Back to Basics - Literacy Proficiency, Immigration and Labour Market Outcomes in Sweden

We explore how education, literacy skills and migrant origin affect employment and over-qualification mismatch, using a simple model of human capital, standard regression methods and data from the OECD Survey of Adult Skills (PIAAC). Sweden is an interesting case, as a compressed wage distribution makes thresholds to enter the labour market high for those with low education and low skills. Skill and education levels are high among the native-born. At the same time, the high influx of humanitarian and family reunion migrants, who are on average less educated and less skilled than natives, increases the supply of low-skilled labour. We find that substantial employment penalties all but disappear when controlling for migrants' lower literacy proficiency. In contrast, the high incidence of over-qualification mismatch among immigrants is little sensitive to literacy proficiency and demographic profiles. However, having participated in education and training activities in Sweden improves matching considerably, in particular if such activities are manifested in formal qualifications.