The Premium of English Proficiency in the South Korean Labor Market

Abstract

In this paper, we estimate the wage premium of English skills in the Korean labor market using Korean Labor and Income Panel Study (KLIPS) data. In a simple OLS model, we find

that people with some English skills in terms of self evaluation or job requirement earn 30% more than those who do not have English skills. But in a small sample of relatively young people, higher English test scores do not raise earnings. When we add SAT scores in the wage equation, there is no wage premium of English skills, and in the IV estimation, we find no English premium. These results consistently imply that while there is a large wage premium of English skills in the Korean labor market, it reflects unobservable ability for the most part. Meanwhile some of the regression results favor human capital theory over screening theory as an explanation of the nature of the wage premium of English skills.