I went through this research report and wondering which is better off, self-employed or an employee!
Social Capital and Wages - Outcome of Recent Immigrants to Canada
7. Discussions and Conclusions
The paper examines through longitudinal analysis the relationship between social networks and labour market earnings, taking into account the potential endogeneity of social capital with the unobserved individual specific effects including personality, ability and so on, using Hausman-Taylor models. The results from HT estimates reveal that social capital does have an impact on the wages of recent immigrants. The effects are mixed and varied across gender.
Workplace ethnic diversity is the most influential factor within social capital variables examined. The return to ethnic diversity of workplace network is significantly positive for both genders, while it is larger for female immigrants. The channels through which newcomers actually obtain jobs do not make a difference to male immigrants’ earnings generally, but the return to using family ties as a job-finding method for females is significantly positive. Network size generally has a negative impact on wages; however its magnitude differs with the type of networks. The number of relatives in Canada has a large negative impact on immigrants’ wages while the number of friends in Canada also affects negatively female newcomers’ earnings, though the effect is very small.
In the attempt to identify differential effects of social capital indicators on wages for different groups, the HT estimates were also obtained by including interaction terms. For men, social capital effects are much more different across groups than for women. Immigrants with lower education levels gain more from jobs obtained through family ties and have higher returns to kinship size. Relative to White immigrants, all visible minority newcomers seem to benefit more (or be affected less negatively by) from the size of their kinship network. In addition, there is significant evidence that skilled worker principal applicants, Chinese and West Asian and Arab immigrants have higher returns to kinship size.
For women, the social capital effects are quite universal, except for groups with different human capital stock in terms of education and language skills. Jobs found through family ties give much higher premiums over jobs found through other methods to those female immigrants without English speaking skills than those who could converse in English fluently. Francophone immigrants who found jobs through non-co ethnic friends receive much less than those without knowledge of French obtaining jobs through the same way. However, it is interesting that the impact of ethnic diversity of workplace network is not enlarged for those women newcomers short of educational capital. Those female immigrants with lower education level are penalized more for a diverse workplace network.
Most of the results from the interaction effects analysis confirm previous research that suggests that social capital adds to human capital on labour market outcomes, but only limited to close ties or strong ties. Those who are disadvantaged by education attainment or official language skills are most likely to benefit from close social networks, such as family ties or co ethnic friends in getting higher wages than their counterparts without the assistance of strong ties. While weak ties such as participation in organizations affect male immigrants’ wage outcomes positively, the effects are not always significant. Although workplace network diversity gives a significantly positive impact on immigrant’s wages generally, it is less important for female immigrants without a university degree.
To summarize, social capital plays a significant role in helping immigrants integrate into the Canadian labour market and get better jobs in terms of higher wages. Family ties, friends and workmates are all helping to make immigrants succeed in the labour market. Contrary to the conventional argument that weak ties dominate, in the initial years strong ties are the most productive networks within an immigrant’s social capital. Kinship size, using family ties as method for finding a job and frequency of contact with family sponsors have significant influence on the wages of immigrants. Consistently with what Calvó-Armengol and Jackson (2007) suggest, in the short run, network size has a negative impact on labour market outcomes due to competition for job information within the network; kinship and friendship size both show negative effects on immigrants’ wages whereas only the effect of kinship size is large and significant. Workplace diversity plays a significant role in getting immigrants a higher wage. As the workplace network including both coworkers and supervisors is of the type between strong and weak ties, this result could be a potential support of the literature finding that weak ties work.
Meanwhile, the results show that personal ties are most useful or important for those disadvantaged by human capital in the labour market. The return to social capital is generally much higher for these groups. These findings confirm the previous literature that social capital substitutes for human capital to some extent, and its effects are amplified for those lacking labour market skills as well.
The study also shows gender differences in the return to social capital. Female immigrants would have larger returns to the use of family ties to obtain a job and to workplace ethnic diversity. Male newcomers have more returns to participation in organizations while female newcomers seem not to benefit from this network. The results may help to explain the gender differences in the labour market outcomes through a new angle.
While determining the returns to social capital indicators in the labour market for recent immigrants, several questions remain. For example, how social capital continues to affect labour market outcomes of immigrants in the integration process for a longer period of time? In the long term, will network size become positively related to employment and wages, and furthermore will weak ties outweigh strong ties one day to help immigrants make wage gains? To answer these questions would require longitudinal data covering longer time spans. The current study is a good starting point in understanding the importance of social capital for immigrants in the initial years in a new labour market, and in understanding essential elements within social networks playing roles in the settlement and integration stages for new immigrants.
