The Effect of Cognitive Skills on Aboriginal People's Employment Outcomes

Abstract

This paper uses the 2012 Programme for the International Assessment of Adult Competencies (2012 PIAAC) and examines how cognitive skills affect the labour market outcomes of Aboriginal people in Canada. The results show that literacy, numeracy, and solving problems in technology-rich environment skills have a significant impact on earnings, but there is no difference in the returns on these skills between Aboriginal people and non-Aboriginal people. A one point increase in literacy, numeracy or PSL skills is estimated to increase hourly wages by about 3% to 4%, when they are included in separate regressions. In addition, Aboriginal people have comparatively lower cognitive skills than non-Aboriginal Canadians as measured by 2012 PIAAC. Education attainment is an effective way to increase people's cognitive abilities. A Bachelor’s degree is associated with a 30 to 50 point increase in cognitive skills relative to high school education.