The Impact of Immigrant Language Skills on Canadian Wages by Seda Gunduz Thesis submitted to the Faculty of Graduate and Postdoctoral Studies in Partial Fulfillment of the Requirements for the Doctorate in Philosophy Degree in the Department of Economics Faculty of Graduate and Postdoctoral Studies c Seda Gunduz, Ottawa, Canada, 2017 Abstract This thesis consists of three chapters investigating the impact of immigrant language skills on Canadian wages. The first chapter, “Linguistic diversity among Canadian immigrants: 1981-2006”, describes the changes in linguistic diversity among Canadian immigrants, as measured by a preferred linguistic distance measure, the Levenshtein Distance (LD) In- dex, and documents socio-demographic characteristics of recent immigrants as well as their labour market performance based on their language capital at the time of entry. The LD is an approximation of immigrants’ language skills in the Canadian official languages and represents the “distance” of an immigrant’s reported language to the Canadian official lan- guages. Using the 20% micro-data files of the Canadian Censuses between 1981 and 2006, I assign each immigrant an index number based on two language measures: mother tongue and home language. French and English are defined as the Canadian official languages in Quebec and outside of Quebec, respectively. The main findings suggest that although immigrants’ mother tongues became more “distant” to the Canadian official languages in both regions over time, the language skill of an average immigrant based on home language remained almost the same in Quebec, in particular, between 1981 and 1996. In terms of immigrants’ socio-demographic characteristics and their labour market performance, gen- eral patterns were similar across the two regions, although there were significant differences by language groups. In particular, the change in immigrants’ wages by language groups is suggestive of the role of language skills in determining wages. The second chapter, “Immigrant versus native men? Substitutability and the role of linguistic diversity in Canada”, estimates the degree of substitutability between immigrant and native men by incorporating immigrants’ language skills into the analysis ii and calculates the potential wage effects of immigration on Canadian wages. Using the 20% micro-data files of the Canadian Censuses between 1981 and 2006 and imposing a nested-CES production function on the Canadian economy, I estimate immigrant-native substitutability based on immigrants’ language skills in addition to education levels and years of labour market experience. I use the LD Index to represent immigrants’ language skills by the distance of the mother tongue and home language of an immigrant to English outside of Quebec and to French in Quebec. I define three language groups for immigrants as the high language-skilled, the medium language-skilled, and the low language-skilled. The key findings are as follows. First, home language-based estimates suggest imperfect substitutability in Canada outside of Quebec in some cases. Second, by language skill groups, the low language-skilled immigrants are more likely to be imperfect substitutes for the Canadian-born. Third, the findings for Quebec are substantially different from those for Canada outside of Quebec. My simulations suggest that the long-run effect of immigration on immigrants’ wages was negative between 1981 and 2006 while the long-run effect of immigration on the wages of the Canadian-born was small but positive over the same period. The third chapter, “Gender, linguistic diversity, and labour market substitutabil- ity”, uses the same methodology and data sources as in the second chapter to incorporate female workers into the analysis of immigrant-native substitutability. This study estimates the elasticity of substitution between immigrant language groups and natives for female workers and the pooled sample of male and female workers. The findings suggest that the degree of substitutability between female immigrants and female natives is similar to the de- gree of substitutability between male immigrants and male natives. The main results do not change for the pooled sample. Due to potential differences between language accumulation processes between female and male immigrants, the third chapter also estimates female-male immigrants substitutability based on language skills, education levels, and years of labour market experience. The findings suggest that female and male immigrants are imperfect substitutes outside of Quebec regardless of language measures. iii Dedication This thesis is dedicated to my mother and my father, Muzeyyen and Dogan Gunduz, for their unconditional love and support and their constant encouragement; to my grandmother and my grandfather, Hacer and Nihat Arda, whom I could not say my last goodbyes and thank for the sweetest memories of my childhood; and to my best friend, Oya Uzum, for always reminding me that even distances separate and years pass, the real and true one stays real and true. iv Table of Contents Abstract ii Dedication iv Table of Contents v List of Tables viii List of Figures xii Acknowledgements xiv Introduction to the thesis xv 1 Linguistic Diversity among Canadian Immigrants: 1981-2006 1 1.1 Introduction . 