published in: Economic Record, 2003, 79 (245), 165-181
This paper uses data from the 1996 Australian Survey of Aspects of Literacy to examine the
effects on labour market outcomes of literacy, numeracy and educational attainment. The
survey includes a range of literacy and numeracy variables that are highly inter-correlated. A
“general to specific” approach identifies the most relevant literacy and numeracy variables.
Including the others adds little explanatory power. Among males and females separately
about half of the total effect of education on labour force participation and on unemployment
can be attributed to literacy and numeracy (the indirect effect) and about half to the direct
effect of education. There is apparently no indirect effect of labour market experience through
literacy and numeracy on participation or unemployment. The direct and total effects of
experience are the same. The findings suggest that education is a value added process in
which skills, including literacy and numeracy, are improved and that these skills enhance
labour market outcomes.
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