Skill deficits among foreign-educated immigrants: Evidence from the U.S. PIAAC

Researchers have long observed that foreign-educated immigrants earn lower wages and hold less-skilled jobs than U.S. natives who have the same level of educational attainment, but the reasons for the disparity have been less clear. This paper tests the hypothesis favored by the human capital model of earnings and employment–namely, that foreign-educated immigrants struggle in the U.S. labor market primarily because they possess fewer marketable skills than workers with U.S. degrees. Standardized tests administered as part of the Program for the International Assessment of Adult Competencies reveal that foreign-educated immigrants score 0.82 and 0.54 standard deviations lower on measures of literacy and numeracy, respectively, compared to natives who have the same age and educational attainment. The gaps remain significant after controlling for self-assessed English reading ability. When these skill measures are incorporated into regression analyses, the wage and skilled-employment penalties experienced by foreign-educated immigrants fall by half or more, providing strong evidence for the human capital model. However, this analysis cannot rule out additional explanatory factors, such as legal and social obstacles that foreign-educated immigrants may face

Immigrant-native differences in PIAAC numeracy scores.

Immigrant-native differences in PIAAC numeracy scores.</p

Immigrant-native differences in PIAAC literacy scores.

Immigrant-native differences in PIAAC literacy scores.</p

Average percentile scores on PIAAC numeracy, by immigrant-education group.

The vertical line at the top of each bar indicates the 95% confidence interval. The scores are not age-adjusted.</p

Immigrant-native differences in PIAAC PST scores.

Immigrant-native differences in PIAAC PST scores.</p

Average percentile scores on PIAAC literacy, by immigrant-education group.

The vertical line at the top of each bar indicates the 95% confidence interval. The scores are not age-adjusted.</p

Distribution of PIAAC PSL category scores, education = advanced.

The figure displays the percentage scoring at four different levels of the PST test. Higher levels require more sophisticated problem solving. The percentages are not age-adjusted.</p

Distribution of self-assessed English reading ability among test-takers with valid PIAAC scores.

Distribution of self-assessed English reading ability among test-takers with valid PIAAC scores.</p

Distribution of PIAAC PSL category scores, education = any.

The figure displays the percentage scoring at four different levels of the PST test. Higher levels require more sophisticated problem solving. The percentages are not age-adjusted.</p