Statistics Canada
Symbol of the Government of Canada

Site navigation menu

Gaining and Losing Literacy Skills Over the Lifecourse

Warning View the most recent version.

Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.

by J. Douglas Willms and T. Scott Murray

Skill loss and age
Why skill loss matters
Age, period, and cohort effects


The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations.

According therefore as this produce, or what is purchased with it, bears a greater or smaller proportion to the number of those who are to consume it, the nation will be better or worse supplied with all the necessaries and conveniences for which it has occasion.

(Adam Smith, 1776, Book One)

The policy community has for some time recognized that human capital – what workers know and can put to productive use – plays an important role in the social and economic development of nations (Becker, 1964; Schultz, 1963). As noted in the quote above Adam Smith, author and one of the world's first economists, was among the first to comment on the importance of human capital to the wealth of nations. More recently John Kenneth Galbraith, a noted Canadian-born economist, identified literacy as a key aspect of human capital and a central pillar of economic development:

"People are the common denominator of progress. So…no improvement is possible with unimproved people, and advance is certain when people are liberated and educated. It would be wrong to dismiss the importance of roads, railroads, power plants, mills and the other familiar furniture of economic development…But we are coming to realize…that there is a certain sterility in economic monuments that stand alone in a sea of illiteracy. Conquest of illiteracy comes first." (Galbraith, 1958)

Smith and Galbraith's intuition has recently been confirmed by empirical evidence. Differences among 14 OECD countries in the stock of human capital, as reflected in average levels of adult literacy skills, explains over half (55%) of differences in long term growth rates in GDP per capita, one of the key measures of economic performance (Coulombe, Tremblay, and Marchand, 2005). In addition to this "level" effect, Coulombe also identifies a distributional effect in which the percentage of adults with very low literacy skills1 appears to reduce the long-term growth rate of Gross Domestic Product (GDP) per capita as well as productivity in those countries with higher percentages of such adults.

Learning, including the acquisition of literacy skills, takes place over the life course in a diverse variety of contexts. Countries can influence the stock of human capital that is available to the economy and society by increasing the output of learning systems – the quantity and average quality of learning – at all ages. For example, learning output can be increased by improving the level of maternal health, the quality of early childhood experience, the quality of primary education, the quality and average duration of secondary education, the quality and average duration of post-secondary education, and the incidence and duration of formal and informal learning undertaken by adults.2 Learning output can also be increased by increasing the efficiency of the learning process in each of these systems, either by increasing the incentives to learn, the efficiency of markets that select and reward skill, the adoption of more productive instructional technologies and by providing individuals with the tools to be independent learners.

Canada is among a select group of countries that invested heavily in increasing its stock of human capital, expending an average of 7% of GDP on education in the post-war period. Much of this investment has gone to increasing the quality of the early childhood experience and the quality and quantity of initial formal education. As a result Canada now boasts one of the world's highest levels of educational attainment. Canada also ranks among the world's elite in terms of the quality of its secondary education system, consistently placing in the top tier of international comparisons of reading, mathematics and science (Beaton et al., 1996; Willms, 2006).

However, the recent findings from the International Adult Literacy Survey (IALS) and the 2003 Adult Literacy and Life Skills Survey (ALL) suggest that Canada's stock of human capital may not be increasing as rapidly as expected, at least as measured by increases in the average levels of adult literacy (Willms, 2005). It seems that this lack of progress can be attributed to the fact that improvements in literacy skill flowing from the initial education system are being eroded by significant levels of literacy skill loss in adulthood. This is troubling given the relationships between literacy and overall economic performance, and between literacy and measures of individual success such as wages, health outcomes and social engagement. At a minimum, literacy skill loss erodes the public and private returns on investments in its acquisition and denies both individuals and the economy the benefits associated with strong literacy skills.

This study uses data from IALS and ALL to explore how Canada's stock of literacy skill evolved over the nine year period from 1994 to 2003. It employs a synthetic cohort analysis to document net skill change for various demographic groups for Canada and the provinces and to explore the individual characteristics that influence whether a particular group has gained or lost skill on average over the nine year reference period. The analysis reveals the presence of significant literacy skill loss in adulthood, loss that would seem to be concentrated in adults from lower socio- economic backgrounds.  Given the influence that literacy skill appears to exert upon individual labour market success and the overall performance of the economy understanding what underlies the loss and what, if anything, should be done by individuals, institutions or governments to slow or reverse the process, should be a priority.

Skill loss and age

A plausible explanation for the skill loss in Canada is that, on average, people lose skills as they age, and Canada has an aging population. Chart 1 shows the relationship between document literacy skills and age for Canada and Norway, based on data from the 1994 IALS. The IALS and ALL studies measured slightly different sets of skill domains;3 however, the prose literacy and document literacy measures were virtually identical for the two surveys, and therefore afforded data that can be compared across cohorts. We chose document literacy skills for these analyses because they generally have a stronger relationship than prose literacy with occupational attainment and earnings (Statistics Canada and the Organization for Economic Cooperation and Development, 2005).

The results show a marked decease in skills associated with age for individuals above the age of 30 in both countries. However, this relationship is stronger in Canada than in Norway. Some of the effects of age are associated with the level of education attained by adults in both countries, as well as other factors. Therefore, we pose the question: "Could the distribution of literacy skills in Canada be comparable to that of Norway?"

