literacy & numeracy do they really matter?

1

Literacy & Numeracy

Do They Really Matter?

W. Craig RiddellUniversity of British Columbia

Ministry of Training, Colleges and Universities Toronto, Ontario

December 4, 2008

2

Objective of study

• To investigate the factors that influence the literacy and numeracy

skills of Ontario residents

• To analyse the consequences of literacy and numeracy skills for key

labour market outcomes:

– participation in the labour force

– employment vs unemployment

– earnings

• Focus is on native-born non-aboriginal adult population in Ontario

• Some results for aboriginals and immigrants also provided

• Comparisons to other Canadian regions also provided

3

Outline of presentation

• Benchmark: how do skills of Ontario adults compare to those in other provinces?

• Determinants of skills: what are the key factors that influence cognitive skills?

• Consequences of skills: what are impacts of skills on labour market outcomes?

4

Data: IALSS 2003

• Key advantage: direct measures of cognitive skills

• Skills assessed: prose literacy, document literacy, numeracy,

problem solving

• Tests assess ability to apply skills in everyday settings

• Skills measured on a scale from 0 to 500

• Rich data on demographic and individual characteristics

• Large sample -- allows analysis at regional level

• Some groups over-sampled (e.g. aboriginals)

• All statistics and estimates use sample survey weights

5

Sample size and restrictions

• Main sample: focus on Canadian born, non-aboriginal population

• Some results also for Immigrant and Aboriginal samples

• Drop those whose main activity is “student”

• Worker sample: drop self-employed, unemployed, non-participants,

wage outliers

• Sample sizes, Canada: NB 14,637; IMM 3,738; ABOR 2,969

• Sample sizes, Ontario: NB 2,977; IMM 1,603; ABOR 130

6

Educational attainment

Information on years of completed schooling and highest level of

education

Separate question on high school graduation

Six main categories:

Less than HS

HS graduate

Non-university post-secondary without high school completion

Non-university post-secondary with high school completion

University bachelor’s degree

University postgraduate and professional degree

7

Sample characteristics I

• Tables 1a and 1b show composition by province/territory and

region

• Ontario (34%) and BC (30%) have largest proportions of

immigrants

• Territories have largest proportions of aboriginals

8

Table 1(a) Sample composition by province and territory

ProvinceFull Sample

(%)NB Sample

(%)IMM Sample

(%)ABOR Sample

(%)

NF 100 92 2 6

PE 100 94 4 2

NS 100 91 7 2

NB 100 94 4 2

QC 100 87 12 1

ON 100 64 34 2

MB 100 77 16 7

SK 100 89 5 6

AB 100 76 19 5

BC 100 65 30 5

YK 100 72 13 15

NT 100 53 10 37

YT 100 24 4 72

Total obs 21,371 14,637 3,738 2,969

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Table 1(b) Sample composition by region

Region Full Sample (%)NB Sample

(%)IMM Sample

(%)ABOR Sample

(%)

East of Ontario 100 89 10 1

Ontario 100 64 34 2

West of Ontario 100 73 22 5

Total obs 21,371 14,637 3,738 2,969

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Sample characteristics II

• Table 2 shows summary statistics for NB sample in

Canada, Ontario, East, West

• Average skills lower in East than in Ontario, but higher in

West

• Average years of schooling and proportion of university

grads highest in Ontario

• Most educated parents are in West, least in East

• Many second generation immigrants in Ontario and West

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Table 2 Summary Statistics for the NB Sample Canada Ontario East of Ont West of Ont

Age 44.9 43.5 46.5 44.5

Experience 26 24.1 28.1 25.4

Years of Schooling 12.9 13.4 12.4 13.1

Educational Attainment

% Less than High School 24.7 23.4 28.3 21.8

% High School 32.1 33.3 30.3 33.2

% Non Univ PS w/o HS 2.5 2.5 2.1 3.1

% Non Univ PS with HS 23 21 23.5 24.4

% University BA 13.2 13.9 12.2 13.5

% Univ Postgrad 4.5 5.9 3.6 4

Prose Literacy 280.6 285.4 267.3 292.1

Document Literacy 278.2 283.2 263.6 291.1

Numeracy 269.2 272.4 257.9 280.0

Problem Solving 273.4 278.4 261.2 283.3

Average Skill Score 275.3 279.8 262.5 286.6

Number of Observations 14637 2977 7192 4468

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Table 2 Summary Statistics for the NB Sample (Continued)

