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Education and Earnings

Skills and Earnings in the Full-Time Labor Market
Neeta Fogg, Paul Harrington, and Ishwar Khatiwada

Descriptive Analysis of Earnings: Mean Monthly Earnings by Proficiencies, Education, and Demographic Traits of Workers

This section of the report provides a descriptive portrait of mean monthly earnings during 2012-2014 among prime age, full-time workers who were part of the enhanced U.S. household sample data. We begin with an examination of the relationship between mean monthly earnings of all workers and their levels of literacy and numeracy achievement as measured by the PIAAC literacy and numeracy test scores. We examine mean monthly earnings of workers in the following four achievement levels of literacy and numeracy proficiencies:

  • level 1 or below (score of 225 or less)
  • level 2 (226 to 275)
  • level 3 (276 to 325)
  • levels 4 and 5 combined (326 to 500)

The differences in earnings by literacy and numeracy proficiencies are presented as mean earnings of workers in each of the four achievement levels relative to the mean earnings of workers in level 2. Examinations of the earnings of workers by their achievement level of literacy and numeracy proficiencies are presented for all 25- to 54-year-old full-time workers, and separately for subgroups of workers by their educational attainment.

More detailed analysis of the monthly earnings among subgroups of workers is presented in Appendix C of this report. This analysis includes average monthly earnings estimates by the four levels of literacy and numeracy proficiency listed above for subgroups of workers by educational attainment, gender, age, race-ethnicity, work experience, nativity status, self-reported English writing ability, disability, sector of work, region of residence, and skill-based occupational groups.

Literacy and Numeracy Proficiencies of Workers

A comparison by the National Center for Education Statistics (NCES) of the literacy and numeracy skills of U.S. adults and their counterparts in 21 other developed nations around the world indicates that the skills of U.S. adults are middling at best. Among all 16- to 65-year-old adults in the United States, the mean score on the PIAAC literacy scale was 272—significantly lower than average scores in 7 countries, higher than in 6 , and not statistically different from 8 countries and the overall PIAAC international average. The mean U.S. score of 257 on the numeracy scale was at the lower end of the international comparison of adult math proficiency. The U.S. mean numeracy score was significantly lower than the average score of 16 countries and the PIAAC international average, higher than in 3 countries, and not statistically different from the mean score of 2.17

An examination of the literacy and numeracy proficiencies of 25- to 54-year-old full-time employed workers studied in this report reveals that their mean scores were higher than those of all 16- to 65-year-old adults in the United States: 281 versus 272 on the PIAAC literacy assessment, and 269 versus 257 on the PIAAC numeracy assessment. These differences are expected since the average skills scores of employed working-age adults ages 16 to 65 are higher than those who are unemployed (277 versus 259 on the literacy assessment, and 264 versus 238 on numeracy), and full-time employed adults have higher skill scores than their part-time employed counterparts (279 versus 270 on literacy, and 267 versus 254 on numeracy) (Figure 1). Conversely, adults with higher skills are more likely to be employed overall and in full-time positions.18

Figure 1: Mean Literacy and Numeracy Proficiency Scores of 16- to 65-Year-Olds by Employment and Full-Time/Part-Time Employment Status, 2012-2014

Mean Literacy Score

Mean Numeracy Score

The literacy and numeracy proficiencies of workers reported next are presented in the form of mean scores and levels of proficiencies. Proficiency levels based on a range of cut scores are associated with a range of literacy and numeracy tasks. The proficiency levels, score ranges, and task descriptions for each level are presented in Table 1 (literacy) and Table 2 (numeracy).

Table 1: PIAAC Literacy Proficiency Levels and Cut Scores and Task Descriptions for each Literacy Proficiency Level

Literacy Proficiency Levels and Cut Scores

Literacy Task Descriptions

Source: U.S. Department of Education, National Center for Educational Statistics, Institute of Education Sciences, Skills of U.S. Unemployed, Young, and Older Adults in Sharper Focus: Results from the Program for the International Assessment of Adult Competencies (PIAAC) 2012/2014, First Look, March 2016, Exhibit B-1, Page B-3, https://nces.ed.gov/pubs2016/2016039rev.pdf.

