Occupational transition and country-of-origin effects in the early stage occupational assimilation of immigrants: some evidence from Australia

Abstract

We examine the occupational attainment of recent immigrants at 2 years post migration in order to study their early stage assimilation into the labour market in Australia. Human capital endowments and country-of-origin effects are examined for six occupational groups. We also study transitions across occupations from source to host country. The empirical approach utilizes the Ordered Generalized Extreme Value (OGEV) model which embodies differing utility functions across occupational outcomes, as well as accounting for any ordering in these outcomes. The results suggest that the transferability of knowledge and skills is affected by cultural and social backgrounds, and that non-Western immigrants are disproportionately channelled into inferior jobs post migration. The investigation of the country-of-origin effect on the skilled migrants’ occupational transition process is especially apt in the context of skill shortages in many host countries.

Keywords:

• immigrant
• occupational assimilation
• ordered discrete data
• ordered generalised extreme value model
• labour market outcomes

JEL Classification:

• J24
• J61

Notes

¹ There are two cohorts of LSIA. However, occupations in Cohorts 1993 and 1999 are classified using the first and second editions of the Australian Standard Classification of Occupation, respectively. The former has eight major groups representing eight skill levels, and the later nine major groups with five skilled levels. Thus, it is not possible to utilize both cohorts and evaluate the impact of 1997 migration policy changes.

² Estimation is undertaken using a maximum likelihood estimator and codes are written in GAUSS. The codes are available from the authors upon request.

³ These categorizations are supported by the Cramer and Ridder (1991) test.

⁴ As pointed out by an anonymous referee, estimating separated gender equations could potentially yield a richer insight into the occupational assimilation of immigrants. However, due to the complexity of the model and the relatively small sample size, this was not possible.

⁵ To avoid the problem of near perfect multi-collinearity, visa category is not included in the model. When we included visa category as an additional explanatory variable, the English and former occupations variables become insignificant, implying strong correlations between this visa variable and other human capital endowments that are used as selection criteria for granting skilled visas.

⁶ The pre-determined nature of occupation in former-country precludes endogeneity caused by contemporary factors, such as the social-economics environment. However, immigrants might be working in the same occupation before and after migration, owing to some personal attributes unobserved in the data. This would not be a concern for our statistical inference, as we are interested in the transition probabilities between occupations other than a causal relationship.

⁷ Although individually, each country-of-origin dummy is insignificant and the significance of the cross-terms with age and experience varied, they are jointly significant using the likelihood ratio criteria. Test statistics are available from the authors upon request.

⁸ The SVI (SVI = 100 in November 1997) is based on a count of skilled vacancies in the major metropolitan newspapers, and it released monthly by the Department of Employment and Workplace Relations.