Religiosity, human capital return and earnings in Canada

The purpose of this paper is to investigate the link between religiosity and labour market outcomes.

Using the Ethnic Diversity Survey, the author: examines how religious belief and practice relate to earnings in Canada; considers the impact of the degree of religiosity using a composite index constructed by means of survey questions; and uses this index as an explanatory variable in the estimation of standard human capital‐earnings function.

A negative correlation between religiosity and earnings is found controlling for demographic, behavioural and human capital variables. Examining the cross‐religion differential in earnings and human capital return, Muslims' earnings are found to be significantly lower compared to the average. Muslims' wage gap is explained by their immigrant status.

This paper is the first to use a composite, score‐based index standing for the degree of religiosity instead of a single survey question or unique observable indicator. Second, this paper is the first to consider the interaction of the degree of religiosity and religious denomination in a human capital‐earnings equation. Third, the author considers both men and women, which previous Canadian papers did not do. Fourth, this study is the first on a high income country to consider Muslims as a distinct religious group. Fifth, the author considers the interaction of the effects of religion and of immigration.