Measuring and Assessing the Impact of Basic Skills on Labour Market Outcomes

Individual copy price: £5 The Centre for the Economics of Education is an independent research centre funded by the Department of Education and Employment. The view expressed in this work are those of the authors and do not necessarily reflect the views of the Department of Education and Employment. All errors and omissions remain the authors. Executive Summary The 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 …