Measuring and assessing the impact of basic skills on labour market outcomes

Abstract

Executive SummaryThe work on the effect of basic literacy and numeracy skills on labour market outcomes arises from a recent report by Sir Claus Moser, which investigated the basic skills of English adults (DfEE, 1999). This report suggested that approximately 20% of adults in England, i.e. nearly seven million people, have severe literacy difficulties, whilst around 40% have some numeracy problems. Furthermore, the report showed that this 'skills gap' is one of the worst in Europe. Other recent research has confirmed this gloomy picture, indicating that as many as one in five UK adults have literacy problems 1 . Although this government is committed to tackling poor literacy and numeracy 2 , much of the emphasis thus far has been on finding ways to improve the basic skills of those who are still in the school system, with initiatives such as the National Strategies for Numeracy and Literacy. However, these initiatives will obviously not help adults, who have already left the education system, to overcome their numeracy and literacy problems. Instead, Moser suggested a National Strategy for Adult Basic Skills, with clear and ambitious national targets to reduce the number of functionally illiterate and innumerate adults. To investigate the possible benefits of such a strategy, this report evaluates the economic returns to having better literacy and numeracy skills.Apart from the obvious policy need for an analysis of the effects of basic skills on earnings, this work also fills a significant gap in the literature. Although there is substantial international evidence that the labour market rewards certain skills, particularly mathematical skills, there has been very little research that specifically investigates the impact of basic literacy and numeracy on labour market outcomes. The main findings are as follows;• Currently around 80% of UK adults have achieved Level 1 literacy skills, and 60% Level 1 in numeracy (British Skills Agency Standard). DfEE (1999) suggested a target of 90% and 70% respectively by 2010. • This report evaluates the impact of better literacy and numeracy skills on individuals' economic outcomes, focusing particularly on the effect of increasing numeracy and literacy skills up to Level 1.• We found evidence of a large positive effect on earnings and employment rates from having better numeracy skills, specifically from achieving at least Level 1 skills, although there was also evidence of a large premium from acquiring just Entry Level numeracy skills.• Not taking into account other factors that influence earnings, individuals with Level 1 numeracy skills earn around 15-19% more than those with skills below this level. Even after allowing for an independent effect from the worker's education/qualification level, and after controlling for family background, workers with Level 1 numeracy skills earn around 6-7% more than their less skilled peers. We also use NCDS data to control for initial ability in reading and mathematics at age 7, ability at 16 and education level, thus giving an approx...

What is the economic value of literacy and numeracy?

“…The US shows the highest wage premium from having better numeracy skills at nearly 30%. The PIAAC evidence is broadly consistent with the main conclusions drawn from other studies using the International Adult Literacy Survey data collected in 1996, which also show a high premium for basic skills (both literacy and numeracy) and again indicate substantial variation across countries [7], [8], [11].…”

“…For the individual worker, having higher skills is beneficial in that they result in higher wages and greater employment opportunities [7], [8], [9], [10], [11]. For example, it has been recognized for some time that in the US, individuals with higher levels of cognitive skills, including mathematical skills, have higher earnings [10].…”

Language and Labor Market Success

“…McIntosh and Vignoles (2001) provide estimates for positive wage and employment effects for UK, noting that around 20 percent of the British population had severe literacy difficulties in 1999. These literacy difficulties are associated with a sizeable wage penalty of about 15 percent.…”

Cross-National Differences and Accounting for Social Class Inequalities in Education

“…Student achievement or test scores are a strong correlate of a range of educational outcomes, such as grades at school, academic programme, school completion, university attendance and years of education (Jencks et al, 1979: 110-11;Marks and Fleming, 1999;Marks et al, 2000;Sewell et al, 1969;Sewell and Shah, 1967;Teachman, 1987). Student achievement also relates to a range of labour market outcomes including unemployment, unemployment duration, occupational status and earnings (McIntosh and Vignoles, 2001;Lamb, 1997;Marks and Fleming, 1998;Murnane et al, 1995). Therefore, social class inequalities in achievement are likely to be reflected or possibly magnified in subsequent educational and labour market outcomes.…”