Ethnic Wage Penalty and Human Capital Transferability: A Comparative Study of Recent Migrants in 11 European Countries

Abstract

This article examines the ethnic wage penalty among migrants in 11 Western European countries. It aims to extend the literature on the models of migrant occupational inclusion in European labor markets by studying the wage gap and to disentangle whether the gross wage penalty experienced by foreign-born residents can be explained by human capital-related factors and/or by migrants’ occupational segregation. Estimating probit models with sample selection on European Labour Force Survey data (2009–2016), we find that both male and female migrants experienced a larger gross wage penalty in Southern Europe, where they had lower education levels and faced stronger occupational segregation. In the other countries under study, we find a smaller gross wage penalty among foreign-born women. Results show that migrants from Eastern Europe were not systematically less penalized than migrants from Africa, Asia, and Latin America, except for men in Italy and Greece. Wage penalties were higher among tertiary-educated migrants, compared to their less-educated counterparts, only in Mediterranean countries, where the former were mainly concentrated at the bottom of the occupational structure. Finally, the acquisition of the highest education after migration reduced migrants’ wage penalty, thanks to a better match between educational credentials and job allocation, especially in Southern Europe. Focusing on the ethnic wage penalty and on both human capital- and occupation-related factors of ethnic penalization highlights cross-country differences not yet explored by existing comparative research, allowing a new and more comprehensive picture of migrants’ penalization in Europe.