Law360 Canada (July 20, 2026, 2:11 PM EDT) --

Sergio R. Karas

Canada has become very good at recruiting skilled immigrants. It has not become nearly as good at rewarding them. That distinction matters. A country that selects engineers, physicians, software developers, researchers, finance professionals and entrepreneurs on the promise of economic opportunity — but then delivers lower wages, credential barriers, punishing housing costs and weaker career mobility — should not be surprised when some of those same people leave.

The departure of high-skilled recent immigrants is often discussed as a social integration problem. It is better understood as an economic one. Newcomers do not uproot families, abandon professional networks and navigate Canada’s complex immigration system merely to hold status. They come to build careers, accumulate savings, buy homes and advance professionally. If the Canadian bargain fails on those terms, the most mobile and marketable immigrants will rationally compare Canada with the United States, Europe, the Gulf states and other destinations where their skills may command higher returns.

The central problem is not that Canada lacks appeal. It is that Canada’s economic model increasingly asks high-skilled immigrants to accept a discount: lower compensation than comparable opportunities abroad, slower recognition of qualifications, higher housing costs in gateway cities and fewer paths into globally scaled firms. That is not a sustainable talent strategy.

Statistics Canada’s recent labour-market research confirms that many recent immigrants do find work relatively quickly. Among working-age immigrants who arrived in Canada in the five years before the third quarter of 2024 and were not employed at arrival, 42.5 per cent found a job or started a business within three months, better than the 31.3 per cent rate for immigrants who arrived 10 to 15 years earlier. But the speed of entry into employment is not the same as the quality of employment. The same Statistics Canada release found that 31.7 per cent of recent working-age immigrants reported difficulty finding their first job, with the most common obstacles being insufficient Canadian experience or references, lack of labour-market connections and foreign work experience not being accepted.

That is the first economic driver of outmigration: underemployment. For skilled immigrants, the question is not simply whether they can work, it is whether Canada allows them to work at their level. Statistics Canada found that recent immigrants with post-secondary credentials were more likely to report job mismatch than both established immigrants and Canadian-born workers. In September 2024 and September 2025, close to one-third — 32.6 per cent — of core-aged recent immigrants with post-secondary qualifications reported being overqualified for their jobs, compared with 19.1 per cent of Canadian-born workers. Recent immigrants were also more likely to work outside their field of study: 20.8 per cent, compared with 15.6 per cent among Canadian-born workers with post-secondary credentials.

For a high-skilled newcomer, overqualification is not a temporary inconvenience. It is an income shock, a career detour and a signal that Canada’s labour market may not value foreign-acquired human capital. The C.D. Howe Institute has been blunt about this. Its 2024 study found that university-educated immigrants, especially recent arrivals, face disproportionately high rates of overqualification, caused by factors including foreign credential recognition, lack of Canadian work experience, language barriers, workplace unfamiliarity and regulated-occupation licensing requirements. It also noted that overqualification reduces potential earnings, limits career progression and may affect immigrants’ decision to stay in Canada.

The earnings consequences are severe. C.D. Howe reported that, in 2021, 26.7 per cent of recent working-age immigrants with a bachelor’s degree or higher worked in jobs requiring only a high school diploma or less — three times the rate for Canadian-born workers. Its analysis also found that overqualified immigrants face the most pronounced earnings gap, with earnings, on average, 60 per cent lower than those of non-immigrants whose education and skills match their jobs, and still 46 per cent lower after adjustment for other factors. A country cannot credibly claim to be competing for global talent while converting a material share of that talent into lower-wage labour.

Credential recognition and occupational licensing compound the problem. The federal government’s own foreign credential recognition guidance states that internationally trained professionals seeking to work in regulated occupations or compulsory trades must have their credentials recognized by the relevant provincial or territorial regulatory body and must obtain licensure or certification before working in the profession or using the designated title. The process varies by occupation and province, and can take time and be costly.

