Immigrant-native wage gap, gender, and cognitive skills: evidence from PIAAC

Abstract

The study investigates the effect of cognitive skills and use of these skills in various contexts on the immigrant-native wage gap in 14 European countries by using the data from Programme of International Assessment of Adult Competencies (PIAAC). After revealing the significant disparities in cognitive skills between immigrants and native-born respondents we analyze the effect of skills and their use on the wage gap in a multi-level regression model by controlling for individual demographic and occupational characteristics, as well for a set of host-country characteristics, reflecting economic development and social welfare. Gender differences in immigrant-native wage gap and drivers behind it are paid particular attention. Once the skill-related variables are incorporated, the wage gap considerably decreases for both genders although it still remains significant for females. By analysing immigrants with respect to their tenure in the host country, we observe that in the early years of immigration the foreign-born people are significantly disadvantaged in the host country labour markets regardless of their skills. But in later years the use of skills reveals significant association with hourly earnings of immigrants. The wage decompositions show that Spain, Finland, and Estonia are the countries with the highest immigrant-native wage gaps.