Literacy and numeracy skills and labour market outcomes in Australia

Abstract

This paper profiles the literacy and numeracy skills of Australia’s adult population and assesses how important they are for two labour market outcomes - employment and wages. The authors found a strong positive association between skills and labour market outcomes. Modelling results show that a one-level increase in skills, approximately equivalent to the difference between completing Year 12 education and completing Year 11 (or lower), is associated with: an increased probability of employment of about two percentage points for men and about four percentage points for women; and an increase in wages of about 10 per cent, for both men and women. The authors found a high correlation between literacy and numeracy - that is, someone with low literacy skills is also likely to have low numeracy skills. Much of the positive association between education and employment is attributable to literacy and numeracy skills. However, the results also suggest that improved education provides many other attributes of human capital that are valued in the workplace.