The difficulty is particularly acute in professions where Canada claims shortages. C.D. Howe noted that many immigrants work in unrelated fields, with especially high mismatch rates among health professionals: only 36.5 per cent of foreign-educated nurses and 41.1 per cent of foreign-educated doctors worked in their related occupations in Canada, while approximately nine in 10 Canadians with nursing or medical degrees worked as registered nurses or doctors. The problem is not that Canada has too many skilled immigrants. It is that Canada too often fails to deploy them.

The second major driver is the wage and opportunity gap with the United States. Canada competes most directly with the U.S. for high-skilled workers, and the comparison is uncomfortable. As I noted in one of my previous Law360 Canada articles, “Can Canada attract U.S.-bound talent?”, highly educated immigrants in Canada experience lower employment rates, greater underemployment and significantly lower earnings than their counterparts in the U.S., citing Fraser Institute research. It also contrasted U.S. labour-market outcomes for college-educated immigrants with Canada’s outcomes: labour-force participation among college-educated immigrants in the U.S. stood at 75 per cent, slightly higher than U.S.-born peers, while in Canada the 2021 employment rate for recent university-educated immigrants was 79.1 per cent, compared with 87.4 per cent among highly educated Canadian-born workers.

TD Economics’ 2026 report describes this problem as Canada’s “silent brain drain.” It argues that Canada’s core challenge is not attracting world-class talent but anchoring it, because Canada produces strong research and education outcomes yet underperforms in commercialization, business R&D, technology adoption and scaling firms, lowering the domestic returns to skill and entrepreneurship compared with U.S. innovation clusters. TD also points directly to tax competitiveness: Canada’s higher top marginal personal tax rates apply at lower income thresholds than in the U.S., making relocation more rational for top earners and founders. The report states that the median pre-tax wage for tech workers in the United States is 46 per cent higher than in Canada, before accounting for currency effects or equity compensation.

The Bank of Canada’s research points in the same direction. A 2024 staff working paper found that Canada’s GDP per adult fluctuated between 70 and 90 per cent of the U.S. level between 1960 and 2020, and that the top 10 per cent of the income distribution accounts for three-quarters of the Canada-U.S. GDP-per-adult gap and up to two-thirds of the measured labour-productivity gap. The authors further suggested that selective emigration of high-ability workers — brain drain — may play a significant role in explaining those gaps. In other words, Canada’s inability to retain top talent is both a symptom and cause of weaker productivity.

The third economic driver is housing affordability, especially in Toronto and Vancouver. High-skilled immigrants are often directed by employment networks, professional licensing opportunities and ethnic communities toward Canada’s largest metropolitan areas. Those are also the markets where the after-tax, after-rent value of a Canadian salary can look least attractive.

Statistics Canada’s 2023 census analysis found that recent renter households face higher monthly shelter costs than existing renters. Recent renter households were more likely to live in unaffordable housing, meaning they spent more than 30 per cent of pre-tax household income on shelter: 43.2 per cent versus 30.5 per cent for existing renter households.

Housing also affects retention because it undermines wealth formation. A software engineer, physician or financial analyst may tolerate an early-career discount if homeownership and upward mobility remain plausible. But if the Canadian path offers lower wages, higher taxes and a rental market that absorbs a disproportionate share of income, the incentive to leave grows.

Recent joint research by Immigration, Refugees and Citizenship Canada and Statistics Canada confirms that immigration interacts with housing pressures, particularly in larger municipalities. From 2006 to 2021, the rise in new immigrants was associated with 11 per cent of the rise in median house values and median rents across municipalities with populations over 1,000, with more pronounced effects in larger municipalities. In municipalities over 100,000 — which housed about 82 per cent of new immigrants in 2021 — the increase in new immigrants accounted for 21 per cent of the overall increase in median house values and 13 per cent of the increase in median rents. Immigration is not the sole cause of high housing costs; supply constraints, land-use policy and interest rates matter greatly. But for newcomers deciding whether to stay, causation matters less than lived affordability.

