1 Literacy & Numeracy Do They Really Matter? W. Craig Riddell University 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 Province Full Sample (%) NB Sample (%) IMM Sample (%) ABOR Sample (%) NF PE NS NB QC ON MB SK AB BC YK NT YT Total obs21,37114,6373,7382,969

9 Table 1(b) Sample composition by region RegionFull Sample (%) NB Sample (%) IMM Sample (%) ABOR Sample (%) East of Ontario Ontario West of Ontario Total obs21,37114,6373,7382,969

10 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

11 Table 2 Summary Statistics for the NB Sample CanadaOntarioEast of OntWest of Ont Age Experience Years of Schooling Educational Attainment % Less than High School % High School % Non Univ PS w/o HS % Non Univ PS with HS % University BA % Univ Postgrad Prose Literacy Document Literacy Numeracy Problem Solving Average Skill Score Number of Observations

12 Table 2 Summary Statistics for the NB Sample (Continued) CanadaOntarioEast of OntarioWest of Ontario Mother’s education % Less than High School % High School % Some Post Secondary % BA or higher % None reported Father’s education % Less than High School % High School % Some Post Secondary % BA or higher % None reported Immigrant Parents % Immigrant mother % Immigrant father Math in high school % Good math grades % Teachers went too fast

13 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

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

15 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

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

17 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)

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

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

20 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

21 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

22 Figure 2 (a) Cognitive skills by years of schooling

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

24 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: S = 12 S = % Impacts similar elsewhere: S = 12 S = % S = 12 S = % OLS2 shows results by highest level of education Relative to HS dropouts, gains largest in East, lowest in West

25 Table 3 Determinants of skills (Ontario) OLS 1OLS 2OLS 3OLS 4 Female ** (0.0097) * (0.0101) * (0.0097) (0.0095) Years of schooling *** (0.0107) *** (0.0104) *** (0.0111) Schooling squared *** (0.0003) *** (0.0003) *** (0.0003) Age *** (0.0016) ** (0.0017) *** (0.0017) *** (0.0016) Age squared (/100) *** (0.0000) *** (0.0000) *** (0.0000) *** (0.0000) Educational Attainment High School *** (0.0168) -- Non Univ PS w/o HS *** (0.0303) -- Non Univ PS with HS *** (0.0181) University BA *** (0.0190) -- Univ Postgrad *** (0.0210) --

26 Table 3 Determinants of skills (Ontario) continued OLS 1OLS 2OLS 3OLS 4 Mother’s education Less than High School ** (0.0123) *** (0.0118) Some Post Secondary (0.0132) (0.0127) BA or higher (0.0227) (0.0215) None reported * (0.0248) * (0.0247) Father’s education Less than High School (0.0144) (0.0141) Some Post Secondary (0.0159) (0.0148) BA or higher (0.0165) (0.0161) None reported ** (0.0259) ** (0.0261) Immigrant Parents Immigrant mother (0.0142) (0.0138) Immigrant father (0.0126) (0.0121) Math in high school Good math grades *** (0.0115) Teachers went too fast ** (0.0122) Constant *** (0.0860) *** (0.0353) *** (0.0864) *** (0.0946) Observations 2,977 R-squared

27 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

28 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

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

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

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

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

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

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

35 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

36 Table 4 Earnings regressions, worker sample, Ontario OLS 1OLS 2OLS 3OLS 4OLS 5 Female *** (0.0575) *** (0.0554) *** (0.0560) *** (0.0565) *** (0.0576) Experience *** (0.0077) *** (0.0082) *** (0.0075) *** (0.0079) *** (0.0078) Experience squared (/100) *** (0.0170) *** (0.0189) *** (0.0165) *** (0.0174) *** (0.0173) Years of schooling *** (0.0103) *** (0.0109) *** (0.0111) *** (0.0113) Educational Attainment High School *** (0.0945) --- Non Univ PS w/o HS (0.1985) --- Non Univ PS with HS *** (0.1161) --- University BA *** (0.1065) --- Univ Postgrad *** (0.1246) --- Average Skill Score *** (0.0008) *** (0.0008) *** (0.0008)

37 Table 4 Earnings regressions, worker sample, Ontario continued OLS 1OLS 2OLS 3OLS 4OLS 5 Mother’s education Less than High School (0.0684) (0.0683) Some Post Secondary (0.0846) (0.0849) BA or higher (0.1045) (0.1047) None reported (0.1321) (0.1296) Father’s education Less than High School (0.0778) (0.0776) Some Post Secondary (0.0836) (0.0844) BA or higher * (0.1022) (0.1013) None reported (0.1349) (0.1351) Math in high school Good math grades (0.0588) Teachers went too fast ** (0.0617) Constant4.6641*** (0.1677) *** (0.0935) *** (0.2333) *** (0.2290) *** (0.2456) Observations1,536 R-squared

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 DecilesSkill Scores (Canada NB)Skill Scores (Ontario NB) 10th th th th median th th th th max

44 Mean Skill distributions: Full Sample

45 Mean skill distributions: NB sample

46 Mean skill distributions: IMM sample

47 Mean skill distributions: 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)