ARCHIVED – Immigrant income and the family

IV. Income sources and composition

Before looking at the composition of income, note that, for the majority of the population, a very small percentage of total income is attributable to retirement income. [note 22] Table A3 illustrates that it is an exclusive segment of the population, those aged 60 or older, that is reporting retirement income. This is expected since as an individual approaches retirement age, reliance on labour market income falls and reliance on retirement income rises. This age pattern is seen for both the immigrant and non-immigrant populations; however, in the non-immigrant population there is a hint of “freedom 55” or earlier retirement with the reliance on labour market income already beginning to decline for those aged 45-59 years. This is not seen for the immigrant population aged 45-59 years.

Given that those less than 60 years of age rely most heavily on labour market income and those greater than 60 years of age rely more heavily on retirement income, the population will be divided into two groups for the subsequent analysis.

Individuals Less Than 60 Years of Age

Table 1 provides a break down of total income in 2003 by category for those less than 60 years of age. Labour market income; and more specifically, employment earnings make up the lion’s share of total income for immigrants and non-immigrants alike. In 2003, employment earnings account for roughly 90 percent of total income for non-immigrants, economic immigrants [note 23], and family class immigrants [note 24]. For refugees, [note 25] employment earnings are also the dominant income source but at 84 percent it was slightly lower than that of the other categories. The shares of self-employment earnings (6-7 percent) and employment insurance benefits (2-3 percent) are also roughly the same for non-immigrants and the four categories of immigrants. However, the share of social assistance is 4 percentage points higher for refugees than the other immigrant categories and the non-immigrant population. [note 26]

Table 1: Composition of Total Income for Those Less Than 60 Years of Age, by Immigrant Category, Tax Year 2003
  Non-immigrants Economic PA Economic SD Family Class Refugee Class
Labour Market Income (%)
Employment Earnings 88 89 89 88 84
Self-Employment Earnings 7 7 7 6 7
Employment Insurance Benefits 2 2 2 3 3
Provincial Supplements (incl. Social Assistance) 1 1 1 1 5
Total Labour Market Income 98 99 99 99 99
Retirement Income (%)
Canada/Quebec Pension Plan (C/QPP) 1 0 0 0 0
Registered Retirement Savings Plan (RRSP) 1 1 1 1 1
Private Pension 0 0 0 0 0
Old Age Security (OAS) 0 0 0 0 0
Guaranteed Income Supplement (GIS) & Allowance 0 0 0 0 0
Total Retirement Income 2 1 1 1 1
TOTAL INCOME 100 100 100 100 100

Source: LAD, Statistics Canada

Individuals 60 Years of Age or Older

Table 2 provides a break down of total income in 2003 by category for those 60 years of age or older. Unlike that seen for the younger populations, the composition of total income is very different for the immigrant and non-immigrant populations aged 60 and older. The non-immigrant population aged 60 or older relies most heavily on retirement income, with 73 percent of total income coming from retirement sources. Private pensions and C/QPP account for the larger shares of the retirement income, 42 and 26 percent, respectively. While only 27 percent of the retirement income comes from the non-contributory retirement sources – OAS (22 percent) and GIS/Allowance (5 percent). The other 27 percent of total income comes from labour market sources. Employment earnings account for roughly 80 percent of the labour market income and self-employment earnings account for an additional 15 percent.

Within the immigrant population aged 60 or older it is the economic immigrants [note 27] who have an income composition most like that of the non-immigrant population, even though they are more reliant on labour market sources than non-immigrants. For economic principal applicants only 32 percent of total income comes from retirement sources, roughly 40 percent less than that for non-immigrants. For economic spouses and dependents 40 percent of total income comes from retirement sources. Similar to non-immigrants, economic immigrants report a large share of retirement income from private pensions – 44 percent for principal applicants and 31 percent for spouses and dependents. These two categories of immigrants also report 12 percent of retirement income from C/QPP, a much lower share than observed for non-immigrants.  A lower share is expected given that immigrants have had less time in the Canadian labour market to contribute to this retirement plan. Economic immigrants also have the lowest share of income from non-contributory retirement sources of all immigrants; however, it is remains higher than that report by non-immigrants. For economic principal applicants, 39 percent of retirement income comes from non-contributory sources – 11 percent from OAS and 28 percent from GIS/Allowance. For economic spouses and dependents, non-contributory retirement sources account for 50 percent of retirement income – 14 percent from OAS and 36 percent from GIS/Allowance. Although economic immigrants rely more heavily on labour market income, the composition of this labour market income is similar to that of the non-immigrants – 83 percent from employment earnings and 13 percent from self-employment earnings.

