From Skills to Licences: The Economics of Credential Recognition for Newcomers in Canada
Canada’s immigration system has long been recognized as one of the most open and strategically designed in the world. Nearly 90 percent of recent population growth is driven by immigration, a deliberate policy tool used to offset demographic aging, sustain labour markets, and strengthen long-term competitiveness. Refugees, too, are included in this framework through complementary pathways such as the Economic Mobility Pathways Pilot, which aligns humanitarian protection with opportunities for skilled migration.
Yet beneath this inclusive entry system lies a persistent paradox. For newcomers, gaining admission to Canada is often far simpler than gaining admission to their own professions. Physicians, engineers, nurses, teachers, accountants, and skilled tradespeople frequently discover that their qualifications; earned through years of education and practice abroad are not readily accepted. Instead, they must navigate fragmented provincial licensing regimes, repeat costly assessments, and wait through years of bridging programs, often while working in jobs far below their training. The result is wasted talent, delayed integration, and a national economy deprived of skills it urgently needs.
This disconnect between Canada’s inclusive immigration policy and its restrictive licensing infrastructure is more than a policy inconsistency. It represents a material economic inefficiency. It slows the pace of integration, depresses lifetime earnings, and constrains the fiscal dividend of immigration. At the same time, it deprives the Canadian economy of a latent reservoir of human capital that could alleviate sectoral bottlenecks and enhance national competitiveness. Bridging the gap between skills and licences is no longer a marginal issue, it is a central challenge in Canada’s labour market strategy.
Foreign Credential Recognition
In Canada, all regulated occupations — including physicians, engineers, nurses, teachers and skilled trades — require domestic licensure prior to practice. This requirement means that foreign degrees and professional experience, regardless of their depth or relevance, must be formally assessed and approved by provincial or territorial regulatory bodies. The process is widely regarded as protracted, costly and inconsistent. Even federal guidance concedes the challenge, noting that "this process takes time and can be costly" (Government of Canada).
The economic implications of this bottleneck are substantial. A recent study highlights that "the complex mix of licensing and certification requirements for regulated professions creates significant barriers" (C.D. Howe Institute). These barriers are particularly acute in health care, where Canada faces chronic shortages of physicians and nurses. Yet foreign-trained professionals are routinely subjected to multiple examinations, supervised practice periods and expensive assessments. The irony is stark: while hospitals struggle with staffing shortages and emergency rooms face capacity constraints, qualified professionals remain sidelined — often working in survival jobs far below their skill level.
Leading analysts converge on a clear conclusion. Poor recognition of foreign credentials is the principal obstacle to fully leveraging immigrant talent (RBC, C.D. Howe Institute). What could serve as a robust economic engine — thousands of highly trained professionals arriving annually — instead becomes a reservoir of underutilized human capital. The result is a dual loss: newcomers experience income suppression and downward mobility, while Canada forfeits the productivity gains and fiscal contributions that their expertise could deliver.
Provincial and Regulatory Inconsistencies
A major barrier to foreign credential recognition stems from the fragmented nature of Canada’s licensing system. While immigration is administered federally, professional regulation falls under provincial and territorial jurisdiction. Each region sets its own standards, and even within the same occupation, requirements can vary widely. Some regulators mandate Canadian work experience or additional examinations; others rely on distinct competency frameworks or training modules. Although the 2010 Canada Free Trade Agreement compels provinces to recognize each other’s credentials for domestically trained workers, this reciprocity does not apply to foreign-trained professionals (Government of Canada; Public Policy research). The result is a structural paradox: a Canadian engineer licensed in Alberta can relocate to Ontario with minimal friction, yet an engineer arriving from abroad—regardless of experience—must restart the licensing process, often facing assessments, fees and retraining.
The psychological toll of this inconsistency is significant. Many newcomers mistakenly assume that passing the federal immigration skills assessment qualifies them for employment. In reality, that assessment only determines eligibility for entry; the licensing journey begins anew upon arrival. As one immigrant put it, “even an engineer with over 15 years of experience needs to prove themselves again” under provincial rules (Government of Canada). From an economic standpoint, this fragmented regulatory architecture breeds inefficiency. It delays labour market integration, fuels underemployment, and increases the likelihood that immigrants abandon their professions entirely. In sectors plagued by persistent shortages—such as health care and engineering—the costs are borne not only by immigrants, but also by patients, employers and taxpayers.
