Skip to content
Licensed Unlicensed Requires Authentication Published by De Gruyter August 17, 2018

The Impact of Language Skills on Immigrants’ Labor Market Integration: A Brief Revision With a New Approach

Eric Schuss

Abstract

I examine the impact of language skills on immigrants’ labor market performance by applying a new approach, which allows to estimate wage benefits attributed to initial language skills at arrival. By exploiting unique data, I isolate the endogenous part of current German skills and instrument current command by German proficiency measured retrospectively at the point in time of migration. This approach tackles the problem that labor market effects from current language skills are at risk to reflect merely the sum of a successful residence in Germany and only display growth effects. I find that a good command of German increases labor market income by 47.0% for males, while no significant language effects are detected for females. Further analyses illustrate that differences in language effects by gender can be attributed to selection into different occupations and part-time employments and that language operates complementary and enables cross-border transferability of human capital.

JEL Classification: C26; J24; J31; J61

Appendix

A

Table 7:

Different disciplines of German language command over 2013–2015 (in %).

MalesFemales
2013201420152013–20152013201420152013–2015
Speaking
Very good31.833.213.028.332.133.214.029.0
Good37.034.332.035.038.633.630.035.2
Intermediate25.525.334.527.322.224.935.825.7
Poor5.46.618.98.76.67.117.68.9
Very poor0.40.71.70.80.51.32.61.2
100.0100.0100.0100.0100.0100.0100.0100.0
Observations1,6031,2237573,5831,9051,4408004,145
Reading
Very good31.832.414.728.434.634.917.631.4
Good36.735.633.035.639.337.437.338.3
Intermediate22.323.629.724.317.417.927.819.6
Poor7.16.417.49.06.06.012.87.3
Very poor2.12.05.22.72.63.74.63.4
100.0100.0100.0100.0100.0100.0100.0100.0
Observations1,6031,2237573,5831,9051,4408004,145
Writing
Very good27.826.711.424.028.930.213.826.4
Good30.129.225.928.935.432.429.533.2
Intermediate25.627.029.726.922.122.432.824.3
Poor12.613.024.415.210.210.616.911.6
Very poor4.04.18.65.03.54.47.14.5
100.0100.0100.0100.0100.0100.0100.0100.0
Observations1,6031,2237573,5831,9051,4408004,145

  1. Source: IAB–SOEP Migration Sample, own illustration.

Table 8:

Sample composition by labor market performance and countries of origin.

MalesFemales
GoodNoGoodNoMean diff.
commandcommandMean diff.commandcommandMean diff.by sex
Labor market performance:
Intensive margin:
Labor market income (in € per year)23,621.819,869.43,752.424,649.319,476.35,178.41,000.5
Hours weekly worked40.840.3-0.529.725.64.111.7
Employed (in %)79.667.412.263.644.719.017.3
Full-time employed66.257.29.026.615.710.939.7
Part-time employed8.69.81.233.228.15.022.9
Not employed20.432.612.236.455.319.017.3
Occupational sectors (in %):
Blue collar42.565.523.027.460.032.614.7
White collar44.627.816.860.030.129.914.0
Public sector8.04.63.418.610.38.39.9
Self-employed4.76.51.82.53.51.02.4
Countries of origin (in %):
Greece3.53.53.52.63.22.70.7
Italy5.25.35.23.22.93.12.1
Spain1.51.51.52.31.12.00.5
Turkey9.911.010.36.114.98.32.0
(Former) Yugoslavia13.06.911.29.99.89.81.4
Countries of EU11.414.712.415.314.715.12.7
enlargement 2004
Countries of EU9.212.410.111.712.411.91.8
enlargement 2007
Russia and (former) USSR29.024.727.734.819.430.83.1
East, Southeast and2.43.02.63.05.43.61.0
remaining Asia
Northern Africa2.42.92.61.12.11.41.2
Africa2.12.02.11.72.61.9-0.2
Arabic countries6.68.47.14.78.85.71.4
Observations2,5321,0513,5833,0751,0704,1457,728
Individuals1,7898652,4812,1298622,8065,275

  1. Notes: Two-sided t tests: significant at 10%, significant at 5%, significant at 1%

    Source: IAB–SOEP Migration Sample, own calculations.

