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5.5  Conclusion

There is clear evidence from the studies reviewed above that literacy has a persistent, positive and statistically significant association with people’s earnings and labour force status. People with greater literacy skills are more likely than people with weaker literacy skills to be employed and, when employed, tend to be paid more. The studies above point to an earnings premium of 4 to 20% for a one standard deviation increase in literacy test score and, for the same increase, an increased probability of employment of 2 to 8 percentage points. These returns differ across countries and times, and by gender and ethnicity.

Are these benefits large? They are certainly not trivial, but whether or not they are considered large depends on the effort required to raise literacy levels. If it is relatively easy to increase a person’s literacy skills then the rewards outlined above might be considered quite substantial. On the other hand, if literacy improvement is a slow and expensive struggle the rewards might be considered small. The studies discussed in Chapter 6 below suggest that a good deal of effort would required to raise literacy amongst adults by even a fraction of a standard deviation. In terms of schooling, Levin and Kelley (1994, p.99) point out that “there is no educational reform in any country that has been shown to systematically raise test scores of high school graduates by even one standard deviation.”

The size of the literacy-related benefits reported above might also be overstated, as cross-sectional studies such as IALS have only a limited number of control variables available to them. There remains the possibility that unobserved factors such as natural ability, family background and ‘soft’ skills might explain a portion, perhaps a sizeable portion, of the association between literacy skills and earnings (or employment). Naturally clever, perceptive or determined people, for example, might have better literacy skills than their less talented counterparts and, independently, do well in their jobs, thereby giving the appearance that literacy skills have a larger impact on wages than is really the case. The one study which does try to control for natural ability, McIntosh and Vignoles (2001), finds that including measures of ability, along with other controls, drives many of the coefficients on literacy and numeracy down in size, and to insignificant levels. The issue of natural ability has long been discussed in the literature on returns to years of schooling and studies in this area have used research designs, such as twin studies and instrumental variables, to deal with the possibility of ‘ability bias’. No such research designs have been used to study literacy and earnings. On the other hand, some comfort might be taken from the fact that studies of the returns to years of schooling which use these other research designs tend to produce estimates similar to those from ‘ordinary’ studies (Card 1999).

The studies reviewed above only measure the direct earnings and employment benefits of literacy skills to individuals. They do not measure productivity benefits which are captured by firms, or any spill-over benefits to other workers, which are not rewarded by increased wages. The size of the benefits reported above might therefore underestimate the economic benefits of increased literacy to society as a whole.

The focus of this paper is on people with poor literacy skills, but the earnings studies reviewed here indicate that improved literacy is likely to have an effect on all people. Even individuals with good literacy skills, who are not considered a problem group, would benefit from an increase in their skills. As Denny et al (2004) say:

Helping individuals to make transitions into the highest levels of functional literacy can make as much difference to their earnings as moving from the lowest to next level. This may be counter-intuitive because skills such as are measured in the IALS are typically labelled “basic skills” so there may be a presumption that while some minimum or basic level of these skills pays rich dividends, there is little or no premium to increasing the skills of someone who is already highly skilled. Clearly this is not the case (p.14).

There is, however, some evidence that literacy improvements at low levels of literacy have higher rewards than improvements at higher levels of literacy, at least in New Zealand if not in all countries.

Finally, it is worth pointing out that the effect of basic skills on absolute levels of earnings and employment is likely to be dwarfed by other factors. Literacy skills may be important, but at any point in time will only explain a small portion of the variation in outcomes between individuals. Over time, as well, macroeconomic factors will influence absolute levels of earnings and employment. Murnane et al (1995), for example, find that increased literacy and numeracy skills were much more highly rewarded in the United States in 1986 than in 1978. However, they also find that men with strong basic numeracy skills earned less in 1986 than men with weak numeracy skills did in 1978, due to the relative performance of the economy at these two points in time.

6  Impact of literacy programmes

6.1  Introduction

This chapter looks at whether, and by how much, literacy programmes improve participants’ literacy skills. If programmes are effective in raising literacy then we can plausibly assume, given the results of Chapter 5 above, that they will also increase people’s employment and their earnings. Labour market outcomes can be measured directly, though, and this chapter also looks at whether, and by how much, literacy programmes increase people’s employment chances and earnings. It is the third of three chapters looking at the economic effects of increased literacy skills (these were introduced in Chapter 3).

