The Impacts of Literacy and Numeracy on Earnings: Do Admission Categories Matter?

Abstract

We explore differences in literacy and numeracy skills, and the economic returns to these skills for immigrants to Canada in different admission classes, and their Canadian-born counterparts. Respondents are categorized into nine subpopulations: adult economic immigrants, adult refugees, adult family reunification, other adult immigrants, adult temporary residents, young refugees, young non-refugee immigrants, second- and third-generation Canadians. With some exceptions, the results suggest that both adult and young immigrants (those who arrived in Canada at age 13 or younger) do not perform as well on literacy and numeracy tests as those born in Canada, although young immigrants have higher test scores than adult immigrants. Similar results are found for wages, our metric for success in the labour market. Generally, we find that economic immigrants tend to have the highest test scores and hourly wages, with refugees having the lowest, amongst all immigration categories. A one-standard deviation increase in literacy attracts a wage premium of eight percent for men and nine percent for women. Those of numeracy scores are associated with 10 percent wage premium for both males and females. Though literacy and numeracy tests in PIAAC 2012 are used to capture basic everyday life and workplace proficiency, the returns to these basic skills are economically significant across different quantiles of earnings.