International Conflict Penalty in Workplaces

This paper studies how international conflicts affect local labor market outcomes by exploring the origins of firm owners and workers. Using a comprehensive dataset of Canadian immigrant-owned firms from 2001 to 2017, we find workers from countries in armed conflicts with the owners' countries of origin consistently receive lower wages than those from countries with friendly relations. This effect is stronger than favoritism toward workers from the same origin as the owners. Workers from conflicting nations experience higher pay growth but are less likely to reach the firm's highest pay rank. These workers show a higher propensity to leave their positions, particularly when they receive pay increases, suggesting a misalignment in the labor market dynamics, as opposed to when pay is cut. The results suggest global political conflicts can shape economic relations among immigrants, even in a domestic labor market.