Canada Ontario East of Ontario West of Ontario

Mother’s education


% High School 26.1 30.4 18.5 31

% Some Post Secondary 14 14.7 12.2 15.4

% BA or higher 7.5 8.5 5.6 8.8

% None reported 7.6 6.8 8.3 7.6

Father’s education


% High School 19.6 14.4 14.4 24.9

% Some Post Secondary 11.6 10.6 10.5 11.8

% BA or higher 11.1 8.5 8.5 13.1

% None reported 8.9 9.2 9.2 8.3

Immigrant Parents

% Immigrant mother 16 22.9 5.9 20.9

% Immigrant father 18.6 27.5 6.3 24.2

Math in high school

% Good math grades 68.3 66.8 71.6 65.8

% Teachers went too fast 26.2 28 21.8 29.8

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Skills of Ontario residents I

• Figure 1a shows average skills of other provinces

relative to Ontario, using full sample (NB + IMM +

ABOR)

• Skill measure is average of 4 IALSS skills

• Patterns for individual skills are similar

• East of Ontario: skills a bit lower (exc NS)

• West of Ontario: skills about 10 points higher

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Figure 1(a) Comparison of mean skills – Ontario vs other provinces Full Sample

-10

-50

510

15M

ean

Ski

ll re

lativ

e to

On

tario

nf pe ns nb qc mb sk ab bc

Full Sample

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Skills of Ontario residents II

• Fig 1b shows skills of NB population in each province

relative to Ontario

• East of Ont: skills 10 to 20 points lower

• West of Ont: skills 5 to 15 points higher

• Skills of NB in Man and Sask about the same

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Figure 1(b) Comparison of mean skills – Ontario vs other provinces NB Sample

-20

-10

010

Mea

n S

kill

rela

tive

to O

nta

rio


NB Sample

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Skills of Ontario residents III

• Fig 1c shows skills of immigrants in Ontario relative to

other provinces

• Ontario immigrants have lower skills (except Man)

• Differences in immigrant skills are large

• Fig 1d shows data for Aboriginals

• Most provinces similar to Ont (except Alta)

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Figure 1(c) Comparison of mean skills – Ontario vs other provinces IMM Sample

010

2030

40M

ean

Ski

ll re

lativ

e to

On

tario


IMM Sample

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Figure 1(d) Comparison of mean skills – Ontario vs other provinces ABOR Sample

-10

-50

510

15

Mea

n S

kill

rela

tive t

o O

nta

rio


ABOR Sample

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Skills of Ontario residents IV

• Overall, Eastern provinces have skill levels similar to

Ontario

• This results from NB skills that are lower and IMM skills

that are higher

• Combination of large immigrant population with relatively

low skills reduces average skill level in Ontario

• In Western provinces both NB and IMM populations

have higher skills

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Determinants of skills I

• Strong positive association between skills and formal

education (Fig 2a)

• Relationship displays diminishing returns

• Gradient a bit steeper in Ontario

• Average skills and average years of schooling by level of

education (Fig 2b)

• Note skills and schooling among post-secondary grads

without HS

• Lower skills in Ont than West despite more years of

schooling

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Figure 2 (a) Cognitive skills by years of schooling

15

020

025

030

035

0A

vera

ge S

kill

Sco

re

5 10 15 20 25Years of Schooling

East of Ont OntWest of Ont

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Figure 2 (b) Average skill score by average years of schooling

NoGrad

PSwoHS

HSGrad

PSwHS

UnivBA

UnivPostGrad

NoGrad

PSwoHS

HSGrad

PSwHS

UnivBA

UnivPostGrad

NoGrad

PSwoHS

HSGrad

PSwHS

UnivBA

UnivPostGrad20

025

030

035

0A

vera

ge S

kill

Sco

re

5 10 15 20Average Years of Schooling

East of Ont OntWest of Ont

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Determinants of Skills II

• Dependent variable in regressions is log of average skill score

• Small gender difference

• Essentially no relationship between skills and age in cross-section

• Strong relationship with education, but diminishing returns

• Impact of extra year of S: Ont @ S = 12 3.6% @ S = 16 2.1%

• Impacts similar elsewhere: East @ S = 12 3.1% @ S = 16 2.2%

• West @ S = 12 2.9% @ S = 16

2.3%

• OLS2 shows results by highest level of education

• Relative to HS dropouts, gains largest in East, lowest in West

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Table 3 Determinants of skills (Ontario)OLS 1 OLS 2 OLS 3 OLS 4

Female -0.0208**(0.0097)

-0.0194*(0.0101)

-0.0168*(0.0097)

-0.0090(0.0095)

Years of schooling 0.0818***(0.0107)

-0.0747***(0.0104)

0.0667***(0.0111)

Schooling squared -0.0019***(0.0003)

--0.0018***(0.0003)

-0.0016***(0.0003)

Age 0.0048***(0.0016)

0.0033**(0.0017)

0.0069***(0.0017)

0.0076***(0.0016)

Age squared (/100) -0.0001***(0.0000)

-0.0001***(0.0000)

