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Language proficiency and immigrants’ economic integration

Posted on:
January 26, 2020

It is vital to measure language proficiency well, as it crucially determines immigrants’ earnings.


“Over recent decades, Western countries have admitted many immigrants from non-traditional regions (e.g. Philippines, India, China), which has coincided with poor economic integration. Language proficiency is an important determinant of economic integration; in addition to being a component of human capital, it plays a key role in facilitating the transmission of other components of human capital. Examining the strengths and weaknesses of objective and subjective measures of language proficiency is crucial for good integration policy, as is understanding the relationship between these measures and earnings, a key indicator of economic integration.”

Key findings


  • Language proficiency is a component of human capital and facilitates the transmission of other components.
  • Differences in objective language proficiency explain most of the immigrant/native-born earnings gaps.
  • Self-assessed measures of language proficiency are more readily available and contain a large amount of information related to earnings.
  • Skills can be used to compare human capital across individuals, avoiding issues related to education quality and work experience.


  • Objective measures of language proficiency are uncommon; more common subjective measures contain measurement error and/or capture different skills.
  • Test scores reflect a mix of cognitive ability and language proficiency since many immigrants do not take tests in their mother tongue.
  • Available measures of literacy and numeracy are highly correlated, implying they may not capture the skills they are intended to test.
  • Objective tests are often not challenging enough for high-skilled respondents.
  • Literacy and numeracy do not capture the full range of skills needed to succeed in the labor market.

Summary and policy advice

“Language proficiency is key to the economic integration of immigrants, both as a component of human capital and because it facilitates the transmission of other components. Empirically, language proficiency is highly correlated with other skills though, such as numeracy. This suggests that tests are similar in terms of what they assess or that language proficiency affects test performance across skills, making it difficult to assess the relative importance of each for economic integration. Moreover, it could also be that tests are not difficult enough to capture skills and language proficiency in the upper part of the distribution.

To assess the relationship between language proficiency and economic integration, most research has relied on data sets that contain self-assessments, not objective test scores. However, there seems to be a large amount of overlap in literacy test scores for self-assessed speaking groups, which implies measurement error in the latter, or that self-assessments are capturing different skills. While both objective and subjective measures contain information pertinent to earnings, gaps remain for self-assessed groups when controlling for literacy test scores.

Many countries have recognized the importance of language proficiency and have integrated language tests into their immigrant selection criteria. For example, Australia made language tests mandatory for prospective immigrants in the 1990s. This policy improved language proficiency relative to earlier cohorts, as well as relative to Canada and the US, in which rigorous language tests were not in place over the same period.

However, Canada, for instance, has recently made efforts to better incorporate language tests into its immigrant selection criteria. Most recently, the Express Entry program requires economic immigrants to undergo tests that assess listening, speaking, reading, and writing proficiency. The level required to pass depends on the program to which the immigrant is applying, as well as the designated occupation. Still, better data are needed to accurately assess the effect of these types of policies, and policymakers should adjust the programs accordingly.”

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Research at a Glance is designed to inform the Immigration, Refugees and Citizenship Canada (IRCC) community and other interested parties about recently published, policy-relevant research from government, academic and NGO sources. The views expressed in the documents described do not necessarily reflect those of IRCC.


Examining the strengths and weaknesses of objective and subjective measures of language proficiency is crucial for good integration policy, as is understanding the relationship between these measures and earnings, a key indicator of economic integration.