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April 27, 2020

What are the challenges in using language proficiency to predict the economic integration of immigrants?

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Immigration continues to grow in many Western countries. Recent immigrants have tended to come from source regions that are different from the host country in many important aspects. In Canada, prior to 1980, most immigrants originated from Europe and the US. In recent decades there has been a major shift in source regions, with the majority of immigrants now originating from Asia. This shift coincides with poorer economic integration, a key indicator of which is earnings. Despite increasing levels of formal education, recent immigrants have continued to experience lower entry earnings and many may never attain the average earnings of the native-born population. 

While many factors contribute to these declining labor market outcomes, language ability has been highlighted as a key contributing factor. Language proficiency is a component of human capital, and it facilitates the transmission of other components. Because of the change in source regions, the mother tongue of many immigrants differs from that of the host country, making it difficult to transfer human capital acquired prior to arrival. There is evidence that language proficiency, measured using literacy test scores, explains most of the earnings gap between immigrants and the native-born population. However, literacy test scores are not available in most datasets. Self-assessed measures of language proficiency (usually speaking ability) are more common and, while related to earnings, they are often an insufficient measure of language ability. 

While both literacy test scores and self-assessed speaking ability matter for earnings, they are not equivalent. For example, individuals with the same literacy test score have very different speaking ability (poor, fair, good, very good, mother tongue, native born). This suggests that self-assessed speaking ability is measured with error, or that it reflects different human capital than literacy test scores. Thus, it is important to consider various dimensions of language proficiency when assessing the effect of human capital on economic integration.

In addition to differences between literacy test scores and self-assessed speaking ability, there are other limitations to using language proficiency as a proxy for human capital. While literacy test scores are useful for comparing human capital across individuals and avoiding issues related to quality of education and work experience, they are often not challenging enough to allow fine distinctions. On the other hand, because many immigrants do not take tests in their mother tongue, differences in literacy scores may persist at the top of the skill distribution because they reflect differences in language proficiency. Another limitation is that literacy and numeracy test scores are very highly correlated. This suggests they assess a similar set of skills, or that language proficiency affects test scores across skills. This makes it difficult to assess the relative importance of each skill to the economic integration of immigrants. Likewise, literacy and numeracy test scores likely do not reflect the broad range of skills needed to succeed in the labor market. 

Many countries have recognized that language proficiency is important for the economic integration of immigrants. For example, Canada now includes extensive language tests in its selection criteria for economic immigrants—tests of listening, speaking, reading, and writing. The levels required to pass depend on the program to which the immigrant is applying and their designated occupation. Nevertheless, better measures of language proficiency are needed in widely used datasets to advance research in assessing language ability and its role in economic integration. This will inform policy aimed at selecting immigrants and facilitating their economic integration. These measures should distinguish between language proficiency and cognitive ability. Moreover, they should reflect the specific skills they are intended to measure and should be able to distinguish differences near the top of the skill distribution.

© Angela Daley, Min Hu, and Casey Warman

Read Daley et al.'s full IZA World of Labor article here "Language proficiency and immigrants’ economic integration."

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We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.