The fourth driver is selection without sufficient labour-market matching. Canada’s points-based system has traditionally rewarded education, age, language and experience. Those are valuable signals, but they do not guarantee that employers will pay for the skills selected. Statistics Canada’s 2026 study of immigrant entry earnings shows how strongly early outcomes depend on prior Canadian earnings and labour-market conditions. First-year average earnings rose 21 per cent for the 2020 admission cohort and 11 per cent for the 2021 cohort, then declined 13 per cent for the 2022 cohort, even as median wages for all Canadian workers modestly increased. The study found that rapid changes in cohort composition — especially a decline in immigrants with pre-admission Canadian earnings — explained most of the sharp 2022 drop. That is a powerful lesson: immigrants with proven Canadian labour-market attachment tend to do better.

That insight is already shaping policy. The proposed Express Entry reforms would shift Canada away from broad human-capital factors and toward labour-market outcomes, wages and employer demand. Future rankings may place greater weight on candidates with higher earnings, strong job offers and employment that exceeds wage benchmarks, while reducing emphasis on Canadian education credentials or other bonus factors. That direction is correct, but incomplete. Canada should not merely select higher earners; it must create conditions that keep high earners and reduce costs and the tax burden.

The policy implications are clear.

First, Canada should treat immigrant retention as an economic-performance metric, not an immigration-processing afterthought. It is not enough to count admissions. Governments should track whether high-skilled newcomers are employed in their field, whether their earnings converge with comparable Canadian-born workers, whether they acquire housing stability, and whether they remain in Canada after five and 10 years.

Second, economic immigration should be tied more closely to real labour demand. Employer-supported pathways, sector-specific selection and wage-based indicators can reduce mismatch, provided they are designed carefully to avoid excluding promising candidates whose early earnings reflect temporary barriers rather than long-term potential. The goal should be not simply to reward high current income, but to identify credible pathways to high productivity.

Third, credential recognition must become a national economic priority. Provinces regulate professions, but Canada bears the national cost of underutilized talent. Faster pre-arrival assessments, conditional licensing, supervised practice routes, mutual recognition agreements with trusted jurisdictions and transparent timelines should become standard. If Canada recruits physicians, engineers and nurses, it must not consign them to years of avoidable occupational limbo.

Fourth, housing policy must be treated as immigrant-retention policy. High-skilled newcomers cannot be expected to remain indefinitely in cities where market rents prevent savings and homeownership is remote. Immigration levels, municipal housing approvals, rental supply and infrastructure funding must be aligned. A talent strategy that ignores shelter costs is not a strategy. It makes no sense to bring immigrants if their entry will burden the infrastructure and social services.

Fifth, Canada must improve the domestic return to skill. That means deeper capital markets, more support for scaling firms, better commercialization of research, competitive tax structures and fewer regulatory barriers to growth. Otherwise, Canada will continue to educate, select and train talent that creates its greatest economic value elsewhere.

Canada’s immigration debate too often focuses on intake numbers, and there is too much emphasis on unskilled refugee admissions. The more important question is whether Canada offers skilled newcomers a compelling economic future after arrival. High-skilled immigrants do not leave because they misunderstand Canada. Many leave because they understand the numbers too well.

If Canada wants to remain a serious destination for global talent, it must stop assuming that permanent residence is enough. Status opens the door. Earnings, housing, recognition and opportunity determine whether people stay, and if they do not, Canada will have wasted resources and created a cohort of people who hold Canadian passports and live abroad, where better economic opportunities exist.

Sergio R. Karas, principal of Karas Immigration Law Professional Corporation, is a certified specialist in Canadian Citizenship and Immigration Law by the Law Society of Ontario, Division Chair of the ABA International Law Section, past chair of the Ontario Bar Association Citizenship and Immigration Section, past chair of the International Bar Association Immigration and Nationality Committee, and a fellow of the American Bar Foundation.

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