-0.0001***(0.0000)

-0.0001***(0.0000)


High School -

0.1504***(0.0168)

- -

Non Univ PS w/o HS-

0.0869***(0.0303)

- -

Non Univ PS with HS-

0.1996***(0.0181)

University BA-

0.2454***(0.0190)

- -

Univ Postgrad-

0.2988***(0.0210)

- -

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Table 3 Determinants of skills (Ontario) continuedOLS 1 OLS 2 OLS 3 OLS 4


Less than High School- -

-0.0295**(0.0123)

-0.0307***(0.0118)

Some Post Secondary- -

-0.0129(0.0132)

-0.0137(0.0127)

BA or higher- -

0.0088(0.0227)

0.0091(0.0215)

None reported- -

-0.0440*(0.0248)

-0.0479*(0.0247)


Less than High School- -

-0.0190(0.0144)

-0.0156(0.0141)

Some Post Secondary- -

0.0051(0.0159)

0.0084(0.0148)

BA or higher- -

0.0048(0.0165)

0.0130(0.0161)

None reported- -

-0.0569**(0.0259)

-0.0542**(0.0261)

Immigrant Parents

Immigrant mother- -

-0.0136(0.0142)

-0.0149(0.0138)

Immigrant father- -

0.0041(0.0126)

0.0044(0.0121)

Math in high school

Good math grades- - -

0.0463***(0.0115)

Teachers went too fast- - -

-0.0281**(0.0122)

Constant 4.8705***(0.0860)

5.5049***(0.0353)

4.9103***(0.0864)

4.9399***(0.0946)

Observations 2,977 2,977 2,977 2,977

R-squared 0.4886 0.4574 0.5067 0.5289

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Skills generation: possible omitted variables bias

• Education and cognitive skills may be correlated with innate ability

• Ideal control would be IQ type measure at young age

• Proxies for innate ability I: parental education (OLS3)

• Proxies for innate ability II: ease of learning mathematics (OLS4)

• Parental education below HS has significant and moderately large

effects (combined effect about 5%)

• Modest decline in coefficient on years of schooling (< 10%)

• Ease of learning math also significant and moderately large effects

(combined effect about 7%)

• Adding both ability proxies: impact of education smaller (15%-20%)

but still large

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Skills and labour market outcomes

• Analysis examines impacts of literacy and numeracy skills on key

labour market outcomes:

– participation in the labour force

– employment vs unemployment

– earnings

• Fig 3 (Canada) and Fig 4 (Ontario) show LF Participation Rate,

Employment Rate and Weekly Earnings by quartiles of the skill

distribution

• Much lower LF participation among low skilled (bottom quartile)

• Lower employment rate among low skilled

• Among those employed, lower earnings among low skilled

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Figure 3 (a) % in labour force by quartile of skill distribution (Canada NB)

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Figure 3 (b) % employed conditional on being labour force participants (Canada NB)

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Figure 3 (c) Mean wages conditional on being employed by quartile of skill distributions (Canada NB)

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Figure 4 (a) % in labour force by quartile of skill distribution (Ontario NB)

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Figure 4 (b) % employed conditional on being labour force participants (Ontario NB)

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Figure 4 (c) Mean wages conditional on being employed by quartile of skill distributions (Ontario NB)

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Earnings, education and cognitive skills I

• Columns 1 and 2 in Table 4 report log earnings regressions

• Economic returns to education highest in Ont, lowest in West

• Note importance of distinguishing post-secondary grads with and without

HS, large impact of HS grad, large impact of university

• Column 3 adds controls for cognitive skills

• Returns to education decline by about 20% (9.2% to 7.3%)

• Thus about 20% of the returns to education arise from impact of education

on skills and impact of skills on earnings

• Impact of skills on earnings highest in Ontario (3.1% vs 2.3%/2.4%)

• 10 point increase in skills raises earnings by 31%, after controlling for other

influences on earnings

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Table 4 Earnings regressions, worker sample, OntarioOLS 1 OLS 2 OLS 3 OLS 4 OLS 5

Female -0.3625***(0.0575)

-0.3721***(0.0554)

-0.3540***(0.0560)

-0.3535***(0.0565)

-0.3343***(0.0576)

Experience 0.0721***(0.0077)

0.0682***(0.0082)

0.0709***(0.0075)

0.0682***(0.0079)

0.0695***(0.0078)

Experience squared (/100)

-0.1244***(0.0170)

-0.1208***(0.0189)

-0.1192***(0.0165)

-0.1139***(0.0174)

-0.1171***(0.0173)

Years of schooling 0.0922***(0.0103)

-0.0734***(0.0109)

0.0728***(0.0111)

0.0731***(0.0113)


High School -

0.3524***(0.0945)

