Labour Economic Outcomes and the Returns to Language Acquisition: A Comparative Study of Refugees and Economic Immigrants in Germany

Abstract

This paper analyses the differences in labour economic and language outcomes between refugees and economic immigrants in Germany. We use data from the German Socioeconomic Panel (GSOEP), a yearly household survey of the population of Germany. Analysing the period from 1994 to 2014, we study only immigrants working at the time of survey. We find that working refugees, on average, earn between 17.6 and 19.2 percent less than working economic immigrants in Germany. The reasons for this are that refugees work on average 10.9 percent less hours annually and earn 8.3 percent (though not a significant result) less hourly wages, than their counterparts. We further set out to explore how important language proficiency is for the annual earnings of these two distinct groups of working immigrants. We find that for both groups, being classified as “Good” or “Very Good” in spoken German improves their earnings on average by around 11.9 percent. In addition, working refugees are not more likely to speak German well, or improve their language proficiency at a faster rate, compared to working economic immigrants. Our main models of choice use the Ordinary Least Squares (OLS) estimation method with robust standard errors.