Immigration and the Canadian Earnings Distribution in the First Half of the Twentieth Century

We use newly available micro-data from the 1911 to 1941 Canadian Censuses to investigate the impact of immigration on the Canadian earnings distribution in the first half of the twentieth century. We show that Canadian inequality rose sharply in the inter-war years, particularly in the 1920s, coinciding with two of the largest immigration decades in Canadian history. We find that immigration was not the main force driving changes in the earnings distribution. This results from a combination of self-selection by immigrants, occupational adjustments after arrival, and general equilibrium adjustments in the economy.


ALAN G. GREEN AND DAVID A. GREEN
We use newly available micro-data from the 1911 to 1941 Canadian Censuses to investigate the impact of immigration on the Canadian earnings distribution sharply in the inter-war years, particularly in the 1920s, coinciding with two of from a combination of self-selection by immigrants, occupational adjustments he 1910s and 1920s were, respectively, the second and fourth largest mately 24 percent of Canada's 1911 population arrived in Canada, and sense) for the United States since Canadian Confederation in 1867 was 1 1920s were accompanied by large emigration to the United States, and we discuss this as part of immigrant adjustment after arrival, but even after accounting for that, immigrants who arrived in the previous decade 2 The Journal of Economic History 1 2 We will provide evidence that many immigrants who ultimately left Canada entered the settled permanently in Canada understates the impact of the large immigration on the considerable attention in discussions of immigration impacts in modern Canadian population in 2006 who had arrived in the previous decade tion of immigration coincided with a substantial change in the Canadian 10th percentiles of the male annual earnings distribution increased by We then estimate the impact of immigration on the earnings of the native that model, we address potential endogeneity concerns arising because across occupations partly in response to demand patterns arising from new immigrants tend to locate where previous immigrants from their ---Immigration and the Canadian Earnings Distribution 389 control anything, including the total level of immigration, in the period distribution of recent immigrants was similar to that of the native born in all decades but were particularly important in the 1920s-a decade when Canada had adopted a more activist immigration policy that helped the United States); geographic migration within Canada; and switching so immigrants did not merely pass through Canada without impacting the this implies a limited impact of immigration on the shape of the earn- We conclude, much as earlier discussions that incorporate full general account of spillover effects through patterns of substitutability across balanced at arrival than is typically recognized or become more balanced As part of investigating the impact of immigration on the earnings -ings distribution, we use recently available micro data from the decadal 1920s that were previously undocumented and also show new patterns in either used aggregate wage data or relate only to a few occupations in our estimates of immigration impacts is that the large increase in earnings

Immigration Policy and Patterns
We begin with an overview of Canadian immigration policy before that policy helped determine how immigrants adapted to the Canadian immigration policy in Canada from 1896 to 1930, shows that the period legislation in place to allow the government to refuse immigrants apart 3 ment to prohibit immigrants from landing if they belonged to "any race 3 could be implemented through regulations, without the need to go to to be admitted if they were farmers or farm labourers or, if they were grants from countries other than Britain had to get a visa before entering that in the United States in the 1920s-small relative to the pre-war period Canadian government entered into agreements with the two main railway companies for them to recruit agricultural labour in non-preferred counthere was a substantial composition shift in immigration toward immi-4 -4 labour, the 1927 renewal of the agreement stipulated that the immigrants brought in by the railway companies had to have assured agricultural employment in advance ew 2000)