- - -

Non Univ PS w/o HS-

0.1767(0.1985)

- - -

Non Univ PS with HS-

0.5802***(0.1161)

- - -

University BA-

0.9233***(0.1065)

- - -

Univ Postgrad-

1.0591***(0.1246)

- - -

Average Skill Score- -

0.0031***(0.0008)

0.0033***(0.0008)

0.0028***(0.0008)

37

Table 4 Earnings regressions, worker sample, Ontario continued

OLS 1 OLS 2 OLS 3 OLS 4 OLS 5


Less than High School - - - 0.0593(0.0684)

0.0584(0.0683)

Some Post Secondary - - - -0.0393(0.0846)

-0.0390(0.0849)

BA or higher - - - -0.0541(0.1045)

-0.0634(0.1047)

None reported - - - -0.0923(0.1321)

-0.1064(0.1296)


Less than High School - - - -0.0238(0.0778)

-0.0125(0.0776)

Some Post Secondary - - - 0.0569(0.0836)

0.0788(0.0844)

BA or higher - - - -0.1740*(0.1022)

-0.1269 (0.1013)

None reported - - - -0.1292(0.1349)

-0.1354(0.1351)

Math in high school

Good math grades - - - - 0.0530(0.0588)

Teachers went too fast - - - - -0.1397**(0.0617)

Constant 4.6641***(0.1677)

5.5166***(0.0935)

4.0066***(0.2333)

4.0232***(0.2290)

4.1381***(0.2456)

Observations 1,536 1,536 1,536 1,536 1,536

R-squared 0.3745 0.4103 0.3932 0.4071 0.4177

38

Earnings, education and cognitive skills II

• Columns 4 and 5 add proxies for innate ability

• Little change in impacts of skills on earnings with addition of controls

for parental education

• Parental education itself has little or no impact on earnings, once we

control for own education, experience and skills

• Ease of learning math has a large impact on earnings, and reduces

return to skills modestly

• Impact of skills on earnings remains large -- 28% gain in earnings

associated with 10 point increase in skills

39

Summary of main results I

• Overall, Eastern provinces have skill levels similar to

Ontario

• This results from NB skills that are lower and IMM skills

that are higher

• Combination of large immigrant population with relatively

low skills reduces average skill level in Ontario

• In Western provinces both NB and IMM populations

have higher skills

40

Summary of main results II

• Strong relationship between formal education and

literacy & numeracy skills

• Relationship displays diminishing returns, so largest

impact among least educated

• Impact of schooling on skills remains large after

controlling for innate ability

• Little evidence of influence of age on skills

• Parental education <HS has a negative impact on

literacy and numeracy

41

Summary of main results III

• Low skills associated with much lower LF participation,

higher unemployment, and much lower earnings among

the employed

• Impact of education on earnings higher in Ontario than

East and West

• Impact of skills on earnings also highest in Ontario

• 10 point increase in skills raises earnings by about 30%,

controlling for other factors

• About 20% of the economic return to education arises

from its cognitive skill generation effects

42

Appendix

• Deciles of NB skill distributions, Ontario and

Canada

• Skill Distributions by Region and Population

• Skills of Immigrants Relative to Native Born,

Canada and Ontario

43

Deciles of NB skill distributions, Ontario and Canada

Deciles Skill Scores (Canada NB) Skill Scores (Ontario NB)

10th 205.7 215.7

20th 235.7 242.95

30th 254.95 261.6

40th 269.8 275.25

median 281.45 285.2

60th 293.65 297.8

70th 304.3 308.65

80th 317.1 321.45

90th 334.3 336.85

max 416.05 401.3

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Mean Skill distributions: Full Sample

0.0

02

.004

.006

.008

kde

nsi

ty d

skill

100 200 300 400Mean Skill

kdensity dskill Provinces east of Ontkdensity dskill Ontariokdensity dskill Provinces west of Ont

Full Sample

45

Mean skill distributions: NB sample

0.0

02

.004

.006

.008

.01

kde

nsi

ty d

skill

100 200 300 400Mean Skill


NB Sample

46

Mean skill distributions: IMM sample

0.0

02.0

04.0

06.0

08kd

ens

ity d

skill

100 200 300 400Mean Skill


IMM Sample

47

Mean skill distributions: ABOR sample

0.0

05

.01

.015

kde

nsi

ty d

skill

100 200 300 400Mean Skill


ABOR Sample

48

Percent of IMM population in each quartile of NB skill distribution (Canada)

49

Percent of IMM population in each quartile of NB skill distribution (Ontario)

literacy & numeracy do they really matter?

Documents

imm sample

regionregionfull sample

restrictionsmain sample

territoryprovincefull

studentworker sample

b sample composition

sample characteristics

sample characteristics