Level 5

(376 – 500)

At this level, tasks may require the respondent to search for and integrate information across multiple, dense texts; construct syntheses of similar and contrasting ideas or points of view; or evaluate evidence-based arguments. Application and evaluation of logical and conceptual models of ideas may be required to accomplish tasks. Evaluating reliability of evidentiary sources and selecting key information is frequently a requirement. Tasks often require respondents to be aware of subtle, rhetorical cues and to make high-level inferences or use specialized background knowledge.

Level 4

(326 – 375)

Tasks at this level often require respondents to perform multiple-step operations to integrate, interpret, or synthesize information from complex or lengthy continuous, noncontinuous, mixed, or multiple type texts. Complex inferences and application of background knowledge may be needed to perform the task successfully. Many tasks require identifying and understanding one or more specific, noncentral idea(s) in the text in order to interpret or evaluate subtle evidence-claim or persuasive discourse relationships. Conditional information is frequently present in tasks at this level and must be taken into consideration by the respondent. Competing information is present and sometimes seemingly as prominent as correct information.

Level 3

(276 – 325)

Texts at this level are often dense or lengthy, and include continuous, noncontinuous, mixed, or multiple pages of text. Understanding text and rhetorical structures become more central to successfully completing tasks, especially navigating complex digital texts. Tasks require the respondent to identify, interpret, or evaluate one or more pieces of information, and often require varying levels of inference. Many tasks require the respondent to construct meaning across larger chunks of text or perform multistep operations in order to identify and formulate responses. Often tasks also demand that the respondent disregard irrelevant or inappropriate content to answer accurately. Competing information is often present, but it is not more prominent than the correct information.

Level 2

(226 – 275)

At this level, the medium of texts may be digital or printed, and texts may comprise continuous, noncontinuous, or mixed types. Tasks at this level require respondents to make matches between the text and information, and may require paraphrasing or low-level inferences. Some competing pieces of information may be present. Some tasks require the respondent to cycle through or integrate two or more pieces of information based on criteria; compare and contrast or reason about information requested in the question; navigate within digital texts to access and identify information from various parts of a document.

Level 1

(176 – 225)

Most of the tasks at this level require the respondent to read relatively short digital or print continuous, noncontinuous, or mixed texts to locate a single piece of information that is identical to or synonymous with the information given in the question or directive. Some tasks, such as those involving noncontinuous texts, may require the respondent to enter personal information onto a document. Little, if any, competing information is present. Some tasks may require simple cycling through more than one piece of information. Knowledge and skill in recognizing basic vocabulary, determining the meaning of sentences, and reading paragraphs of text is expected.

Below Level 1

(0 – 175)

The tasks at this level require the respondent to read brief texts on familiar topics to locate a single piece of specific information. There is seldom any competing information in the text and the requested information is identical in form to information in the question or directive. The respondent may be required to locate information in short continuous texts. However, in this case, the information can be located as if the text were noncontinuous in format. Only basic vocabulary knowledge is required, and the reader is not required to understand the structure of sentences or paragraphs or make use of other text features. Tasks below level 1 do not make use of any features specific to digital texts.

Table 2: PIAAC Numeracy Proficiency Levels and Cut Scores and Task Descriptions for each Numeracy Proficiency Level

Numeracy Proficiency Levels and Cut Scores

Numeracy Task Descriptions

Source: U.S. Department of Education, National Center for Educational Statistics, Institute of Education Sciences, Skills of U.S. Unemployed, Young, and Older Adults in Sharper Focus: Results from the Program for the International Assessment of Adult Competencies (PIAAC) 2012/2014, First Look, March 2016, Exhibit B-3, Page B-7, https://nces.ed.gov/pubs2016/2016039rev.pdf.

Level 5

(376 – 500)

Tasks at this level require the respondent to understand complex representations and abstract and formal mathematical and statistical ideas, possibly embedded in complex texts. Respondents may have to integrate multiple types of mathematical information where considerable translation or interpretation is required; draw inferences; develop or work with mathematical arguments or models; and justify, evaluate and critically reflect upon solutions or choices.

