Language skills in an ethnically segmented labour market : Estonia 1989–2012

Purpose: The purpose of this paper is to analyse the relationship between skills in the Estonian, Russian and English language, and labour market outcomes in Estonia, a linguistically divided country. Design/methodology/approach: The authors use the Estonian Labour Force Surveys 1992–2012. The authors rely on multivariate linear regression models to document the relationship between language skills and labour market outcomes. Findings: Estonian language knowledge (for ethnic Russians) are important determinants of unemployment. Wage, in contrary, is closely related to English skills. Ethnic Russian men do not earn any premium from speaking Estonian, while women, fluent in Estonian earn approximately 10 per cent more. For ethnic Estonians, Russian fluency is associated with a similar income gain. Research limitations/implications: Due to the observational nature of the data, the effects reported in this study are not causal effects. As a second limitation, the self-reported language skills data may be imprecise and hence the effects the authors report may be too small. Practical implications: The results stress the role of workplace segregation, both along gender and ethnic lines, in determining the individual labour market experience. Originality/value: The authors provide a comprehensive overview of the effects of language skills in a rapidly developing labour market in a linguistically divided economy. The authors analyse several languages with different legal status and document long-term trends in the effects.