6.1.1  Types of studies

Studies of three types of programmes are reviewed in this chapter. Employment-related training programmes (section 6.2) aim to combat welfare dependency and poverty by getting participants into work or into higher-paying jobs. These programmes typically involve some form of basic literacy training. Workplace literacy programmes (section 6.3) are conducted in people’s places of work and aim to improve participants’ performance in their jobs. Community and family literacy programmes (section 6.4) are those offered to members of the community who wish to increase their literacy skills. In family literacy programmes, adults and their children are educated together. Evaluations of these three types of programmes look at whether participating in a programme leads to better outcomes than not participating. Greater detail on the methodology of the studies reviewed in this chapter is given in Appendix 2.

Another type of research in the field of adult literacy involves setting up small-scale experiments or quasi-experiments to test whether certain instructional techniques are more effective than others. These studies test innovations in literacy training rather than evaluating existing, ongoing literacy programmes. In a New Zealand study, for example, Lavery, Townsend and Wilton (1998) compare the improvement in literacy and numeracy skills of two groups: a group of six people who received 18 hours of computer-aided instruction and a group of six who received 18 hours of traditional ‘textbook and lecture’ instruction. Torgerson, Brooks, Porthouse, Burton, Robinson, Wright and Watt (2004) and Kruidenier (2002) review these types of studies. Such studies are not discussed in this chapter, however, as they do not bear directly on the question of whether literacy training, as implemented in real-life settings, is effective compared to no training at all.

This chapter also avoids any discussion of literacy interventions for school-aged children, e.g. Reading Recovery. Studies of school-based programmes do not look at the effects on employment and earnings, or on literacy skills in adulthood (although increased literacy as a child should hopefully result in increased literacy as an adult). More importantly, the school system – a core role for which is developing sound basic skills – is already well established and funded, and the positive effects of schooling in general (if not for every component of it) have been well documented. There is no real policy debate, at least in New Zealand, over the importance of literacy and numeracy in the school system. Adult literacy training, on the other hand, is a developing field, and governments in a number of countries are considering a major expansion of provision. This makes adult literacy a topical policy issue and it is timely to consider the evidence on the effectiveness of adult programmes.

6.1.2  Quality of studies

Studies of adult literacy programmes are included in this chapter if they objectively measure the outcomes of interest (literacy skills or earnings or employment) both before and after participants take part in the programme. Other studies rely on self-report data, which is less satisfactory. Apart from problems associated with accuracy of recall and lack of precision, there is also an understandable tendency for survey respondents to inflate the value of experiences, like adult literacy training, that entail significant sacrifices on the part of respondents and tutors. On the other hand, objective tests of literacy skills may or may not be appropriate for the teaching given or sensitive enough to measure the sorts of literacy gains perceived or valued by learners.

Finding that people who participated in a literacy programme gained literacy skills, or earnings, or employment, does not necessarily imply that the literacy programme was effective. This is particularly the case with earnings or employment, since these outcomes are influenced by a whole range of factors that have nothing to do with literacy acquisition: for example, the state of the local labour market, inflation, changes in welfare benefits, changes in the minimum wage, employment regulations and fluctuations in the economy. Over time, as well, people tend to get paid more as a result of experience on the job. Studies therefore need to compare the labour market outcomes of people who took part in the literacy programme (the ‘treatment’ group) against the outcomes of similar people who did not take part in the programme (the ‘control’ or ‘comparison’ group). Studies of the earnings or employment impacts of literacy programmes are therefore included in this chapter if they employ a control or comparison group. This requirement is relaxed for studies which measure gains in literacy skills since it can plausibly be assumed that people’s literacy skills are reasonably constant in the absence of literacy training, at least in the short term.

For studies of earnings or employment, a group of people with literacy needs should ideally be randomly assigned to either the treatment group or to the control group, but this experimental design is not always practical or affordable. The second-best option is to construct a comparison group of people who are as similar as possible to people in the treatment group. This is not as satisfactory as random assignment, however, since people who choose, or who are selected, to undertake literacy training may differ in some unobserved ways from people who don’t take part. They may, for example, be more naturally able or have greater motivation and persistence than people who don’t take part, and any observed increase in earnings or employment might be a result of this ability or motivation, rather than the effect of literacy training.

Other methodological problems can also plague studies of literacy programmes, and studies have not been included in this chapter if they are seriously flawed: if, for example, they have unacceptably low response rates. Beder (1999) provides an excellent and sympathetic discussion of the methodological issues involved in evaluating adult literacy programmes. Beder reviews 23 studies of adult literacy programmes, most of which have considerable methodological problems.

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