Level 4

(326 – 375)

Tasks at this level require the respondent to understand a broad range of mathematical information that may be complex, abstract or embedded in unfamiliar contexts. These tasks involve undertaking multiple steps and choosing relevant problem-solving strategies and processes. Tasks tend to require analysis and more complex reasoning about quantities and data; statistics and chance; spatial relationships; and change, proportions and formulas. Tasks at this level may also require understanding arguments or communicating well-reasoned explanations for answers or choices.

Level 3

(276 – 325)

Tasks at this level require the respondent to understand mathematical information that may be less explicit, embedded in contexts that are not always familiar and represented in more complex ways. Tasks require several steps and may involve the choice of problem-solving strategies and relevant processes. Tasks tend to require the application of number sense and spatial sense; recognizing and working with mathematical relationships, patterns, and proportions expressed in verbal or numerical form; and interpretation and basic analysis of data and statistics in texts, tables and graphs.

Level 2

(226 – 275)

Tasks at this level require the respondent to identify and act on mathematical information and ideas embedded in a range of common contexts where the mathematical content is fairly explicit or visual with relatively few distractors. Tasks tend to require the application of two or more steps or processes involving calculation with whole numbers and common decimals, percentages and fractions; simple measurement and spatial representation; estimation; and interpretation of relatively simple data and statistics in texts, tables and graphs.

Level 1

(176 – 225)

Tasks at this level require the respondent to carry out basic mathematical processes in common, concrete contexts where the mathematical content is explicit with little text and minimal distractors. Tasks usually require one-step or simple processes involving counting, sorting, performing basic arithmetic operations, understanding simple percentages such as 50%, and locating and identifying elements of simple or common graphical or spatial representations.

Below Level 1

(0 – 175)

Tasks at this level require the respondents to carry out simple processes such as counting, sorting, performing basic arithmetic operations with whole numbers or money, or recognizing common spatial representations in concrete, familiar contexts where the mathematical content is explicit with little or no text or distractors.

The percentage distribution of 25- to 54-year-old full-time employed workers across six PIAAC literacy and numeracy proficiency levels presented in figures 2 and 3 find that the bulk of these workers had proficiencies in the middle two levels, with much smaller shares at the two ends.19 Distribution by literacy proficiency levels in Figure 2 finds only 3 percent of workers scored below literacy proficiency level 1 and an additional 10 percent of workers scored at literacy level 1, resulting in a combined 13 percent scoring at or below literacy proficiency level 1. The middle two levels accounted for 69 percent of these workers (29 percent in level 2 and 40 percent in level 3). The share of workers who scored in level 4 of the literacy proficiency test was 17 percent and in level 5 was only 1 percent (Figure 2).

Figure 2: Percentage Distribution of 25- to 54-Year-Old Full-Time Employed Workers by Literacy Proficiency Level, 2012-2014

Figure 3: Percentage Distribution of 25- to 54-Year-Old Full-Time Employed Workers by Numeracy Proficiency Level, 2012-2014

On the numeracy scale, one-fifth of 25- to 54-year-old full-time employed workers fell in the two lowest proficiency levels: 5 percent below level 1, and 15 percent at level 1 (Figure 3). About two-thirds of workers had numeracy scores that placed them in levels 2 or 3 of the numeracy proficiency test. Only 14 percent of workers scored in levels 4 and 5 (13 percent in level 4 and 1 percent in level 5). Because of the small number of observations at the two ends of the literacy and numeracy proficiency distribution, our examination of outcomes by literacy and numeracy proficiency levels combines the two lowest levels (below level 1 and level 1) and the two highest levels (levels 4 and 5), in line with standard practice for PIAAC skill measures.

A large and convincing body of evidence has found that the employment and earnings outcomes of labor market participants (and even the likelihood of participating in the labor market) are strongly associated with the acquisition of human capital. Workers with more intensive development of their productive potential in the form of higher levels of educational attainment and greater work experience are more knowledgeable and able to perform more sophisticated tasks on the job.