Table 9:

Baseline estimations for females: The effect of German language skills on logarithmized labor market income (conditional on employment).

OLS2SLS IV
(1)(2)(3)(4)(5)(6)
Language skills0.12840.05470.04870.75140.38920.2465
(0.0398)(0.0399)(0.0396)(0.2432)(0.2714)(0.2634)
Socioeconomic variables:
Age0.00860.01020.00560.0084
(0.0025)(0.0027)(0.0035)(0.0036)
Years of residence0.00450.00990.00100.0077
(0.0039)(0.0039)(0.0047)(0.0048)
Relationship0.30030.33700.30370.3404
(0.0447)(0.0479)(0.0453)(0.0482)
German citizenship0.03470.0307-0.01870.0008
(0.0621)(0.0635)(0.0770)(0.0761)
Remittances0.18870.17960.18490.1805
(0.0370)(0.0368)(0.0385)(0.0380)
Informal way of job search0.0048-0.00660.0042-0.0070
(0.0413)(0.0407)(0.0416)(0.0405)
Member of EU0.27130.13850.25230.1291
(0.0809)(0.0817)(0.0828)(0.0822)
Education:
High education, ISCED 5-60.38500.34710.34490.3256
(0.0489)(0.0491)(0.0589)(0.0568)
Low education, ISCED 1-20.22240.19400.18460.1740
(0.0514)(0.0510)(0.0611)(0.0592)
Graduation in Germany-0.0918-0.0210-0.1110-0.0319
(0.0696)(0.0710)(0.0718)(0.0721)
First stage:
Language skills at arrival0.23210.18880.1916
(0.0273)(0.0257)(0.0258)
F statistic65.251.452.1
Additional control variables:
Country of originYesYesYesYes
Current residency statusYesYesYesYes
Pre-migration characteristicsYesYes
Residency status at arrivalYesYes
R20.01430.18750.21190.01430.17560.2088
χ210.4378.02,441,86.49.6374.1469.5
Number of observations2,3592,3592,3592,3592,3592,359
Individuals169016901690169016901690

  1. Notes: p<10%, p<5%, p<1%; standard errors in parentheses. Table 2 considers females and uses logarithmized labor market income per year conditional on employment as the dependent variable. Models (1)–(3) apply random effects GLS and Models (4)–(6) apply two-stage least-squares instrumental variable (2SLS IV) estimations, where current command of the German language is instrumented by German language skills at arrival. The models are extended stepwise with socioeconomic and educational covariates, country of origin-fixed effects, current residency status, pre-migration characteristics and initial residency status at arrival. A list on used covariates can be found in Table 1.

    Source: IAB–SOEP Migration Sample, own illustration.

Table 10:

Minor robustness checks.

MalesFemales
(1)(2)(3)(4)
Ethnic GermansAge at arrivalEthnic GermansAge at arrival
excluded≥ 18excluded≥ 18
Language skills0.47230.53610.52100.4484
(0.2184)(0.3553)(0.2573)(0.2573)
First stage:
Language skills at arrival0.26990.31120.17270.2127
(0.0339)(0.0375)(0.0303)(0.0303)
F statistic63.569.029.948.7
Additional controlsYesYesYesYes
R20.21180.20110.21090.2048
χ2450.5401.2421.3393.0
Number of observations2,1812,0301,9191,925
Individuals1,5731,4581,4071,382

  1. Notes: p<10%, p<5%, p<1%; standard errors in parentheses. Table 10 presents 2SLS IV estimations for males and females conditional on employment with logarithmized labor market income per year as the dependent variable. Each estimation controls on the full set of covariates summarized in Table 1. Model (1) and (3) excludes ethnic Germans from estimations and Model (2) and (4) excludes childhood immigrants, which arrived before the age of 18 in Germany.

    Source: IAB–SOEP Migration Sample, own illustration.

