The impact of literacy, numeracy and computer skills on earnings and employment outcomes

This paper examines which incremental increases in numeracy skills, literacy skills and skills and readiness in using information and communication technology (ICT) for problem solving have the biggest impact on employment participation and related labour market outcomes, and how these compare to incremental increases in educational attainment. The source of the data is the 2012 Survey of Adult Skills, a product of the OECD Programme for the International Assessment of Adult Competencies (PIAAC). Using the 2012 PIAAC data, the authors' analysis confirms that there are significantly higher earnings and employment returns to both increasing levels of formally recognised education, and to increasing levels of numeracy, literacy and ICT skills proficiencies controlling for the level of education.

Unsurprisingly, the labour market returns to changes in formally recognised levels of education in general exceed the labour market returns associated with increasing levels of skills proficiency. In the case of literacy and numeracy proficiencies, improved literacy and numeracy skills narrow the labour market outcomes gap between individuals with different levels of formally recognised education, but do not close it completely. The analysis demonstrates more substantial returns to ICT skills. Furthermore, possession of higher levels of ICT skills and lower levels of formally recognised qualification are often associated with higher returns compared to individuals with higher levels of formally recognised education but lower ICT proficiency levels. In other words, ICT skills proficiencies often entirely compensate for lower formally recognised qualifications in the labour market.

Edited excerpts from publication. Show less