Table 2: Composition of Total Income for Those 60 Years of Age or Older, by Immigrant Category, Tax Year 2003
  Non-immigrants  Economic PA  Economic SD Family Class Refugee Class
Labour Market Income  (%)
Employment Earnings 22 56 50 21 36
Self-Employment Earnings 4 9 8 2 3
Employment Insurance Benefits 0 1 1 1 1
Provincial Supplements (incl. Social Assistance) 1 2 1 7 21
Total Labour Market Income 27 68 60 32 62
Retirement Income (%)
Canada/Quebec Pension Plan (C/QPP) 19 4 5 3 4
Registered Retirement Savings Plan (RRSP) 3 2 3 1 1
Private Pension 31 14 12 12 2
Old Age Security (OAS) 16 4 5 9 6
Guaranteed Income Supplement (GIS) & Allowance 4 9 15 43 26
Total Retirement Income 73 32 40 68 38
TOTAL INCOME 100 100 100 100 100

Source: LAD, Statistics Canada

For family class immigrants [note 28] 68 percent of total income comes from retirement sources. This is close to the share observed for non-immigrants; however, the composition is very different. Only 5 percent of the retirement income comes from C/QPP, less than 1/5th of the share seen for non-immigrants. Private pensions account for 18 percent of the retirement income compared to 43 percent for non-immigrants. With respect to non-contributory retirement sources, OAS accounted for a smaller share (13 percent) for family class immigrants as well; however, GIS accounted for a much larger share (63 percent) of retirement income relative to non-immigrants. The other 32 percent of total income comes from labour market sources; however, once again, the composition is very different from that of non-immigrants. For family class immigrants only 65 percent of labour market income comes from employment earnings, 15 percent lower than the share calculated for non-immigrants. Self-employment earnings were also less significant. Provincial supplements, in contrast, accounted for a much larger share (35 percent) of labour market income for family class immigrants than for non-immigrants (2 percent).

Refugees [note 29] had a unique income split as well with 38 percent of total income coming from retirement sources and 62 percent from retirement sources. For refugees about 10 percent of retirement income comes from C/QPP and only 5 percent from private pensions, a smaller share from private pensions than any other category. While 82 percent comes from the non-contributory sources – 15 percent from OAS and 67 percent from GIS/Allowance. With respect to labour market income, the majority (58 percent) comes from employment earnings and only 6 percent comes from self-employment earnings. Similar to the family class a considerable share (35 percent) comes from provincial supplements.

Although there were several differences among the immigrant categories, note that the reliance on OAS and GIS/Allowance observed for all immigrants is the reverse of that seen for non-immigrants. More specifically, immigrants have a smaller share of retirement income from OAS and a much larger share from GIS/Allowance, while the reverse is true for non-immigrants. To be eligible for a full OAS pension, an individual has to be at least 65 years of age and have a minimum of 40 years of residency in Canada after reaching age 18. To be eligible for a partial OAS pension an individual must be at least 65 years of age and have ten years of aggregate residency in Canada after reaching age 18. A partial OAS pension is then earned at a rate of 1/40th of the full amount for each year of residence in Canada. The vast majority of the immigrants identified in the LAD population have less than 20 years of residency in Canada. Therefore, the highest possible amount of OAS that an immigrant identified in LAD is eligible to receive is equal to half the average pension a non-immigrant receives. This explains why OAS is a smaller share of income for immigrants than for non-immigrants. Related to this, the share of GIS/Allowance is notably higher for immigrants than for non-immigrants. GIS is a pension offered to those in receipt of OAS who still fall below the specified income level. Consider two individuals over the age of 65 with identical income situations but different years of residency in Canada. The first, an immigrant with ten years of residency, applies for OAS and receives 25 percent of the amount the second individual, a non-immigrant, receives. Both remain below the guaranteed income level and both apply for GIS. To increase the income of both these individuals to the guaranteed income level requires that they each receive a different amount of GIS. The immigrant who received only a partial OAS pension will require a more substantial GIS “top-up” to bring him to the same level as the non-immigrant who received the full OAS pension. This explains why all of the immigrant categories relied more heavily on GIS than non-immigrants. [note 30]

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22  See Table A3 in the appendix for the labour market/retirement income split by age.

23  In 2003, economic principal applicants account for 22.2 percent of the immigrant population less than 60 years of age and economic spouses and dependents account for 22.8 percent.

24  In 2003, family class immigrants account for 31.4 percent of the immigrant population less than 60 years of age.

25  In 2003, Refugees account for 16.1 percent of the immigrant population less than 60 years of age.

26  Note that in addition to social assistance programs administered by the provinces, the federal government operates the Resettlement Assistance Program (RAP), formerly known as the Adjustment Assistance Program (AAP). The RAP is an income support program that provides benefits to Government Assisted Refugees during the first year after landing. For taxation purposes, there is no distinction between income received from RAP and income received from other social assistance programs. As a result, a high rate of “social assistance” utilization among GARs is expected in their first year after landing since this includes RAP benefits. This is serves to increase the average of all refugees as seen in table 1.

27  In 2003, economic principal applicants account for 12.6 percent of the immigrant population aged 60 or older and economic spouses and dependents account for 5.7 percent.

28  In 2003, family class immigrants account for 66.1 percent of the immigrant population aged 60 or older.

29  In 2003, refugees account for 8 percent of immigrants aged 60 or older.

30  Similar results have been found in previous research looking at elderly immigrants using the IMDB (Dempsey 2005, 2004).

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