The causal effect of deficiency at English on female immigrants’ labor market outcomes in the UK

Using the first wave of the UK Household Longitudinal Survey, we investigate how deficiency at English as measured by English as Additional Language (EAL), contribute to the first generation immigrant-native wage gap for female employees in the UK, after controlling for age, region of residence, educational attainment and ethnicity. To deal with the endogeneity of EAL and a substantial problem of self-selection into employment we suggest a 3-step estimation (TSE) procedure and use the interaction of language of country of birth and a late age-at-arrival indicator as instrument for EAL, exploiting variations in the female-to-male ratios of labor force participation and educational attainment by country of birth to instrument employment status. The properties of the TSE estimator are investigated in a Monte Carlo simulation study and we show evidence that suggests our procedure delivers a consistent and asymptotically normal estimator. We find a large and statistically significant causal effect of EAL on the immigrant-native wage gap.