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Adult literacy and economic growth - WP 04/24

Publication Details

  • Adult literacy and economic growth
  • Published: Dec 2004
  • Status: Current
  • Author: Judge, Ken
  • JEL Classification: I21; J31; J60; O40
  • Hard copy: Available in HTML and PDF formats only.

Adult literacy and economic growth

New Zealand Treasury Working Paper 04/24

Published 15 Dec 2004

Author: Grant Johnston


Developed countries, including New Zealand, used to consider their populations wholly literate, in the sense that almost all adults could read and write. Contemporary definitions expand the concept of literacy to include wider cognitive skills, and extend it across the whole population: people are more or less literate depending on how well they understand and use printed information to solve everyday problems at home and at work. Using this wider definition, the International Adult Literacy Survey found that developed countries contain a considerable number of people who have poor literacy skills. This paper looks at whether an increase in the basic literacy skills of adults would have a positive effect on the New Zealand economy. It finds good evidence for the benefits of literacy: studies consistently find that adults with better literacy skills are more likely to be employed, and to earn more, than those with poorer literacy skills, even when taking account of other factors which affect work performance. There is little rigorous evidence, however, for the benefits of adult literacy training and almost no accompanying information on the costs of this training. While there is a good case for an increased focus on adult literacy, and on workplace literacy in particular, these findings suggest a cautious approach to expanding publicly-funded adult literacy programmes. There is a clear need for more and better New Zealand-based research, for piloting innovative literacy programmes and for undertaking rigorous evaluations. A modest increase in literacy training may not materially affect economic performance but it may still be a worthwhile investment – only good-quality research and evaluation will tell us this.


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Table of Contents

List of Tables

List of Figures

1 Introduction

  • 1.1 The purpose of this paper
  • 1.2  Why look at literacy?
  • 1.3  Review methods
  • 1.4  How the paper is structured

2 Literacy skills in New Zealand

  • 2.1   The IALS survey
  • 2.2   Literacy skills at Level
  • 2.3   Level 1 and 2 tasks in IALS
  • 2.4   New Zealanders with Level 1 skills
  • 2.5   International comparisons
  • 2.6   Conclusion

3 An introduction to the economic effects of increased literacy

  • 3.1   Country-level studies.
  • 3.2   Individual-level studies
  • 3.3   Firm-level studies
  • 3.4   Analyses of trends in skill requirements
  • 3.5   The following chapters

4 Macroeconomic studies of aggregate returns to literacy skills

  • 4.1   Cross-country growth studies
  • 4.2   Literacy in cross-country regressions
  • 4.3   Conclusion

5 Individual returns to literacy skills

  • 5.1   Introduction.
  • 5.2   Literacy and earnings
  • 5.3   Literacy and employment
  • 5.4   A note about birth cohort studies.
  • 5.5   Conclusion

6 Impact of literacy programmes

  • 6.1   Introduction.
  • 6.2   Employment-related training programmes
  • 6.3   Workplace literacy programmes.
  • 6.4   Community and family literacy programmes
  • 6.5   Conclusion

7 Discussion


Appendix 1 – Studies of literacy, earnings and employment

Appendix 2 – Studies of literacy training programmes

twp04-24.pdf (591 KB) pp. 1–26

List of Tables

List of Figures


I am indebted to a number of people who read and commented on versions of this paper and in particular to Anna Vignoles, Sholeh Maani, Les Oxley, Paul Callister, Hazel Barnes, Barbara Annesley, Bronwyn Croxson, Jeremy Corban, Ruth Isaac and Dean Hyslop. I have also benefited greatly from discussions on adult literacy with Katherine Percy, Susan Reid, Ruth Schick, John Benseman and Alison Sutton. Paul Satherley from the Ministry of Education kindly made available the IALS dataset for New Zealand.


The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author. They do not necessarily reflect the views of the New Zealand Treasury. The Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

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