Immigrant-owned firms suffer from productivity gap for variety of factors: StatCan

Michael Petrovici is shown in this undated handout image received June 9, 2022. The restaurant owner says the suspension of a provincial immigration program has left him scrambling for workers as the busy summer season approaches. (THE CANADIAN PRESS/HO-Michael Petrovici)

OTTAWA — Companies owned by newcomers to Canada tend to struggle taking their businesses to the next level more than Canadian-born founders, new data suggests.

The report released by Statistics Canada on Wednesday explores barriers immigrants to Canada can face when starting and scaling a business.

One of the most significant findings was around labour productivity — how much an individual can produce in an hour of work.

After controlling for factors such as the industry and province of work, StatCan found that labour productivity was 9.4 per cent lower for majority-owned immigrant firms compared to businesses run by their Canadian-born counterparts.

But that gap also widens the bigger a company gets, rising to 20.9 per cent for firms with 100 or more employees.

Rising productivity is an important factor to help Canadians get better wages without driving up inflation.

But dwindling productivity rates across the Canadian economy over recent years have stirred concern among economists, with the Bank of Canada ringing the alarm bell in 2024.

How productive an immigrant-owned firm ends up being can depend on the owner’s business experience before migration, StatCan said, as well as their mastery of Canada’s official languages and overall education levels.

StatCan said there were a few other factors that could play a role in the productivity gap, including financial constraints that limit an immigrant owner’s ability to invest in better technology and tools for workers.

Immigrant-owned firms may also be more concentrated in highly competitive industries with low margins — think restaurants, small retail shops or personal services providers — where StatCan noted it’s more difficult to take advantage of economies of scale to boost productivity.

The productivity analysis produced an interesting wrinkle when looking at firms with a minority immigrant ownership.

For firms under 100 employees in size, labour productivity was actually higher among immigrant minority-owned businesses compared to the Canadian-born alternative.

StatCan’s researchers argued in the report that collaboration between immigrant and Canadian-born owners “facilitates the exchange of information, culture, experiences and networks, helping to develop products that meet diverse demands.”

The report also noted that firms with both partial or majority immigrant ownership tended to pay more in net taxes, owing in part to receiving less in tax credits or refunds per employee.

This report by The Canadian Press was first published Feb. 26, 2025.

Craig Lord, The Canadian Press