Working paper

Literacy and numeracy skills and labour market outcomes in Australia

Literacy Numeracy Labour market Australia
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Australian adults are above the OECD average in literacy but only average in numeracy, according to a staff paper released by the Productivity Commission.

The paper analyses the profile of adult literacy and numeracy skills in Australia, and how important those skills are for labour market outcomes.

Key points:

  • Adult literacy and numeracy skills contribute to wellbeing in many ways. At an individual level, they are central to social and economic participation.
    • Literacy and numeracy skills are a core part of a person's human capital.
    • They also support the development of other forms of human capital, including knowledge, other skills and health.
  • Some Australians have low (level 1 or below) literacy and numeracy skills. In 2011–12:
    • 14 per cent of Australians could, at best, read only relatively short texts from which they were able to locate only a single piece of information.
    • 22 per cent could only carry out one-step or simple processes such as counting where the mathematical content is explicit with little or no text or distractors.
  • At the other end of the skill distribution, 16 per cent of Australians had high (level 4/5) literacy skills and 12 per cent had high numeracy skills in 2011–12.
    • People with high literacy skills can make complex inferences and evaluate subtle truth claims or arguments in lengthy or multiple texts.
    • People with high numeracy skills can understand a broad range of mathematical information that may be complex, abstract or embedded in unfamiliar contexts.
  • Most Australians have skills somewhere between these levels. Groups with relatively low literacy and numeracy skills include: people with low levels of education; older persons; people not working; and immigrants with a non-English speaking background.
  • Compared with other countries in the OECD, Australia performs above average on literacy but average in numeracy.
  • Higher literacy and numeracy skills are associated with better labour market outcomes (employment and wages). Econometric modelling shows that:
    • an increase in literacy and numeracy by one skill level is associated with an increased likelihood of employment of 2.4 and 4.3 percentage points for men and women, respectively
    • an increase in literacy and numeracy skills is associated with a similar increase in the probability of employment, whether a person had a degree, diploma/certificate or Year 12 education
    • an increase in literacy and numeracy by one skill level is associated with about a 10 per cent increase in wages for both men and women. This positive association is equivalent to that of increasing educational attainment from Year 11 to Year 12 or to a diploma/certificate
    • up to 40 per cent of the association between education and employment is attributable to literacy and numeracy skills. These results are consistent with education providing many other attributes of human capital that are valued in the workplace
    • more than half of the 'penalty' that affects the wages of people with a non-English speaking background is explained by their lower literacy and numeracy skills.

Staff working papers are not formal publications of the Commission. They have been prepared and are authored by individual staff to advance understanding of issues on the Commission’s supporting research program.

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