The Immigrant Wage Differential within and across Establishments

Using 1999 and 2001 Canadian matched employer-employee data with rich information on worker and job characteristics, the authors identify the relative importance of immigrant wage differentials within and across establishments and the sources of these differentials. Whereas existing explanations of immigrant wage differentials emphasize immigrants' productive characteristics, differentials across establishments may be entirely independent of immigrants' actual or perceived skills or quality. The findings show highly non-random sorting of immigrants across establishments within Canada's major cities and geographic regions. For immigrant men, this sorting affected wage differentials more than did differences in how immigrant and native men were paid within establishments. For immigrant women, however, particularly those from less developed world regions, within-establishment wage differentials appear to have been more important. These findings raise numerous important questions for future research, such as whether the highly non-random sorting of immigrants across establishments primarily reflects immigrants' search behavior or employers' recruiting methods.