Minorities, Measured Cognitive Skills and the Earnings of Canadians (Working Paper 26)

This paper uses the Statistics Canada Survey of Literacy Skills in Daily Use (LSUDA) to investigate minority-“white”(i.e., non-minority) income differences and the role education and English/French literacy and numeracy skills play in those patterns. There are three principal sets of findings. First, among males, some visible minority groups have substantially lower levels of the measured language and number skills than whites and other more economically successful minorities, and in some cases these differences play a significant role in explaining the observed income patterns. The minority-white income gaps are, however, much smaller for women, and the literacy and numeracy variables do not have much of a role to play in explaining those differences. Second, for men, the minority-white income gaps are largely confined to immigrants, and there are no significant differences amongst the native-born once various factors which affect incomes (including education and the literacy and numeracy measures) are taken into account. For women, though, minority-white income differences only emerge for certain Canadian-born groups when they are differentiated from immigrants, for whom different gaps become apparent. Finally, the measured returns to literacy and numeracy differ significantly by ethnic group and sex. Various implications of the findings are discussed.