Barriers to Entry and Gatekeeping
Canada’s regulated professions often operate as closed systems. Entry is governed not only by competency exams but also by statutory restrictions, protected titles and limited training placements. In practice, professional associations wield monopolistic control over access, with minimal incentive to accommodate internationally trained candidates. As one academic observer noted, “gatekeeping by professional associations keeps immigrants out of jobs they were trained for” (Government of Canada).
The consequences are stark. Newcomers may wait months—or years—for a seat in bridging programs, and are often barred from using professional titles such as “engineer” or “nurse” until every licensing requirement is met. During this limbo, many resort to survival jobs, leading to skill atrophy and diminished earning potential. The result is not only underemployment for immigrants, but an economy that fails to harness the talent already within its borders.
From a competition policy standpoint, restrictive licensing acts as a barrier to entry, curbing labour market dynamism. Artificial constraints on supply preserve high wages for incumbents, while consumers and taxpayers absorb elevated costs for essential services. The Competition Bureau has warned that excessive entry restrictions in self-regulated professions can yield anti-competitive outcomes, stifling efficiency and innovation. In health care, for instance, rationed licensing exacerbates shortages, prolongs wait times and inflates costs—despite the presence of qualified foreign-trained professionals ready to contribute.
The paradox is clear: Canada recruits immigrants for their skills, yet institutional gatekeeping prevents those skills from being fully utilized. This regulatory misalignment depresses productivity, undermines the fiscal benefits of immigration and entrenches labour market inequities.
Canadian Work Experience and Networks
In many regulated professions, entry depends not only on licensing but also on the elusive requirement of “Canadian experience.” This creates a structural paradox: newcomers cannot work in their field without a license, yet cannot gain the local experience needed for licensure or employment without first working. Surveys consistently identify this as the most significant barrier faced by new Canadians (Government of Canada). The labour market reinforces this challenge. Hiring in professional sectors is often network-driven, with employers relying on local references, credentials and established contacts. Immigrants arrive with international qualifications but lack the social capital that facilitates access to Canadian hiring channels. As a result, they are frequently overlooked despite their competence.
Newcomers face a double exclusion: first from their profession due to licensing restrictions, and then from the job market due to the absence of Canadian networks and references. Many are pushed into temporary or survival jobs unrelated to their training, which erodes their professional identity and delays integration. From an economic standpoint, this reflects a coordination failure between immigration and labour-market institutions. Canada selects immigrants for their skills, but those skills are undervalued without local proof. The mismatch squanders human capital and slows productivity growth in sectors such as healthcare, engineering and education, where shortages are most severe. Without mechanisms to recognize international track records as valid substitutes for Canadian experience, both newcomers and the broader economy lose out.
Employer Bias and Cultural Barriers
Beyond formal licensing requirements, immigrants to Canada often face informal yet equally consequential barriers in the labour market. Employers, particularly in high-skilled sectors, tend to favour Canadian degrees and local experience. Government consultations have revealed a persistent reluctance to hire internationally trained candidates, reflecting implicit biases that undervalue foreign credentials. As one participant put it, “Employers should not be afraid to hire immigrants. Each immigrant arrives with his or her cultural baggage, and it is important to think of using that” (Government of Canada).
Empirical evidence supports these perceptions. A recent study by the C.D. Howe Institute found that immigrants educated in Canada are significantly less likely to experience underemployment than those trained abroad. This suggests that employers treat domestic education as a proxy for quality, even when international qualifications may be equivalent or superior. The result is a systematic misallocation of talent, with skilled immigrants often relegated to roles beneath their training. Language and cultural differences further reinforce this dynamic. High scores on language tests such as the Canadian Language Benchmark (CLB) 8 may certify workplace proficiency, but do not guarantee fluency in daily or technical communication. One immigrant noted that “CLB 8… is more focused on the workplace English, not daily life in English” (Government of Canada). In addition, unfamiliarity with workplace norms, professional etiquette and networking conventions can lead to misunderstandings that slow integration. In some cases, these barriers contribute not only to professional exclusion but also to social isolation.
From an economic standpoint, employer bias and cultural barriers function as hidden transaction costs. They increase the perceived risk of hiring newcomers, resulting in inefficient labour allocation. At a time when Canada faces acute shortages in healthcare, engineering and education, these barriers represent not only a loss for immigrants but a broader drag on productivity and growth.
