Canada is failing to reward top-talent immigrants, hurting GDP: Study

The U.S. remains the land of opportunity for highly educated immigrants when it comes to average salaries. The best and brightest U.S. immigrants are keeping the American dream alive as they make far more average compensation than their top-tier Canadian immigrant counterparts, according to a new Fraser Institute study. The research study compares highly-educated U.S. and Canadian immigrants’ incomes, which shows American top-educated immigrants make even more than their native peers. On the other hand, highly skilled immigrants to Canada make significantly less on average than native-born Canadians with similar credentials. The study found high-skilled immigrants (with at least a bachelor’s degree) to the U.S. in the past two decades, often in STEM (science, technology, engineering, and math) professions, make 1.2 percent more than American-born competitors, and enjoy an 8 percent higher employment rate. In contrast, highly educated immigrants to Canada make 16 percent less than native Canadian counterparts in earnings on average, and are 9.5 percent more likely to be unemployed. “The U.S. is more attractive for the top tier of the distribution of highly educated immigrants,” Fraser Institute senior fellow, economics professor, and co-author of the report Steven Globerman said to The Hub in an interview. “One of the reasons is that the tax rates for top-tier earners are lower in the U.S. than in Canada…second is the U.S. really dominates in terms of world-class tech companies. Canada has Shopify, and [a few other major companies]. The U.S. has a concentration of 40 percent of [the world’s] tech output.” The researchers also highlighted previous data showing university-educated immigrants in Canada made $21,000 less on average than their Canadian born counterparts, and that “visible minority immigrants with a bachelor’s degree or higher [made on average] $57,200, whereas it was $68,300…for native-born [peers].” The study also cited previous research showing the disparity in average income in 2022 was even worse for immigrants in Canada holding a master’s degree ($57,200) or doctorate ($84,000) compared to native-born Canadians with a master’s degree ($84,400) or doctorate ($100,000). Canadian immigration policies, which puts heavy emphasis on education credentials for permanent resident applicants, has succeeded in bringing top talent to the country. The Fraser Institute paper drew from the most recent census numbers, where immigrants consisted of 26 percent of Canada’s workforce, but found top-educated immigrants were overrepresented in high-paying fields: “43 percent of engineers, 55 percent of software engineers and designers, 42 percent of physicists and 57 percent of chemists.” Despite highly educated immigrants to Canada making up a disproportionate part of the workforce in many prized professions, the researchers noted previous data showing “that in 2021, 26.7 percent of recent working-age immigrants with a bachelor’s degree or higher worked in jobs requiring only a high-school diploma or less, which was three times the rate for Canadian-born workers with at least a bachelor’s degree.” The recent job vacancy rates in Canada plummeting to an eight-year low in August has likely only exacerbated the situation for highly educated immigrants in Canada to find good-matching, high-skilled jobs in 2025. In Canada’s competition against the U.S. for highly educated immigrants, Globerman also highlighted that the opportunities for capital gains through stock options and opportunities to learn on the job are greater in the U.S. The study looked at gross incomes, not net income after taxes, which if factored in would show an even starker disparity in take-home income between American and Canadian highly educated immigrants. “Obviously, if we [looked at] at net income, the differences between Canada and the U.S. would be even greater because the tax rates are higher federally and provincially than comparable tax rates in the U.S. for any given income level, particularly at the higher income levels,” said Globerman. “Top-tier immigrants that are moving to the U.S., they would pay much higher taxes [if they moved to Canada instead].” “Highly educated immigrants make important economic contributions to the countries they emigrate to, notably through promoting innovation and entrepreneurship, which helps to explain why developed countries compete with one another to attract educated immigrants, particularly those trained in STEM fields,” writes Fraser Institute senior fellow Jock Finlayson, who co-authored the report. The causes of Canada’s brain drain and losing out on prospective foreign talent In addition to the loss of prospective talent, Canada is also losing talent of its own. A late 2024 Bank of Canada report, “The Distributional Origins of the Canada-U.S. GDP and Labour Productivity Gaps,” highlighted the brain drain of top-level talent leaving Canada. The report found the top 10 percent of income earners in the U.S. made up the lionshare of the difference in the growing disparity between America and Canada’s GDP per adult and labour productivity levels. They accounted for three-quarters of the gap in GDP per adult between the U.S. and Canada. The top 10 percent of income earners also accounted for two-thirds of the productivity gap between Canada and the U.S. A recent Globe and Mail report revealed Canadian-founded tech companies setting up headquarters in Canada dropped by more than half from 2015 to 2024, due to Canada’s uncompetitive tax rates. Another recent Fraser Institute report found the top 20 percent of high-earning Canadian households pay over 50 percent of all personal taxes. Globerman and Finlayson believe both personal and corporate taxes need to be brought down for Canada to better compete for top-skilled immigrants and to retain native talent. “So one of the suggestions is to make the corporate tax structure more neutral towards large companies, but more generally to lower corporate tax rates and to lower capital gains tax rates, which…are very important drivers of risk taking and moving companies from startup status to medium to large-size tech companies,” Globerman explained. “Canada is not suffering from a startup problem,” Globerman said. “If you standardize for the sizes of the two economies, it’s not that the U.S. has a lot more startups than Canada does. It’s more successful in growing startups.” Canada could certainly use the next Steve Jobs, Jensen Huang, or Elon Musk to help pull up GDP and labour productivity in the country. The Parliamentary Budget Officer predicts Canada’s GDP increases to remain lethargic for the next five years, with GDP growth projected to remain below a healthy 2 percent for the remainder of this decade. But Globerman believes there is a silver lining for Canada. In September, U.S. President Donald Trump added a $100,000 USD fee for H-1B visas to America for high-skilled talent. Globerman believes there’s a “backdoor opportunity” for Canada to attract more top-level tech talent because at the “margins” high-skilled immigrants will opt to come to Canada due to the steep financial fee American companies now have to incur to bring top-tier talent to the U.S.