Literacy and the Migrant–Native Wage Gap

Abstract

Being able to read and write is one of the most important skills in modern economies. Literacy frequently is a prerequisite for employment and its relevance for productivity and wages is magnified by the fact that it is only through literacy that many other skills become usable. More so than for natives, this argument applies to migrants: even those with high levels of human capital acquired in the country of origin often have it rendered worthless by the absence of literacy in the host country language. Using novel data from a large-scale German adult literacy test (leo -level-one study), we investigate the determinants of literacy and show that migrants have systematically lower language skills than natives. We find that any observed raw employment and wage gaps between natives and migrants can be fully explained by these differences.

Educational Expansion, Skills Diffusion, and the Economic Value of Credentials and Skills

“…For example, in a section titled “A taxonomy of skills,” the OECD (2017) referred to several economic studies, such as Heckman, Stixrud, and Urzua (2006) and Kautz and colleagues (2014), introducing two types of skills—cognitive and noncognitive—as important determinants of socioeconomic outcomes. Cognitive skills are often quantified by standardized assessments of literacy, numeracy, and ICT skills (OECD 2017), among which general information-processing abilities, such as literacy and numeracy, have proved to operate as the foundation for other types of skills and short/long-term economic prosperity at the individual, institutional, and societal levels (Abrassart 2013; Carroll 1993; Ferrer, Green, and Riddell 2004; Finnie and Meng 2007; Green and Riddell 2003; Hanushek et al 2015; Hanushek and Woessmann 2015; Himmler and Jackle 2018; OECD 2013a, 2016; Rocha and Ponczek 2011; Tippins and Sohi 2003).…”

Wage Discrimination Based on the Country of Birth: Do Tenure and Product Market Competition Matter?

“…First, they may partly be due to productivity differentials coming from human capital discrepancies attributed to migrants' language abilities (e.g. Chiswick 1991;Chiswick and Miller 1995;Borjas 1999;Carnevale et al 2001;Dustmann and van Soest 2002), literacy skills (Ferrer et al 2004;Himmler and Jäckle 2018), schooling quality (Sweetman 2004), job tenure attainment (McDonald and Worswick 1998), and different school-to-work transitions (Friedberg 2000;Neels 2000;Bratsberg and Ragan 2002;Aydemir and Skuterud 2005;Euwals et al 2010;Baert and Cockx 2013). Another reason may be occupational and sectoral segregation: migrant workers may be unequally distributed across occupations and industries, confining them to specific jobs that remunerate less (Aydemir and Skuterud 2008;Elliott and Lindley 2008;Peri and Sparber 2009).…”

Foreign Human Capital and Total Factor Productivity: A Sectoral Approach

“…It must be stressed that the literature that looks at the contribution of migrants to productivity growth and innovation has mainly looked at the marginal impact of migrant flows on the productivity of firms and countries, but it has not addressed the issue of whether immigrant workers are comparatively more productive than natives. The studies that look at the wage-gap differential between natives and immigrants suggest that among the many factors that influence this gap (such as for example workplace discrimination) it is also important to include the possibility that immigrants have a lower productivity with respect to natives, due for example to the lack of literacy (Himmler and Jäckler, 2018). Indeed the only study, to our knowledge, that specifically measures the differential contribution of immigrants and natives is the paper by Fassio et al (2019), in which the authors show that the output elasticity of skilled immigrants to patent production in European countries is positive, but lower (about one third) than that of skilled natives.…”