Overqualification and Psychological Impact
The cumulative effect of licensing barriers, regulatory inconsistencies and employer bias is that many skilled immigrants find themselves working far below their capacity. The statistics are sobering: approximately 27 percent of recent degree-holding immigrants in Canada are employed in jobs that require only a high school education—a rate nearly three times higher than that of Canadian-born workers (C.D. Howe Institute). This structural underutilization represents a serious misallocation of human capital at a time when Canada faces acute shortages in fields such as healthcare, engineering and education.
Yet the costs are not solely economic. The personal toll of long-term underemployment is profound. Research from the University of Alberta reveals that immigrants stuck in low-skilled or precarious jobs often experience a loss of professional identity, declining self-confidence and growing mental health strain. The stress of repeatedly having to “prove oneself” through exams, rejections and prolonged credentialing delays becomes corrosive over time. As one participant in the study observed, long-term underemployment “chips away at their self-identity… leading to feelings of inadequacy and mental distress” (University of Alberta).
From an economic standpoint, this represents an invisible but significant cost. Underemployment not only reduces productivity but also weakens the long-term resilience and integration of newcomers. When immigrants are financially and emotionally depleted, their ability to invest in retraining or re-licensing diminishes, creating a feedback loop that perpetuates dependency and underemployment. Ultimately, these outcomes reveal that barriers to professional practice in Canada are not just a matter of regulatory inefficiency; they are a matter of human dignity. They point to an urgent need for reform, not only to unlock labour supply but to honour the professional identities and aspirations of those who have already demonstrated extraordinary resilience by choosing to migrate.
Comparative View Across the OECD
Canada is not alone in facing challenges related to the integration of foreign-trained professionals. OECD data consistently show that immigrants with international credentials are more likely to experience overqualification and delayed entry into their professions than locally educated peers. While this issue is common across advanced economies, the speed and transparency of credential recognition varies widely, and Canada often lags behind the most effective models.
Australia: Competency-Based Recognition with Supervised Practice
Australia has developed nationally consistent pathways into regulated professions that are closely tied to its selective immigration system. In fields such as medicine and nursing, regulators offer provisional registration based on standardized competency exams, followed by supervised practice. This approach minimizes unemployment periods and facilitates quicker labour market entry while maintaining professional standards. The underlying principle is straightforward: assess competencies directly rather than relying solely on lengthy bridging programs. This provides clarity for candidates and confidence for employers.
Germany: Credential Recognition Integrated with Migration Policy
Germany has taken a structural approach by integrating credential recognition into immigration law. Under the Skilled Immigration Act, candidates can obtain residence permits while completing recognition procedures and supplementary training within Germany. Employers, regulators and immigration authorities operate within a coordinated framework, enabling faster integration into the labour market in sectors such as healthcare, engineering and technical trades. The rationale is both economic and humanitarian: aligning visas and licensing reduces bottlenecks and ensures a more predictable supply of qualified workers.
Canada’s Relative Position
Canada performs well in attracting educated migrants, but its fragmented licensing system slows the conversion of skills into employment and productivity. Unlike Australia, provisional practice pathways are rare, and unlike Germany, immigration and licensing systems remain largely disconnected. OECD evidence suggests that countries with streamlined credentialing processes achieve higher employment rates and lower underemployment among newcomers.
Lessons for Policy
International comparisons offer clear guidance for Canada. Moving toward competency-based assessments, supervised provisional practice and better alignment between immigration and licensing systems would reduce uncertainty for newcomers and help address labour shortages in priority sectors such as healthcare and engineering. Treating credential recognition as a strategic economic policy tool, rather than a regulatory formality, would allow Canada to more fully realize the potential of the skilled professionals it attracts.
Turning Immigration into Productivity: Reforming Foreign Credential Recognition in Canada
Canada has long been admired for its openness to immigration. Few countries admit as many skilled newcomers with such generosity and such explicit links between migration policy and economic strategy. Yet a persistent paradox remains: while entry into Canada is relatively straightforward, entry into one’s own profession is not. The country’s success in attracting highly educated immigrants and refugees is undermined by the difficulty of converting foreign credentials into Canadian licensure.
All regulated occupations in Canada; including physicians, engineers, nurses, teachers, and skilled trades require domestic licensure. Foreign degrees and experience must be assessed and approved by provincial or territorial regulators, a process that is often lengthy, expensive, and unpredictable. The economic cost is substantial. In healthcare, for example, Canada faces chronic shortages of doctors and nurses, yet imposes multiple exams, supervised practice periods, and costly assessments on foreign-trained professionals. The result is a dual loss: immigrants face income suppression and downward mobility, while Canada forfeits the productivity and tax revenues their skills could generate.
