Ethnic Inequalities in Educational Returns: Overeducation, Language Skills and Social Capital

According to existing studies, the persistence of ethnic inequalities on Western labour markets is largely due to ethnic differences in educational attainment. Empirically less important, but socially more relevant are differences in educational returns: why is education less beneficial for immigrant minorities in meritocratic societies? Apart of taste based and statistical discrimination, we argue that missing language skills and a lack of social capital could explain why immigrants and their children cannot make full use of their education. For income, we additionally assume "lagged" consequences of lower employment returns to education: Because education is less useful in terms of finding a job for persons of immigrant origin, they are probably overeducated more often and in consequence their overall education has lower income returns.

   Using data from the German Microzensus 2006-2009, we show lower educational employment and income returns for first and second generation Spätaussiedler as well as persons of Italian, Greek and Turkish origin as compared to native Germans. Results of simultaneous conditional quantile regressions show similarly stark percentile and median differences for first and to a lesser degree also second generation immigrants. Missing langauge skills and social capital seem unlikely candiates, given the equal pattern of differences for different percentiles. Yet, these differences in educational returns are largely accounted for by the larger degree of overeducation among persons of immigrant origin. The results also show that lower returns to education have two sides of a coin: The returns are lower, but lacks of education in terms of undereducation are less disadvantageous. If education counts less, so does its lack.