Data

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Our data comes from the International Adult Literacy and Skills Survey (IALSS 2003): a fascinating survey carried out in several countries in 2003.¹ We also make use of the International Adult Literacy Survey (IALS 1994), an earlier survey of literacy skills carried out, for Canada, in 1994. The IALSS 2003 includes standard questions on demographics, labour force status and earnings, but it also attempts to measure literacy and related cognitive skills in four broad areas: Prose, Document, Numeracy, and Problem Solving (the latter is not included in the earlier IALS 1994). Perhaps of most importance for our discussion, the IALSS 2003 and the IALS 1994 did not attempt to just measure abilities in math and reading but tried to assess capabilities in applying skills to situations found in everyday life. Thus, the Prose questions in the surveys assess skills ranging from items such as identifying recommended dosages of aspirin from the instructions on an aspirin bottle to using an announcement from a personnel department to answer a question that uses different phrasing from that used in the text. The Document questions, which are intended to assess capabilities to locate and use information in various forms, range from identifying percentages in categories in a pictorial graph to assessing an average price by combining several pieces of information. The Numeracy component ranges from simple addition of pieces of information on an order form to calculating the percentage of calories coming from fat in a Big Mac based on a table. It is important for the work that follows that the Numeracy component changed substantially between the 1994 and 2003 surveys in response, in part, to concerns that the way the questions were stated in 1994 meant that math skills could not be separated from reading skills. In contrast, the Document and Prose tests have substantial overlap in the two survey years, with approximately 45% of the questions being identical across years. Statistics Canada also renormalized test results from the remaining 55% of the questions in 2003 so that the overall average test scores from 2003 bore the same relationship to the overall average in 1994 as do the averages on the questions that are identical between the two years. Based on this, in the analysis that follows, we treat the Prose and Document test scores as perfectly comparable between the two survey years. We subsequently discuss this assumption and evidence in favour of it.

The IALS 1994 sample contains observations on 5,660 individuals while IALSS 2003 is substantially larger at 23,038 individuals. Our goal is to focus on literacy generation in the Canadian economy and, as a result, we exclude from our sample anyone born outside of Canada from both samples in order to focus attention on the Canadian educational system. We also drop the over-sampled First Nations observations from the 2003 survey, reserving a more careful examination of those individuals for another paper. The surveys cover individuals over age 16 but we exclude individuals who list their main activity as student in order to highlight the effect of completed schooling and what happens to literacy afterwards. The result is samples of size 3,964 for the IALS 1994 and 14,666 for the IALSS 2003, which form the basis of our initial analysis of the distribution of literacy skills in Canadian society. However, when we turn to our investigation of the generation of literacy after leaving school and to the impact of literacy on earnings, we restrict ourselves to a sample of individuals in which we eliminate the self-employed and workers with weekly earnings that are less than $50 and over $20,000. The latter restriction eliminates retired people, the unemployed and others who are not in the labour force. It also cuts out a small number of individuals with earnings that are substantial outliers relative to the rest of the sample. We drop the self employed because we wish to examine the remuneration of skills in the labour market, and self employed earnings reflect both that remuneration and returns to capital. We include both males and females throughout, dividing the analysis on gender lines in some places. Finally, we use the sample weights provided with the data in all tables and estimation.

In the earnings analysis, we use a constructed weekly earnings variable. In the IALSS 2003, respondents are first asked about their standard pay period and then asked about typical earnings in that pay period. From those answers, we construct a weekly earnings variable for each person. Thus, for individuals who report that they are paid monthly, we divide their reported earnings by 4.333.

One defining feature of this data is the strong correlation among the various literacy scores. Thus, the correlation between the Prose and Document scores in the IALS 2003 is 0.96, the correlation between Document and Numeracy is 0.92, and the correlation between the Document and Problem Solving scores is 0.92. Further, a principal components analysis indicated essentially one principal component placing equal weight on all four scores. Thus, a simple average of the scores captures much of the information available in the four scores. Because the scores are so highly correlated, we will work with one specific score in our description of the literacy distribution and generation. We prefer to focus on a single meaningful variable rather than an amalgam of scores in this part of the analysis because it makes cleaner the discussion of how the score is generated. More specifically, we focus on the Document Score. We need to choose either the Document or Prose scores because they are the ones that are common across IALS 1994 and IALSS 2003, and the Document score also happens to be the one with the highest associated factor loading in the factor analysis. None of the conclusions we present below would change if we presented the discussion in terms of one of the other scores. When we turn to the earnings analysis, where we investigate the overall effect of literacy we use a simple average of the four scores. This also allows a clearer comparison with our earlier work.

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Note

1. The other countries participating in this first round of the IALSS 2003 were Bermuda, Italy, Mexico (specifically, the state of Nuevo Leon), Norway, Switzerland and the U.S. The earlier IALS survey was carried out in over 20 countries during the period 1994 to 1998.