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Adult literacy and economic growth




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 good-quality evaluations. A modest increase in literacy training may not materially affect economic performance. It may, however, be a worthwhile investment, but only good-quality research and evaluation will tell us this.

Suggested Citation

  • Grant Johnston, 2004. "Adult literacy and economic growth," Treasury Working Paper Series 04/24, New Zealand Treasury.
  • Handle: RePEc:nzt:nztwps:04/24

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    More about this item


    adult literacy; basic skills; IALS; economic growth; productivity; returns to education; earnings; employment; New Zealand;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General


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