Immigration: Flows and Stocks
the earnings distribution in 1920, it is worth noting that nearly two-thirds portion of the emigrants were Canadian born or immigrants who had arrived in earlier decades and so it is not necessarily the case that 78 important for us because we are interested in the impact of immigrants By using Census data on year of arrival, we can obtain the proportion of immigrants who arrived in the years just preceding the Census and immigrants who arrived in the ten years before 1921 and 63 percent of those who arrived in the two years before 1921 were in Canada at the arrivals were still in Canada at the time of the Census indicates that even if many immigrants eventually left Canada, a substantial proportion data 31 emigration and our estimates will include the impacts of the temporary the United States, others returned home and still others switched occupa-  1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Proportion
Year at the Start of the Decade   1911-1921Born 1921-1931Born 1911-1920Flow 1921-1930 immigrants arriving by sea in 1912 and also show that immigrants had a distribution of the native born and the sectoral growth in the Canadian agricultural labour had an impact that is evident in the stated intentions of arrivals, the percentage in farming declined from the 66 percent who claimed they would enter those occupations when they arrived to the 32 the 1910s, the distribution shifted away from farming occupations toward particular, even after dropping farmers, they continued to show a higher did have some effect-that it was not simply a case of relabeling immia regime when immigrants were not able to adjust their choices before born; preferred country immigrants who arrived more than ten years before the Census; preferred immigrants arriving within the last ten years; and non-preferred source country immigrants in both arrival catethe importance of immigration in the West is evident from the fact that Second, long-standing immigrants from preferred countries were disproportionately represented in the trades and professional occupations and under-represented in both the farm labour and general labourer categorepresented in the general labourer category and under-represented in country immigrants in the West in 1931 who arrived in the previous decade were in farming, but even for that group a larger proportion were who arrived in the 1920s and who were in the West in 1931 were in Sources in the table, among the non-preferred group who arrived in the 1920s, immigration policy in the 1920s was effective in the sense that it gener-gration impacts later in the article, we will need to be concerned about endogeneity since the observed occupational distribution, even of the

Movements in Earnings Inequality
We now turn to characterizing the shifts in the earnings structure that ture for this period and has been made possible by the recent availability We use microdata samples drawn from the 1911, 1921, 1931, and 1941 8 of dwellings with fewer than 30 inhabitants with a more complicated 9 8 the data are provided 9 affected by switching from annual earnings to only "wage-earners" which, in both the introductions to the 1921 and 1931 -- 10 We do not include them because we are concerned that their 11 Because our earnings data correspond to 12-month periods spanning half of two consecutive calendar years, we use the average of the listed 1910 with a "broad" grouping in which we aggregate the narrow occupations -10 owners constituted 19 percent of the total as self-employed, and employers, and unpaid family members in agriculture made up another 6 percent 11 self-employed noting, though, that the ratio of wage earners to the complete set of "gainfully occupied" movements data aggregated to the age by occupation level since we do not have any Figure 2 depicts changes in the real annual earnings distribution for ings in 1921 and log earnings in 1911 at each percentile, and thus roughly percent this does not necessarily mean that a person who was at the 10th of years as that arises when increases at the top of the distribution are close to 10 percent in real terms while those in the upper end of the distripercentile, the real difference line increases linearly from a difference 60th percentile, the differential continues to increase across percentiles, increases from 1911 to 1921; a decade with a very substantial increase of results from Census data with the results from both of these other artiaccords well with the Labour Gazette data in terms of long term move-

FIGURE 2
Source Census data as the most reliable, but we are reassured by the matching of given the relative similarity of changes in earnings above about the 60th

Decomposing the Changes in the Earnings Distribution
the decadal changes in Canada's earnings distribution into factors related A change in the earnings distribution can arise through three chan-ences in average earnings between those categories; and changes in the with the highest wages for managers and professionals, the lowest for Second, the earnings differentials among blue-collar occupations and between white-collar and blue-collar occupations increased substantially, the age differentials either stayed the same or increased slightly while the sion, we estimated the difference between the 90th and 10th percentiles of the log earnings distribution for each of our ten broad occupation catebetween and within occupations) changed substantially between 1921 changes in the wage structure, we employ the ingenious decomposition  Sources average log wages between each occupation by age category and the average log wage in a given decile due to changes in the composition of the labour force and the change arising purely from changes in the composition in terms --

