English skills raise wages for some, not all, in India

Nishith Prakash, Aimee Chin, Mehtabul Azam 26 May 2010

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One in five Indian adults can speak English. Four percent report that they can converse fluently in English, and an additional 16% report that they can converse a little in English according to the 2005 India Human Development Survey. English-speaking ability is higher among men (26% of men speak at least a little English, compared to 14% of women), younger people, more educated people, higher castes, and urban residents. Figure 1 shows mean English ability by states or union territory. The smaller territories tend to have the highest English ability, suggesting that English serves as a working language in a linguistically diverse country where people will often not share a mother tongue.

Figure 1. Mean English-speaking skills by territory

It is widely believed that there are sizable economic returns to English-language skills in India. Due to India’s British colonial past, English remains an official language of the federal government, and is still used in government and education. Moreover, due to the rapid expansion of international trade and outsourcing in recent decades, English has become even more important. Despite this, there are surprisingly no estimates of the wage returns to English skills in India. The impediment appears to have been the lack of a microdata containing measures of both earnings and English ability. In our study (Azam et al. 2010), we quantify the English premium using data from the newly available 2005 India Human Development Survey (IHDS). The Development Survey is a nationally representative dataset covering over 40,000 households located throughout India. Closely related to our study are Rosenzweig (2006) and Chakraborty and Kapur (2008), who estimate the returns to attending a school with English as the medium of instruction – but the returns to attending an English medium school is not in general the same as the returns to English-language skills. (Also on the topic of English and Indian economic development are Clingingsmith 2008 and Shastry 2008).

How big are the returns to English in India?

Figure 2 shows the (unadjusted) mean hourly wages by English skill among male and female workers. At first glance, these unadjusted means suggest significant returns to English – but this probably overstates the returns because the means have not been adjusted to take into account factors such as that more educated people tend to earn more (with or without English skills) and that wage levels tend to be higher in urban areas and in certain states. In the estimated returns to English that we report below, we use a regression framework to control for likely confounding factors so that we can obtain a credible estimate of the causal effect of English-language skills. We focus on workers of the same age, gender, social group, educational attainment, secondary school leaving certificate test performance, district of residence and sector of residence (urban or rural), and then compare the wages of those who speak English with those who do not.

Figure 2. Unadjusted mean hourly wages by level of English

Estimates from Table 1 suggest that for men, hourly wages are on average 34% higher for workers who speak fluent English and 13% higher for workers who speak a little English relative to workers who speak no English. These effects are not only statistically significantly different from zero, but also economically meaningful. For example, the return to being fluent is as large as the return to completing secondary school, and half as large as the return to completing an undergraduate degree. For women, the average return is 22% for fluent English and 10% for a little English.

Table 1. Estimated returns to learning English

 
Men
Women
 
Returns to fluent English
Returns to little English
Returns to fluent English
Returns to little English
Average
34%
13%
22%
10%
No BA, aged 36-65
53%
34%
49%
44%
With BA, aged 36-65
28%
14%
15%
23%
No BA, aged 18-35
13%
-6%
-11%
-9%
With BA, aged 18-35
40%
17%
55%
29%
 

 

 

 

 

 

 

 

 

Note: Each point estimate also has a band of standard error suggesting that small differences in point estimates should not be used to draw conclusions.

Returns to English by age and education

We find that the returns to English-language skills are on average higher for older workers and for more educated workers. Most intriguing are the returns by both experience and education of the worker. To show this, we report in the last four rows of Table 1 the estimated returns to schooling for four groups of workers: less educated (less than Bachelor’s degree) older (aged 36-65) workers, more educated (at least a Bachelor’s degree) older workers, less educated younger (aged 18-35) workers, and more educated younger workers.

A striking finding is that older workers earn high returns to English regardless of their educational attainment while younger workers earn high returns only when they are highly educated. For example, older men without an undergraduate degree receive a 53% wage premium for being fluent in English, compared to 28% for older men with an undergraduate degree. In contrast, younger men without a degree receive a 13% wage premium for being fluent in English, compared to 40% for younger men with a degree. Among younger men, the returns to English are increasing in educational attainment. Furthermore, we find that English skills do not raise wages at all for younger men who have not completed their secondary school education.

These results are consistent with the idea that education and English skills have become more complementary over time. For example at the entry level, workers with English skill may have been able to find a good job decades ago whereas now only the subset with more education would find a good job. This could be because it has become more competitive to get good jobs – because the supply of educated workers has expanded so much – or because there are new jobs that require both higher education as well as English skill to perform – such as many jobs in information technology.

Why should we care?

Quantifying the returns to English-language skills in India is of interest for several reasons. First and foremost, a deeper understanding of the returns to learning English will help individuals and policymakers in India make decisions about how much to invest in English skills.

But the amount to invest is the subject of active debate. In India, as well as many other developing countries, there are those who favour promoting the local language as a way to make primary schooling more accessible and to strengthen national identity. At the same time there are those who argue that learning English leads to economic prosperity given the role of English in the global economy and many Indians are willing to spend extra money on schools and tutors to gain English proficiency. Given that English skills are costly to acquire – it takes time, effort, and often money, to learn English – choosing the optimal amount to invest in English-language skills involves comparing expected costs to expected benefits. This study provides the first estimates of these expected benefits.

This study also provides insight on the more general question of the value of English in a context where English is not a prevalent language. English is often used as a working language and many countries, even ones that are not former British or American colonies, invest in English skills.

What does this mean for the future?

We find that there are large, statistically significant returns to English-language skills in India. But the returns are considerably lower for younger workers – who are more recent entrants into the labour market. For recent entrants English skills help increase wages only when coupled with more education – those who have not completed their secondary schooling will not see their wages increase due to acquisition of English-language skills. As a result, providing English to adults may not necessarily raise their wages.

Policymakers should be aware of the complementary nature of language-skills when designing policies. For example, English programmes for children in schools – which would be in time to influence their educational attainment – would be more effective than adult English classes.

References

Azam, Mehtabul & Chin, Aimee & Prakash, Nishith (2010), "The Returns to English-Language Skills in India," IZA Discussion Papers 4802.

Clingingsmith, D (2008), “Industrialization, Bilingualism, and Linguistic Heterogeneity in Mid-20th Century India”, Case Western Reserve University unpublished paper, November.

Desai, S, R Vanneman, and National Council of Applied Economic Research, New Delhi (2005), India Human Development Survey (IHDS), ICPSR22626-v5. Ann Arbor, MI: Inter-university Consortium for Political and Social Research.

Kapur, S and T Chakraborty (2008), “English Language Premium: Evidence from a Policy Experiment in India”, Washington University in St. Louis unpublished paper, September.

Munshi, K and M Rosenzweig (2006), “Traditional Institutions Meet the Modern World: Caste, Gender, and Schooling Choice in a Globalising Economy”, American Economic Review, September, 96(4):1225-1252.

Shastry, GK (2008), “Human Capital Response to Globalisation: Education and Information Technology in India”, University of Virginia unpublished paper, October.

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Topics:  Education Labour markets

Tags:  India, returns to education, English, language skills

Assistant Professor of Economics, University of Connecticut, Storrs.

Associate Professor of Economics at the University of Houston

Economist at the World Bank

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