1 1.2 The measurement of linguistic distance . 5 1.3 Data and the representation of linguistic distance . 10 1.4 Descriptive patterns in linguistic distance . 13 1.4.1 The patterns of the average LD for recent immigrants . 13 1.4.2 The shifts in source countries . 16 1.4.3 Evolution of the average LD across cohorts . 20 1.5 Immigrants’ sociodemographic characteristics and labour market performance 21 1.6 Conclusion . 27 References 1 30 v 2 Immigrant versus Native Men? Substitutability and the Role of Lin- guistic Diversity in Canada 60 2.1 Introduction . 60 2.2 Review of the literature . 63 2.2.1 Language skills and labour market outcomes of immigrants . 63 2.2.2 Immigrants and natives . 67 2.3 Sample description and data . 76 2.4 Nested-CES model . 85 2.5 The estimates of substitutability for skill groups . 87 2.5.1 The estimates of substitutability for immigrant language groups and natives . 87 2.5.2 Measurement of average wages: Log mean versus mean log? . 94 2.5.3 The estimates of substitutability for experience groups . 96 2.5.4 The estimates of substitutability for education groups . 98 2.6 Total wage effects of immigration . 99 2.7 Conclusion . 102 References 2 106 Appendix 2.1 . 139 Appendix 2.2 . 141 Appendix 2.3 . 142 Appendix 2.4 . 144 3 Gender, Linguistic Diversity, and Labour Market Substitutability 152 3.1 Introduction . 152 3.2 Data and descriptive statistics . 156 3.3 Immigrant-Native substitutability . 163 3.3.1 Structural model . 163 3.3.2 Estimates of immigrant-native substitutability . 166 3.4 Extension: Female-Male immigrant substitutability . 170 vi 3.4.1 Motivation . 170 3.4.2 Structural model . 172 3.4.3 Estimates of female-male immigrant substitutability . 173 3.5 Calculated wage effects for female-male immigrants . 175 3.6 Conclusion . 176 References 3 177 vii List of Tables Table 1.1 The 40-item list of common language words from the Swadesh list . 35 Table 1.2 Linguistic distance to English in the original set of tested languages . 36 Table 1.3 Selection of foreign-born landed immigrants to Canada between 1981 and 2006 . 37 Table 1.4 Top five birth countries for immigrant stocks in Canada outside of Quebec: 1981-2006 . 38 Table 1.5 Top five birth countries for immigrant flows in Canada outside of Que- bec: 1981-2006 . 39 Table 1.6 Top five birth countries for stocks of immigrants in Quebec: 1981-2006 40 Table 1.7 Top five birth countries for immigrant flows in Quebec: 1981-2006 . 41 Table 1.8 The evolution of LD in Canada outside of Quebec: 1981-2006 . 42 Table 1.9 The evolution of LD in Quebec: 1981-2006 . 43 Table 1.10 Age distribution of immigrants by arrival cohort and language group in Canada outside of Quebec: 1981-2006 . 44 Table 1.11 Gender distribution of immigrants by arrival cohort and language group in Canada outside of Quebec: 1981-2006 . 45 Table 1.12 Education of immigrants by arrival cohort and language group in Canada outside of Quebec: 1981-2006 . 46 Table 1.13 Employment of immigrants by arrival cohort, by gender, and by lan- guage group in Canada outside of Quebec: 1981-2006 . 47 Table 1.14 The average logarithm of real weekly wages of immigrants by arrival cohort, by gender, and by language group in Canada outside of Quebec: 1981-2006 . 48 viii Table 1.15 Age distribution of immigrants by arrival cohort and language group in Quebec: 1981-2006 . 49 Table 1.16 Gender distribution of immigrants by arrival cohort and language group in Quebec: 1981-2006 . 50 Table 1.17 Education of immigrants by arrival cohort and language group in Que- bec: 1981-2006 . 51 Table 1.18 Employment of immigrants by arrival cohort, by gender, and by lan- guage group in Quebec: 1981-2006 . 52 Table 1.19 The average logarithm of real weekly wages of immigrants by arrival cohort, by gender, and by language group in Quebec: 1981-2006 . 53 Table A1.1 The “long-form” mother tongue and home language questions . 59 Table 2.1 Sample construction: The number of observations and sample restrictions113 Table 2.2 The percentages of selected home languages spoken by immigrants . 114 Table 2.3 The percentages of selected mother tongues spoken by immigrants . 115 Table 2.4 The difference between the mean log wage of immigrants and natives in Canada outside of Quebec . 116 Table 2.5 The ratio of immigrant to native labour supply in Canada outside of Quebec . 117 Table 2.6 The difference between the mean log wage of immigrants and natives in Quebec . 118 Table 2.7 The ratio of immigrant to native labour supply in Quebec .