The standard indicator used as proxy measure for human capital is the level of educational attainment primarily because of its widespread use in household surveys. Indeed, educators from high school principals and school district superintendents to college deans and presidents, not to mention a plethora of elected officials and business leaders, point to Census data that illustrate the earnings advantages associated with higher levels of educational attainment. The higher productive abilities of workers with higher levels of educational attainment, which presumably represent stronger literacy and numeracy proficiencies, translates into improved employment and earnings outcomes in U.S. labor markets.

Our analysis of PIAAC data for prime-age, full-time employed workers also indicates that the mean monthly earnings of American workers are closely related to their literacy and numeracy proficiencies. The mean monthly earnings of full-time employed 25- to 54-year-old workers increased sharply with higher levels of literacy and numeracy skills. In 2012-2014, monthly earnings were $2,940 among those with literacy proficiency at or below level 1, rising to $3,800 and $5,070 per month for those in levels 2 and 3, respectively, with another sharp rise to $6,700 per month for workers with scores that placed them in levels 4 and 5 combined.

The sizes of earnings advantages associated with higher levels of literacy skills are large. In comparison to the mean monthly earnings of workers in level 2, workers with literacy proficiencies in level 1 or below earned 23 percent less, while workers with level 3 literacy proficiencies earned 33 percent more, and those in levels 4 and 5 combined earned 77 percent more (Table 3). The gap between the mean earnings of workers in the highest (level 4/5) and lowest (1 or below) levels of literacy proficiency was $3,800 ($6,717 versus $2,939, representing a relative earnings advantage of 128 percent). In other words, for every $1 earned by workers with the lowest level of literacy proficiency, their counterparts with the highest literacy proficiency levels earned $2.28.

Table 3: Mean Monthly Earnings of 25- to 54-Year-Old Full-Time Employed Workers by Literacy and Numeracy Proficiency Levels, 2012-2014 (Standard Errors in Parentheses)

Proficiency Level

Mean Monthly Earnings

Monthly Earnings Compared to Level 2

Source: 2012 and 2014 PIAAC surveys, restricted use files, tabulations by authors.

All

$4,729

Literacy Proficiency Levels

Level 1 or Below

$2,939 0.77

Level 2

$3,805 1.00

Level 3

$5,067 1.33

Level 4/5

$6,717 1.77

Numeracy Proficiency Levels

Level 1 or Below

$3,112 0.78

Level 2

$3,989 1.00

Level 3

$5,392 1.35

Level 4/5

$7,133 1.79

Earnings of workers were also closely and positively related to their numeracy proficiencies. Gaps between the mean monthly earnings of prime-age, full-time employed workers with different levels of numeracy skill were quite sizable. The earnings of workers (relative to those with level 2 numeracy proficiency) were 22 percent lower among those with numeracy proficiency at or below level 1, 35 percent higher among those scoring in level 3, and 79 percent higher among those with scores placing them in levels 4 or 5 (Table 3).

With mean monthly earnings of $7,133 among full-time workers with the strongest numeracy skills and just $3,112 among those with the weakest numeracy skills, the gap between the earnings of workers with the highest and lowest numeracy proficiency was also very large: $4,021 per month, representing an earnings advantage of 129 percent for workers with the highest levels of numeracy proficiency relative to their counterparts with the lowest level of numeracy proficiency, about the same in relative terms as the gap between the earnings of workers with the highest and lowest levels of literacy proficiency (Figure 4).

Figure 4: Mean Monthly Earnings of 25- to 54-Year-Old Full-Time Employed Workers by Literacy and Numeracy Proficiency Levels, 2012-2014

Notes

17 U.S. Department of Education, National Center for Education Statistics, Program for the International Assessment of Adult Competencies (PIAAC), 2012/2014 Results, 2016, https://nces.ed.gov/surveys/piaac/results/makeselections.aspx.

18 Tongyun Li, Matthias von Davier, Gregory R. Hancock, and Irwin S. Kirsch, The Prediction of Labor Force Status: Implications from International Adult Skill Assessments, Research Report Series No. RR-16-11 (Princeton, NJ: Educational Testing Service, 2016), 1-20.

19 The literacy and numeracy score of PIAAC respondents are normally distributed. For technical discussion of the PIAAC literacy, numeracy, and problem solving scores, see Yamamoto et al., Technical Report.