Professional regulation is a provincial responsibility, leading to fragmented standards across jurisdictions. Even within the same occupation, requirements vary. While the Canadian Free Trade Agreement facilitates mobility for domestically trained professionals, it does not extend to those trained abroad. Many newcomers mistakenly believe that passing the federal immigration skills assessment qualifies them for employment, only to discover that the licensing process begins anew upon arrival. This regulatory architecture delays labour market entry, perpetuates underemployment, and increases the risk that immigrants abandon their professions altogether.
Regulated professions often function as closed systems. Entry is controlled not only by exams but also by statutory restrictions, protected titles, and limited training placements. Professional associations exercise monopolistic control, with little incentive to expand access for internationally trained candidates. Newcomers may wait years for bridging programs or be barred from using professional titles until every licensing requirement is met. These restrictions limit labour market competition, inflate costs, and contribute to shortages in essential services.
Many immigrants arrive with limited understanding of Canada’s licensing landscape. Pre-arrival guidance focuses on visas and language tests, offering little detail on credentialing hurdles. Once in Canada, the challenge intensifies. Regulatory pathways are fragmented, and the federal Foreign Credential Recognition Tool offers minimal practical guidance. Without mentorship or a transparent roadmap, newcomers often rely on informal networks, miscalculating the time and cost required to re-enter their field. This information asymmetry undermines efficient labour-market matching and slows integration.
Employers frequently demand “Canadian experience,” creating a paradox: newcomers cannot work without a license, yet cannot gain experience without employment. Hiring is often network-driven, and immigrants lack the social capital that facilitates access. The result is a double exclusion; first from the profession, then from the job market. This coordination failure between immigration and labour-market institutions wastes human capital and slows productivity growth in sectors facing acute shortages. Implicit bias further compounds the problem. Employers tend to favour Canadian degrees and local experience, undervaluing foreign credentials. Language proficiency tests certify workplace readiness but do not guarantee fluency in daily or technical communication. Cultural unfamiliarity with workplace norms can lead to misunderstandings and social isolation. These hidden transaction costs inflate the perceived risk of hiring newcomers, resulting in inefficient labour allocation.
The cumulative effect is stark: 27 percent of recent degree-holding immigrants work in jobs requiring only a high school education. This underemployment erodes professional identity, self-confidence, and mental health. The stress of repeatedly “proving oneself” becomes corrosive, creating a feedback loop that discourages retraining and perpetuates dependency. These outcomes reflect not only economic inefficiency but a failure to affirm the dignity and aspirations of skilled newcomers.
Canada has introduced a patchwork of supports, including the Economic Mobility Pathways Pilot and the Foreign Credential Recognition Program. Provincial labour mobility rules facilitate movement for domestically trained professionals, but foreign-trained individuals remain subject to fragmented licensing regimes. While loans, internships, and mentoring programs exist, demand far exceeds supply, and many supports are time-limited. The result is a landscape of partial relief rather than systemic reform. Other OECD countries offer instructive models. Australia provides provisional registration based on competency exams and supervised practice, enabling faster labour market entry. Germany integrates credential recognition with immigration law, allowing candidates to complete licensing while residing and training in-country. Both countries treat credential recognition as a strategic lever for competitiveness. Canada, by contrast, continues to operate a disconnected system that places the burden on individuals to prove their worth again.
If Canada intends to maintain its reputation as both a welcoming country and a competitive economy, credential recognition must be treated as more than a bureaucratic hurdle. Reform requires a coherent national strategy that makes licensing faster, fairer, and more transparent. Pre-arrival information must be expanded and delivered clearly. Bridging programs, mentorships, and internships must be adequately funded and accessible, not subject to long waitlists or arbitrary time limits. Employers must be supported and incentivized to recognize international experience as an asset, not a liability. The stakes are high. Every underutilized professional represents a double loss; one to the newcomer, in terms of dignity and stability, and another to Canada, in terms of lost productivity and innovation. Credential recognition is not just a regulatory issue. It is a cornerstone of economic growth, social cohesion, and human dignity. For newcomers, it is the bridge from survival to contribution. For Canada, it is the difference between immigration as a demographic stopgap and immigration as a true engine of prosperity.
By Jimmy Patricks Unzi, Ch.E
Executive Director
Refugee Pathways and Integration Canada Inc.
