Numeracy, literacy and earnings: evidence from the National Longitudinal Survey of Youth

The analysis is concerned with the contributions of numeracy and literacy to earnings, for three reasons. First, no clear pattern emerges from existing findings relating to the contributions of different types of ability, and numeracy and literacy appear to be a natural basic starting point. Second, measures to improve numeracy and literacy are often given priority in policies intended to help those with lowest educational attainment. Third, with the growth of the knowledge-based economy, and the increasing importance of digital technology, it is of interest to compare the levels and rates of change of the contributions of numeracy and literacy as reflected in earnings. The results suggest that numeracy has a highly significant effect on earnings, mostly through its effect on college attainment, but also directly, controlling for attainment, and interactively with attainment, and its effect may be subject to increasing returns. While the magnitude of the effect is small in absolute terms, it is substantial when compared with other effects, and it appears to be increasing at a rate of 6% per year. Despite the fact that it has an even greater effect than numeracy on college attainment, literacy has a smaller and less significant effect on earnings, with no evidence of an interactive effect with attainment, nonlinearity, or change through time. Because of the absence of nonlinearity, measures to improve literacy may have more impact than measures to improve numeracy on the earnings of the least able, but the difference is not great and the quantitative effects appear to be small. (C) 2003 Elsevier Ltd. All rights reserved.