Social Science Quarterly
subject. Neither of these distinctions is mutually exclusive. There can be
discrimination both before and after hiring and there can be discrimination
because of both taste and poor information. Still, for the purposes of what
follows, these are useful distinctions.
Consider the ndings from our research on training and earnings in light
of them. There are results that are consistent with discrimination. Training
increases pay but visible minority immigrants are less likely to be trained
than their native-born white counterparts with apparently equivalent levels
of human capital. As in other studies, visible minority immigrants earn less
than their white counterparts with apparently similar education and expe-
rience. Their human capital is depreciated. Those two facts are consistent
with discrimination. Lower pay after controls for human capital is consistent
with discrimination at either the point of hire or in subsequent pay and
promotion decisions. It is also consistent with discrimination on the basis of
taste or lack of information. On the other hand, unless we assume that there
is little training after the point of hire, lesser provision of training to visible
minority immigrants suggests some discrimination subsequent to employ-
ment. If discrimination takes place after the point of hire, employer igno-
rance of true human capital becomes a less plausible explanation for
differential outcomes. Poor post hire treatment of visible minority immi-
grant employees looks more like discrimination on the basis of taste. Still,
much training is concentrated at the point of hire so, with respect to the
taste/ignorance variants of the discrimination argument, the evidence is
somewhat equivocal.
Our other results pose some problems for at least some discrimination
accounts. The training disadvantage of visible minority immigrants tends to
disappear for those with postsecondary education. Once trained, pay pre-
miums are similar across the three IVOI categories (in both the cross-
sectional and panel analyses). If employers (or their agents) were inclined to
discriminate on the basis of taste, why would they limit their actions to the
less well educated and fail to extend their discriminatory actions to the pay
and promotion decisions that follow training? Also, if employers discrim-
inate on the basis of taste, why is there a significant positive effect of visible
minority immigrant status on pay growth? It is difcult to reconcile these
results with either discrimination after hiring or discrimination on the basis
of taste.
Visible minority immigrants are hired into industries, occupations, work-
places, and jobs that are less well paid (on average) than those of their white
counterparts. This is linked to the depreciation by employers of their human
capital. The core question is, then, does the lower rate of return to human
capital of visible minority immigrants indicate discrimination?
The answer depends on the character of the signal given by certication
from some of the countries from which most visible minority immigrants
originate. Here are three possible ways of characterizing third-world edu-
cation systems. A diploma from a third-world country might signal the same
Training and the Earnings of Immigrant Males 1237
distribution of competencies, with the same mean competence, as a Ca-
nadian, U.S., or western European equivalent. This is surely unlikely.
Quality education is expensive. Western education should be, on average,
better than third-world education because Western countries can afford
better education systems. A second possibility is that third-world education
signals lower average competencies. This would provide a productivity-based
rationale for the tendency of employers to hire native-born Canadians and
white immigrants into better, more demanding jobs and careers than equiv-
alently certied visible minority immigrants. A third possibility is that mean
school quality is similar in rich and poor countries, but that the dispersal in
poor countries is wider. That is, there are some excellent schools and uni-
versities in third-world countries, as good or better than some of their
Western equivalents (often catering to a small urban elite), but since many
third-world educational institutions have overcrowded classrooms, low
enough teacher pay to reduce the incentive to work, and a scarcity of text-
books and writing materials, the quality of many third-world schools is
appalling (e.g., Heyneman, 1983).
Suppose the latter were truethat the average outputs of the educational
systems of rich and poor countries are about the same but with a radically
different dispersion. The difference in available resources means that this is
unlikely. Still, immigrant selection procedures probably increase the share of
those educated in better schools. In any case, it is worth considering the
possibility because it sheds further light on possible employer motivations
producing differential access to better jobs for native-born and visible mi-
nority candidates.
Hiring people is costly. There are the costs of search and initial training.
There are also the costs of poorer performance during the period between
the point at which a hire takes place and enough evidence accumulates to
warrant its termination. A wide dispersal of competencies across people with
the same qualication implies higher risk to a decision that may turn out to
be very costly indeed. Even within Canada there are, of course, varied
competencies across the same diplomas. But cumulative experience must
surely allow many employers to make informed decisions about probable
competence. Reitz (2001) has made this point with some force.
Bear in mind, furthermore, the evidence cited earlier to the effect that,
contrary to Beckers initial formulation, in fact rms seem to bear the bulk
of the training costs, whether general or specific skills are involved. Barron,
Berger, and Black (1997:186) extend this point.
If rms do bear a large portion of training costs, hiring the wrong worker
for a job requiring a significant amount of training is a very costly mistake.
Firms should be willing, therefore, to expend resources to avoid making
these mistakes by improving their recruiting when hiring for such positions
. . . To the extent that this increased effort results in higher quality workers,
the rm matches higher quality to positions that require more training. As
higher-quality workers command higher wages, this nding helps explain
1238 Social Science Quarterly
why positions with substantial training do not have significantly lower
starting wages.
It is clear that different jobs imply radically different training experiences.
The cost associated with that training means that prudent employers would
seek to avoid the risk of loss implied by hiring a candidate with hard-to-
interpret credentials. For visible minority immigrant job candidates this
anxiety is compounded by the chance that the disjunction between qual-
ication and competence may be very large indeed. This would help explain
the difculties confronted by visible minority immigrants in generating re-
turns to their human capital comparable to those achieved by whites,
whether native-born or not.
Conclusion
Several methods have been used to examine possible discrimination in the
labor market (Darity and Mason, 2004). Even within the current legal
context, help-wanted advertisements in newspapers may signal ethnic pref-
erences, albeit subtly. Audit studies compare labor market outcomes for job
candidates matched as far as possible except in race. There is the large
volume of statistical work using one or another form of the wage-gap
decomposition method. This latter method is the concern of this article.
We argue that it is difcult to apply because it requires accurate, or at least
unbiased, measurement of human capital. Such measurement is usually not
available in the standard data sets used. It may not be available in any large
and general data set.
It follows from this that the idea of a precise estimate of the quantity of
discrimination is probably a chimera. Still, we can make plausible inferences
about the quantity of discrimination in the labor market by looking in detail
at the correlates of labor market outcomes. Most relevant research does
contain evidence consistent with a discrimination account. Most impor-
tantly, most studies, including this one, report negative main effects of
nonwhite status on pay. However, there is also a common nding that is
anomalous for the discrimination account of visible minority immigrant
earnings: the negative main effect is substantially reduced or sometimes
eliminated altogether where an immigrants education is completed within
his or her host country. This is strong evidence that, in employer decisions,
the signal provided by some overseas educations is as, or more, important
than visible minority status.
By introducing into the analysis access, and payoff, to training we are able
to shed further light on the likely motivations of employers, which are at the
heart of the particular version of the discrimination account examined here.
Our most fundamental nding is that, once hired, visible minority immi-
grants seem to do no worse than their white counterparts. In terms of wage
Training and the Earnings of Immigrant Males 1239
growth, they seem, in fact, to do a bit better. The pay disadvantage of visible
minority immigrants comes from their initial jobs. Employer skepticism
about the quality of their human capital probably explains much of this
disadvantage, a skepticism that is likely, in part at least, to be well founded.
However, once employers have improved information about the work ca-
pacities of visible minority immigrants that is produced by employment
withinin this caseCanada, they do not discriminate. This, we would
argue, is reasonably close to the Becker/Sowell view of the outcomes of
competitive labor market functioning. It might even be thought of as reason
for (very cautious) celebration!
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Training and the Earnings of Immigrant Males 1241