References

Akresh, I. R. 2006. “Occupational Mobility among Legal Immigrants to the United States.” International Migration Review 40 (4): 854–885.10.1111/j.1747-7379.2006.00046.xSearch in Google Scholar

Akresh, I. R. 2008. “Occupational Trajectories of Legal US Immigrants: Downgrading and Recovery.” Population and Development Review 34 (3): 435–456.10.1111/j.1728-4457.2008.00231.xSearch in Google Scholar

Angrist, J. D., and J. S. Pischke. 2009. Mostly Harmless Econometrics. Princeton University Press.10.1515/9781400829828Search in Google Scholar

Berman, E., K. Lang, and E. Siniver. 2003. “Language-Skill Complementarity: Returns to Immigrant Language Acquisition.” Labour Economics 10: 265–290.10.3386/w7737Search in Google Scholar

Bleakley, H., and A. Chin. 2004. “Language Skills and Earnings: Evidence From Childhood Immigrants.” Review of Economics and Statistics 86 (2): 481–496.10.1162/003465304323031067Search in Google Scholar

Bleakley, H., and Chin, A. 2010. “Age at Arrival, English Proficiency, and Social Assimilation Among US Immigrants.” American Economic Review: Applied Economics 2 (1): 165–192.10.1257/app.2.1.165Search in Google Scholar

Borjas, G. J. 1994. “Self-Selection and the Earnings of Immigrants.” American Economic Review 77 (4): 531–553.10.3386/w2248Search in Google Scholar

Borjas, G. J. 1995. “Ethnicity, Neighborhoods, and Human-Capital Externalities.” American Economic Review 85 (3): 365–390.10.3386/w4912Search in Google Scholar

Brücker, H., M. Kroh, S. Bartsch, J. Goebel, S. Kühne, E. Liebau, P. Trübswetter, I. Tucci, and J. Schupp. 2014. “The New IAB-SOEP Migration Sample: An Introduction Into the Methodology and the Contents.” SOEP Survey Paper 216, Series C, DIW Berlin.Search in Google Scholar

Budria, S., and P. Swedberg. 2015. “The Impact of Language Proficiency on Immigrants Earnings.” Revista de Economa Aplicada 67: 63–91.10.2139/ssrn.2170645Search in Google Scholar

Chiswick, B. R., and P. W. Miller. 1995. “The Endogeneity between Language and Earinings: International Analyses.” Journal of Labor Economics 13 (2): 246–288.10.1086/298374Search in Google Scholar

Chiswick, B. R., and P. W. Miller. 2002. “Immigrant Earnings: Language Skills, Linguistic Concentration and the Business Cycle.” Journal of Population Economics 15 (1): 31–57.10.1007/PL00003838Search in Google Scholar

Chiswick, B. R., and P. W. Miller. 2003. “The Complementarity of Language and Other Human Capital: Immigrant Earnings in Canada.” Economics of Education Review 22 (5): 469–480.10.1016/S0272-7757(03)00037-2Search in Google Scholar

Clark, K., and S. Drinkwater. 2002. “Enclaves, Neighbourhood Effects and Employment Outcomes: Ethnic Minorities in England and Wales.” Journal of Population Economics 15: 5–29.10.1007/PL00003839Search in Google Scholar

Di Paolo, A., and J. L. Raymond. 2012. “Language Knowledge and Earnings in Catalonia.” Journal of Applied Economics 15 (1): 89–118.10.2139/ssrn.1815070Search in Google Scholar

Dustmann, C., and F. Fabbri. 2003. “Language Proficiency and Labour Market Performance of Immigrants in the UK.” The Economic Journal 113: 695–717.10.1111/1468-0297.t01-1-00151Search in Google Scholar

Dustmann, C., and A. Glitz. 2011. “Migration and Education.” In: Handbook of the Economics of Education, vol. 4, Chapter 4, edited by E. A. Hanushek, S. Machin and L. Woessmann, 327–439. North-Holland.10.1016/B978-0-444-53444-6.00004-3Search in Google Scholar

Dustmann, C., and A. van Soest. 2001. “Language Fluency and Earnings: Estimation with Misclassified Language Indicators.” The Review of Economics and Statistics 83 (4): 663–674.10.1162/003465301753237740Search in Google Scholar

Dustmann, C., and A. van Soest 2002. “Language and the Earnings of Immigrants.” Industrial and Labor Relations Review 55 (3): 473–492.10.1177/001979390205500305Search in Google Scholar

Dustmann, C., and A. van Soest. 2004. “An Analysis of Speaking Fluency of Immigrants Using Ordered Response Models with Classification Errors.” Journal of Business and Economic Statistics 22 (3): 312–321.10.1198/073500104000000163Search in Google Scholar