FIGURE 3A
Source ments in observable characteristics, including changes related to the substantial decline in the lower tail of the real earnings distribution in the differentials between age-occupation groups and the increase in withindistribution that would have arisen if there had been no within-group For 1941, the immigrant earnings distribution is strongly superior to that born occupational distributions were broadly similar, the similarity of the earnings distributions implies that there was not systematic discrimina-13 assess the latter potential impacts we will need to use a structural model evidence in the section on immigration policy patterns showing potentially endogenous geographic adjustments by immigrants after arrival, we follow approaches that focus on national level wage and employment We address the impact of immigration on the wage structure using a 13 a complete accounting of the impacts of immigration by incorporating the potential effects of an increase in the supply of immigrants in one where, L pation and age, EN kljt is the number of combined established immigrants N kljt 's correspond to o , , , and determine, respectively, the degree of substitutability among narrow occupations, age the effect of increased immigration within the same broad immigraamong broad groups is less than that among the narrow groups within in the second right hand side term, are the channels through which immigration in the same broad occupation group but a different narrow occuus to capture the effects of immigration in the same narrow occupation

Estimating Equations and Results
an estimate of - where, E kljt is the number of established immigrants in the occupation by age cell, w Ekljt is their average wage, and Ekljt is the productivity shifter 's), comparing relative differences across cells in wages and employment levels between established immigrant employment but comparatively small changes in tion-that the established immigration increase affected immigrant and it more plausible that there are no productivity differences between the with the same technologies and thus to have the same this cell-level variation, we include separate occupation, age, and time where the u kjt born versus established immigrants may respond to longer run factors such as the persistent occupation, age, and time effects captured in the u kjt numbers from the Census data aggregated to the narrow occupation create instruments to address potential endogenous adjustments by the immigrants, but no such instrument is available for the older immigrants inverse elasticities) and the implied elasticities from each stage of the elasticity from our estimates is 71, implying that established immigrants and established immigrants) and recent immigrants within the same where, w Ikljt is the average wage for recent immigrants, Ikljt is the productivity shifter for recent immigrants, I kljt is the number of recent immiw ENkljt w is the weighted average of established immigrant and native born wages in the occupation-age cell, with the weights We again assume that the ratio of productivity terms can be captured immigrant employment we observe might partly be due to endogenous -grants move to a geographical location based partly on joining an enclave of people from their country of origin and then, once there, pursue the they search for a job in the location they are attracted to for companion- country g, and let the proportion of immigrants from g in location r in year t be given by p grt occupation l that is within broad occupation k in location r in period t be given by klrt g in occupation k in year t where n10 gt+1 is the number of immigrants from country g who arrived in by age group with both the klrt n gt+1 16 Finally, we form our instrument for w Njkt ) is the change in native born log earnings in occupation j and age group k L Ijkt corresponds to the number of recent immigrants who were in that occupation and age category in the time t L Njkt-1 + L Ijkt-1 is the total number of immigrant) who were in that occupation by age cell in the t -1 regression is based on Census data and thus the immigrant employment numbers are after immigrant adjustments interpreted as yielding estimates of the elasticity of demand if immigrants order to match with our more structural estimation, the estimated coef--19

FIGURE 6
Source 19 in the "Farmers and Farmer Labourers" category by the proportion of the sum of farmers and farm labourers who were farm labourers among immigrants who For this calculation and the ones that follow, we use the number of males employed as farmer labourers in the 1921 Census as the ba after accounting for adjustments through re-migration and occupational production function parameter estimates and the full set of immigration only limited impacts on the location of the native born earnings distribu---tions can have substantial impacts on the wages in that occupation and in closely substitutable occupations but those impacts can be mitigated by Using newly available micro Census data, we have shown that the between 1911 and 1941, with most of the increase occurring between conclusion, however, is that immigration played a minor role as a driver 1910s, when there was little policy control over immigration, the people their occupational distribution was similar to the native born at the time grants had shifted occupations such that their occupational distribution grant occupational distribution being similar to that of the native born, -estimates imply that without any adjustment, immigration would have reduced the wage for farm labour by 42 percent in the 1920s but with all the adjustment channels, the ultimate impact was a reduction of only 4 was due to geographic and occupational adjustments made by the immi-