Adult Skills and Productivity: New Evidence from PIAAC 2023

The 2023 Programme for the International Assessment of Adult Competencies (PIAAC) reveals large cross-country differences in adult skill levels that carry important implications for productivity. Cross-country analysis shows a positive relationship between labour productivity and the average level of adult skills at the industry level. This reflect partly a positive link between adult skills and R&D intensity – which is estimated to account for one-quarter of cross-country differences in industry productivity. But the ways in which skilled workers are allocated to different job roles and firms also matters. Higher productivity is observed in industries with lower labour market mismatches and where high-skilled workers are employed in larger and more dynamic firms. Differences in these patterns of allocation can account for at least 12 per cent of the productivity gaps between countries. These findings highlight the importance of policies aimed at enhancing adult skills and structural reforms to improve labour market adaptability and reallocation.