The Effect of Literacy on Immigrant Earnings

Abstract

We examine the impact of literacy on immigrant earnings and the sources of lower returns to education and experience among immigrants. We find that the native-born literacy distribution dominates that for immigrants. However, the two groups obtain similar returns to literacy skills, contrary to discrimination-based explanations for immigrant—native-born earnings differentials. Among the university-educated, literacy differences account for about two-thirds of the earnings gap. However, low returns to foreign experience have a larger impact on this differential. Among the less educated, literacy differences and differences in the returns to experience have similar effects on the earnings differential.