Do Language Skills Pay Off? Earnings Returns to English Skill and Mandarin Skill in Hong Kong

• In Event: 411 - Section on Inequality, Poverty, and Mobility Refereed Roundtable Session and Business Meeting
  In Refereed Roundtable 60min: Table 08. Labor, Mobility, and Inequality.

Abstract

This paper analyzes earnings returns to English skill and Mandarin skill in Hong Kong. Combining two datasets from Hong Kong and using OLS method, I find that controlling other factors, people who can speak English enjoy 12.1 percent higher monthly income than those who cannot. Comparatively, Mandarin skill dose not bring high earnings returns, only 1.6 percent. Then I concentrate on English skill and find the heterogeneity of premium for English skill in gender, education, occupation and cohort. Results from Brown et al decomposition reveal that between-occupation differentials are dominant in total differentials of monthly income between people with English skill and people without English skill, indicating the language exclusion based on English. Furthermore, family background has a significant effect on individuals’ English proficiency, the mechanism of which is through personal educational attainment. These findings shed light on the role of language skills in income inequality and social reproduction.

Author

• Mengyu LIU, Hong Kong University of Science and Technology