Differences in Heterogeneous Returns to Foreign Language Use at Work Among Natives and Migrants in Europe

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The cultural-demographic profile of Europe has been heavily influenced by migration dynamics over the past decades. The question is whether language diversity in a host country – in particular, language proficiency and foreign language use at work – has implications for the workers’ wages. Our study examines the heterogeneous impacts of foreign language use at work on earnings of both native-born workers and foreign-born workers. To that end, a Mincer earnings equation is specified. The model is tested by means of an extensive data set that captures all relevant variables. Despite the dated nature of the data used, several interesting outcomes on wage differentials in Europe – as a result of foreign language use at work – are found. First, for native-born workers with a tertiary diploma, using a foreign language at work is found to have an unambiguously positive impact on their earnings (2%). Second, for foreign-born workers, returns to foreign language use at work is highly complementary to education. Foreign language users below the upper secondary educational level earn significantly less (−8%) than those who use the local language at work. Third, a linguistically distant foreign language gives native-born workers the highest wage premium, while the use of EU official languages pays off the most for foreign-born workers. Fourth, our results do not show evidence that the lack of local language knowledge of low-educated migrants causes these results, as immigrants for whom the mother tongue is similar to the local language show similar outcome.