What happened to immigrant earnings during the Great Depression?

by Chris Minns, Economic History Department, LSE

The Great Depression devastated North American labour markets for a decade, with about a quarter of the work force unemployed at the peak of the crisis. It is well known that the headline figure conceals the extent to which the burden of the Depression was shared unequally. In addition to sharp differences in employment patterns between cities and regions, it was less-skilled workers who saw demand for their labour fall more than those able to access white-collar work. Older men who lost their jobs were particularly vulnerable to falling into the trap of long-term unemployment. There is some evidence to suggest that the Depression may have exacerbated ethnic differences in the labour market, with black men in the United States were affected more heavily than their white counterparts. How was the Depression experienced by the foreign-born population who had settled in large numbers in both Canada and the United States up until the early 1920s? A recent research paper by Kris Inwood, Fraser Summerfield, and myself sought to answer this question using statistical evidence drawn from new digital samples of the Canadian Censuses from 1911 to 1931.

There are three reasons we were particularly interested in this topic. First, while some social historians have argued that immigrants suffered greater exposure to labour market discrimination when jobs were rationed in the 1930s, there is surprisingly little published evidence to confirm or contradict this contention. Second, by focusing on the earnings of immigrants over a twenty year period, we wanted to see whether the experience of the Depression had implications for the long-run labour market adjustment of immigrants relative to native-born Canadians. Third, Canada offers an excellent laboratory in which to conduct this research. The Depression experience in Canada was comparable to the United States in terms of unemployment trends in the early 1930s, and the country was a leading destination for European immigrants from the late 19^th century. A unique feature of early 20^th century Canada was that Census questionnaires asked respondents to report their earnings beginning in 1901. This means that our measure of attainment can reflect changes in pay within occupations and the effects of spell of unemployment on total earnings.

Our analysis of Census earnings yields a striking pattern: immigrants experienced “reverse assimilation” in Canadian labour markets, with the gap in pay between immigrants and the native-born growing between 1921 and 1931. Figures 1 and 2 show predicted earnings for immigrants relative to otherwise identical native-born Canadians for young, recent migrants (Figure 1), and older migrants with longer tenure in Canada (Figure 2). Free migrants had unrestricted access to Canada, and came mainly from the United States and the United Kingdom and Ireland. Preferred and non-preferred migrants hailed mostly from Continental Europe. The figures show that the relative decline of immigrant earnings was strongest among older men, even among those who had lived in Canada for decades when the Depression hit. We also find that the effects are focused almost entirely among immigrants from continental Europe who were not native English speakers, with American and British migrants experiencing no reversal in relative earnings.

Figure 1: Predicted relative immigrant earnings, born 1886, arriving 1911

Figure 2: Predicted relative immigrant earnings, born 1871, arriving 1896

The evidence of reverse assimilation is not a statistical artefact due to selective return migration of European migrants, or selective outmigration of Canadian residents to the United States; international migration flows were much lower in the early 1930s than the late 1920s, despite the government encouraging the return of indigent migrants to their home countries. Nor are the problems of migrants accounted for by a skills mismatch created by the differential shocks of the late 1920s and early 1930s, with immigrants having the misfortune of being concentrated in the jobs that were hit hardest. One factor that does account for a large share in the earnings gap is unemployment; immigrants in the 1931 Census were more likely to have lost time out of work than their native-born counterparts. This suggests that one way in which ethnicity mattered in the Depression was that those who were most obviously foreign were the first to lose their jobs and the last to be rehired. But unemployment does not fully account for reverse assimilation, as non-English speaking immigrants from continental Europe experienced a significant decline in weekly earnings between 1921 and 1931, relative to their native-born counterparts.

Our findings point to a disturbing conclusion: apparently well-integrated immigrants were more vulnerable to the adverse effects of a sustained recession than native-born workers with similar skills.  Whether this pattern has been repeated in immigrant receiving economies during the recent crisis is an important question for future research.