Three Essays on Skills in the Labour Market
This thesis contains three chapters, each of which explore a different research question that pertains to the role of skills in the labour market. The first chapter uses data on immigrants from the Canadian Census and compares immigrants who received a bachelor’s degree from a Canadian university to immigrants who receive a bachelor’s degree in their home country,in order to investigate the returns to skills acquired in Canada versus skills acquired abroad. Our measure of skill is based on post-secondary fields of study linked to the O*NET matrix of skills and competencies. We find that immigrants educated in Canada receive higher returns to their communication skills than those educated abroad. To a lesser degree, they also receive higher returns to their logical and technical skills. These gaps in skill returns explain the entirety of Canadian educated immigrant’s 10% earnings advantage. Our results are robust to controlling for the quality of universities in the immigrant’s country of study, and for occupation and industry choice. The gaps are stable across time and across quantiles of the immigrant earnings distribution. In the second chapter, we find evidence that approximately half of the gap in self-employment rates between immigrants and natives occurs within occupations. Furthermore, this within occupation gap is concentrated in high skill occupations, despite immigrants’ earnings advantage from self-employment being in low skill occupations. To explain this, we propose a theoretical model which predicts that migration costs are less likely to deter migration for those individuals who intend to pursue high earning occupations in self-employment. Empirical results are consistent with this model. Furthermore, similar results are found when using natives who have migrated from one state to another as a proxy for immigrants. In the third chapter, we find that post-secondary graduates of all major fields tend to be employed in occupations that are better matches for their skills than the matches that would be predicted from random assignment to occupations. However, there is considerable disparity in the degree of matching across fields of study. In contrast to the majority of literature, we find that graduates of STEM fields are, at the mean, more poorly matched than graduates of other post-secondary fields of study. This is the result of STEM graduates being more likely to be very poorly matched on the basis of the skills that they use in their jobs. We also find important differences in matching across levels of post-secondary education, and between men and women. Even after conditioning for the skills that are associated with an individual’s occupation, we continue to find that those who studied fields that use dissimilar skills receive a small earnings penalty.