PC News - August 2014

The PIAAC Survey

The Australian Bureau of Statistics (ABS) conducted the Programme for International Assessment of Adult Competencies (PIAAC) survey during 2011-12 on behalf of the Organisation for Economic Co-operation and Development (OECD). The survey was conducted across 23 countries and the Russian Federation. Respondents were given various tasks to assess their literacy and numeracy skills.

• Literacy is defined as the ability to understand, evaluate, use and engage with written texts to participate in society, to achieve one's goals, and to develop one's knowledge and potential.
• Numeracy is defined as 'the ability to access, use, interpret and communicate mathematical information and ideas, in order to engage in and manage the mathematical demands of a range of situations in adult life'.

For each domain, each person's skill was estimated with a test score ranging from 0-500. Five skill levels were defined within this range, as set out in table 1 below.

How does Australia perform?

The authors of a recent Staff Working Paper — Anthony Shomos and Matthew Forbes — found a strong correlation between literacy and numeracy skills among Australians (figure 1). That is, someone with low literacy is also likely to have low numeracy.

Australian literacy levels are above average OECD levels, while numeracy skills are close to the OECD average (figure 2).

Despite this, there are many Australians with very poor literacy or numeracy skills. In 2011-12:

• 14 per cent of Australians could, at best, read short texts from which they were able to locate 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 distractions.

People with lower skills tend to be those with lower levels of education, older persons, people not working, and immigrants with a non-English speaking background.

How important are literacy and numeracy skills for labour market outcomes?

Literacy and numeracy skills are important for successful labour market outcomes. Modelling in the paper shows that an increase in a person's literacy and numeracy score by about 50 points — one skill level for most people — is associated with an increased likelihood of employment of 2.4 percentage points for men, and 4.3 percentage points for women, that is, roughly the same increase in the probability of employment as increasing educational attainment from Year 11 to Year 12. The relationship between the probability of employment and literacy and numeracy is depicted in figure 3.

An increase of literacy and numeracy by 50 points was also found to be associated with wages that are about 10 per cent higher. This was the case for both men and women.

After accounting for differences in literacy and numeracy skills, the association between education and labour market outcomes, such as employment or wages, decreases substantially. This indicates that much of the association between education and labour market outcomes is attributable to literacy and numeracy. This also confirms that education provides other skills that are valued in the workplace, including higher order skills and non-cognitive skills, such as perseverance and leadership.

The association between labour market experience and wages remained relatively unchanged after accounting for differences in literacy and numeracy skills. That is, there did not appear to be a relationship between experience and literacy and numeracy skills in determining wages, suggesting that these skills are not acquired on the job.

Figure 1 Correlation between literacy and numeracy test scores

• 15-74 year olds

  Source: Authors' estimates based on PIAAC data.

Figure 2 Literacy and numeracy test scores, by country, 2011-12^a,b 16-64 year olds

• Literacy

  

• Numeracy

  

Figure 3 Probability of employment, by literacy and numeracy score

• Men

  

• Women

  

The marginal effect of a change in the probability of employment associated with a change in literacy and numeracy is estimated for different literacy and numeracy scores between 50 and 450, and is depicted by the slope of the line. Shaded areas represent 95 per cent confidence intervals.
Source: Authors' estimates using PIAAC data.

• Shomos, A and Forbes, M
• Productivity Commission Staff Working Paper