Skills and Wage Inequality: Evidence from PIAAC (EDU Working Paper No. 114)
This paper exploits data from the Survey of Adult Skills (PIAAC) to shed light on the link between measured cognitive skills (proficiency), (formal) educational attainment and labour market outcomes. After presenting descriptive statistics on the degree of dispersion in the distributions of proficiency and wages, the paper shows that the cross-country correlation between these two dimensions of inequality is very low and, if anything, negative. As a next step, the paper provides estimates of the impact of both proficiency and formal education at different parts of the distribution of earnings. Formal education is found to have a larger impact on inequality, given that returns to education are in general much higher at the top than at the bottom of the distribution. The profile of returns to proficiency, by contrary, is much flatter. This is consistent with the idea that PIAAC measures rather general skills, while at the top end of the distribution the labour market rewards specialised knowledge that is necessarily acquired through tertiary and graduate education. Finally, a decomposition exercise shows that composition effects are able to explain a very limited amount of the observed cross-country differences in wage inequality. This suggests that economic institutions, by shaping the way personal characteristics are rewarded in the labour market, are the main determinants of wage inequality.
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Comparison of PIAAC and PISA Frameworks for Numeracy and Mathematical Literacy (EDU Working Paper No.102)
This paper describes key aspects of the frameworks for the assessment of adult numeracy and mathematical literacy in PIAAC and PISA, which are OECD two flagship programs for international comparative assessment of competencies. The paper examines commonalities and differences in how the constructs of adult numeracy and mathematical literacy were assessed in PIAAC and PISA, and sketches selected challenges associated with interpretation of results from these surveys.
Labour Market Mismatch and Labour Productivity: Evidence from PIAAC Data (ECO Working Paper No. 1209)
This paper explores the link between skill and qualification mismatch and labour productivity using cross-country industry data for 19 OECD countries. Utilising mismatch indicators aggregated from micro-data sourced from the recent OECD Survey of Adult Skills (PIAAC), the main results suggest that higher skill and qualification mismatch is associated with lower labour productivity, with over-skilling and under-qualification accounting for most of these impacts. A novel result is that higher skill mismatch is associated with lower labour productivity through a less efficient allocation of resources, presumably because when the share of over-skilled workers is higher, more productive firms find it more difficult to attract skilled labour and gain market shares at the expense of less productive firms. At the same time, a higher share of under-qualified workers is associated with both lower allocative efficiency and within-firm productivity – i.e. a lower ratio of high productivity to low productivity firms. While differences in managerial quality can potentially account for the relationship between mismatch and within-firm productivity, the paper offers some preliminary insights into the policy factors that might explain the link between skill mismatch and resource allocation.
The educational roots of trust (EDU Working Paper No. 119)
Trust is important for social and economic well-being, for enhancing social cohesion and strengthening resilience, and for maintaining security and order in our societies. Trust is the foundation upon which social capital is built and it also is intimately related to human capital. This work examines the association between education and levels of interpersonal trust, using data from the OECD’s Survey of Adult Skills (PIAAC). Our analysis demonstrated that education strengthens the cognitive and analytical capacities needed to develop, maintain, and (perhaps) restore trust in both close relationships as well as in anonymous others. It does so both directly, through building and reinforcing literacy and numeracy in individuals, and indirectly, through facilitating habits and reinforcing behaviours such as reading and writing at home and at work. Education and trust are thus fundamentally intertwined and dependent on each other. While all countries across the OECD have been striving to improve their education systems in terms of student achievement levels, this analysis suggests that there are also concrete elements that could be usefully addressed in order to reinforce and strengthen trust.
Skills and labour market performance in Sweden (ECO Working Paper No. 1233)
Both educational attainment and skills, as measured in the OECD Survey of Adult Skills (PIAAC), are high in Sweden. They are not perfect substitutes, but both are to some degree necessary for successfully integrating in the Swedish labour market. This paper describes the distribution of proficiency in literacy in the population and explores its determinants, and uncovers a strong relationship between literacy and the likelihood of being employed. The relationship between proficiency in literacy and the likelihood of participating in adult education is also explored. Lower employment prospects for immigrants are well explained by lower literacy proficiency, lower education and less favourable socio-economic backgrounds.
A new measure of skills mismatch: theory and evidence from the Survey of Adult Skills (PIAAC) (OECD Social, Employment and Migration Working Papers No.153)
This paper proposes a new measure of skills mismatch that combines information about skill proficiency, self-reported mismatch and skill use. The theoretical foundations underlying this measure allow identifying minimum and maximum skill requirements for each occupation and to classify workers into three groups, the well-matched, the under-skilled and the over-skilled. The availability of skill use data further permit the computation of the degree of under and over-usage of skills in the economy. The empirical analysis is carried out using the first wave of the OECD Survey of Adult Skills (PIAAC) and the findings are compared across skill domains, labour market status and countries.
Returns to Skills Around the World: Evidence from PIAAC (EDU Working Paper No.101)
Existing estimates of the labor-market returns to human capital give a distorted picture of the role of skills across different economies. International comparisons of earnings analyses rely almost exclusively on school attainment measures of human capital, and evidence incorporating direct measures of cognitive skills is mostly restricted to early-career workers in the United States. Analysis of the new PIAAC survey of adult skills over the full lifecycle in 22 countries shows that the focus on early-career earnings leads to underestimating the lifetime returns to skills by about one quarter. On average, a one-standard-deviation increase in numeracy skills is associated with an 18 percent wage increase among prime-age workers. But this masks considerable heterogeneity across countries. Eight countries, including all Nordic countries, have returns between 12 and 15 percent, while six are above 21 percent with the largest return being 28 percent in the United States. Estimates are remarkably robust to different earnings and skill measures, additional controls, and various subgroups. Intriguingly, returns to skills are systematically lower in countries with higher union density, stricter employment protection, and larger public-sector shares.