Edo, A., N. Jacquement, and C. Yannelis. 2017. “Language Skills and Homophilous Hiring Discrimination: Evidence From Gender and Racially Differentiated Applications.” Review of Economics of the Household forthcoming.10.1007/s11150-017-9391-zSearch in Google Scholar

Fasani, F. 2015. “Understanding the Role of Immigrants’ Legal Status: Evidence from Policy Experiments.” CESifo Economic Studies 61 (3): 722–763.10.1093/cesifo/ifv006Search in Google Scholar

Ganzeboom, H. B. G., and D. J. Treiman. 1996. “Internationally Comparable Measures of Occupational Status for the 1988 International Standard Classification of Occupations.” Social Science Research 25: 201–239.10.1006/ssre.1996.0010Search in Google Scholar

Ganzeboom, H. B. G., and D. J. Treiman. 2003. “Three Internationally Standardised Measures for Comparative Research on Occupational Status.” In: Advances in Cross-National Comparisons: A European Working Book for Demographic and Socio-Economic Variables, edited by J. H. P. Hoffmeyer-Zlotnik and C. Wolf, 159–193. New York: Springer US.10.1007/978-1-4419-9186-7_9Search in Google Scholar

Lang, K., and F. Siniver. 2009. “The Return to English n a Non-English Speaking Country: Russian Immigrants and Native Israelis in Israel.” The B.E. Journal of Economic Analysis & Policy 9 (1): 1–28.10.3386/w12464Search in Google Scholar

Lindley, J. 2002. “The English Language Fluency and Earnings of Ethnic Minorities in Britain.” Scottish Journal of Political Economy 49 (4): 467–487.10.1111/1467-9485.00242Search in Google Scholar

Lochmann, A., H. Rapoport, and B. Speciale. 2017. “The Effect of Language Training on Immigrants’ Economic Integration - Empirical evidence from France.” CESifo Working Paper No. 6460.10.2139/ssrn.2978559Search in Google Scholar

Miranda, A., and Y. Zhu. 2013a. “The Causal Effect of Deficiency at English on Female Immigrants’ Labor Market Outcomes in the UK.” IZA Discussion Paper No. 7841.10.2139/ssrn.2372550Search in Google Scholar

Miranda, A., and Y. Zhu. 2013b. “English Deficiency and the Native Immigrant Wage Gap.” Economics Letters 118 (1): 38–41.10.1016/j.econlet.2012.09.007Search in Google Scholar

Sanroma, E., R. Ramos, and H. Simon. 2008. “The Portability of Human Capital and Immigrant Assimilation: Evidence for Spain.” IZA Discussion Paper 3649: 1–36.10.2139/ssrn.1230836Search in Google Scholar

Sanroma, E., R. Ramos, and H. Simon. 2009. “Immigrant Wages in the Spanish Labour Market: Does the Origin of Human Capital Matter? IZA Discussion Paper 4157: 1–25.10.2139/ssrn.1402504Search in Google Scholar

Schuss, E. 2016. “Between Life Cycle Model, Labor Market Integration and Discrimination: An Econometric Analysis of the Determinants of Return Migration.” SOEPpapers on Multidisciplinary Panel Data Research, DIW Berlin No. 881.Search in Google Scholar

Wagner, G. C., J. Göbel, P. Krause, R. Pischner, and I. Sieber. 2008. “Das Sozio-oekonomische Panel (SOEP): Multidisziplinäres Haushaltspanel und Kohortenstudie für Deutschland - Eine Einführung (für neue Datennutzer) mit einem Ausblick (für erfahrene Anwender).” Wirtschafts- und Sozialstatistisches Archiv 2: 301–328.10.1007/s11943-008-0050-ySearch in Google Scholar

Willis, R. J., and S. Rosen. 1979. “Education and Self-Selection.” The Journal of Political Economy 87 (5, part 2): 7–36.Search in Google Scholar

Yao, Y., and J. C. van Ours. 2015. “Language Skills and Labor Market Performance of Immigrants in the Netherlands.” Labour Economics 34: 76–85.10.1016/j.labeco.2015.03.005Search in Google Scholar

Published Online: 2018-08-17

© 2018 Walter de Gruyter GmbH, Berlin/Boston