Chart 1 Average document literacy scores versus age for Norway and Canada, 1994. Opens a new browser window.

Chart 1 Average document literacy scores versus age for Norway and Canada, 1994

Why skill loss matters

The existence of significant levels of adult literacy skill loss is troubling in several respects. First, many observers argue that Canada's future economic and social development depends on our collective ability to compete in global markets. As citizens we share an interest in understanding what factors will influence our relative success, including those things over which we have some control, either as individuals or through the actions of our institutions or our governments.

The Canadian economy is much more dependent on trade than most other countries, a fact that implies that Canada's firms will feel any shift in the terms of trade more rapidly than others. Traditionally, Canada's wealth has depended on low skill resource extraction.  Canada is, however, becoming far more reliant on knowledge and skill intensive output, a trend that is currently masked by high commodity prices (Kanagarajah, 2003; Statistics Canada, 2004; Yan, 2005).  Even our primary industries – fishing, farming, forestry, and mining – have become much more skill, knowledge and capital intense as they struggle to become more productive and to compete on global markets. 

This analysis documents skill loss that is large enough to offset the skill gain that should have resulted from increases in educational investment over the period of 1994 - 2003. Skill loss of this magnitude could stem from demand deficiencies, problems in the quality of skill supply or inefficiencies in markets for skill or some mix of the three. Governments need to understand the relative impact of each of these factors if they are to know if, or where, they have to intervene. The fact that some of Canada's economic peers have chosen to invest heavily in literacy – to raise levels of literacy skill demand, to increase the quantity, quality and equity of literacy skill supply and the efficiency of markets for literacy – suggests that Canadian public policy makers need to consider action of some sort.4 Also there is growing evidence that inaction will incur a large penalty. The global supply of economically productive skills is growing rapidly, and, like any commodity, the price can be expected to fall (UNESCO, 2005; Murray, 2005).  Thus, governments must devote increasing energy and resources to understanding and managing their human capital (Murray 2005). Understanding and managing the demand for skill, the adequacy of supply and the efficiency of markets for skill that match the two is simply a matter of economic self interest.

Second, skill loss erodes the return on investment in what is largely publicly funded education.  Education absorbs a significant share of public expenditures and it is in our collective interest to see that we get a good return on this investment. Canadian's taxes also pay for the delivery of other public goods and services, including health and social services, the demand for which, and cost of, depend to a considerable extent on the literacy skill of those being served.

Third, previous analyses of the IALS and ALL data indicate youth and adults from lower socioeconomic backgrounds have significantly lower levels of educational attainment than those from higher socioeconomic backgrounds (Statistics Canada and Organisation for Economic Cooperation and Development, 2005; Organisation for Economic Cooperation and Development  and Statistics Canada, 2000). If the skill loss associated with aging is greater for people from poorer economic circumstances, then it raises concerns about equity and the ability of different groups to compete fairly in markets that select upon and reward skill, including the labour market and adult education markets – a serious concern, since Canadians pride themselves on affording their citizens with equal opportunity (Human Resources Development Canada, 2002; Maxwell, 1995).

The link between literacy skill and outcomes in Canada's labour markets, health systems, educational systems, and social systems is among the strongest in the world. For example, analyses of the degree to which literacy skill explains wage differences has revealed that literacy skill explains a higher proportion of individual wage in Canada than all other countries for which IALS data are available, fully 33% (Organisation for Economic Cooperation and Development and Human Resources Development Canada, 1997). While it can be argued that this is economically efficient, such efficiency imposes huge costs upon those Canadians with low levels of literacy skill. Skill loss will only serve to increase already high levels of social inequality in key outcomes like employability and wage rates. Reducing inequality in skill would help to reduce inequality over a range of outcomes.

Finally, there is a significant amount of evidence that human capital will become an increasingly important input, one that allows Canadian firms to adopt the more knowledge and skill intense technologies and work organizations that will keep us competitive in the global economy (Brink, 2002; Krahn and Lowe, 1998). There is considerable evidence that the rate at which Canadian workers will be able to adopt productivity-enhancing information and communication technologies will depend upon their literacy levels (Statistics Canada and Organisation for Economic Cooperation and Development, 2005). The importance of lifelong learning to economic performance was summarized nicely by Marshal McLuhan, who wrote: "In the age of electricity and automation,  the globe becomes a community of continuous learning,  a single campus in which everybody,  irrespective of age, is involved in learning a living" (McLuhan, 1969, p. 41). If McLuhan is right then literacy – the ability to solve problems using information gleaned from the printed word, to be an efficient independent learner and applier of technology – becomes a skill that no Canadian adult can afford to be without and a key foundation of our future economic prosperity.

Age, period, and cohort effects

Canadians share an interest in documenting the level and pace of change in key social and economic outcomes and in understanding processes that underlie the observed change. This knowledge allows both citizens and policy makers to make more informed choices about how and where to invest their scarce resources.

However, it is usually difficult to distinguish between age, cohort, and period effects. Age effects pertain to the effects associated with getting older. In the case of literacy skills, for example, we might expect people to increase their literacy skills rapidly during their childhood and youth, and then to maintain them, increase them, or even lose them during early and late middle age, depending on their engagement in literacy activities.  Cohort effects pertain to macro-level conditions of society that affect individuals of a particular cohort, that is, those born in a specific year. For example, the majority of those who were age 16 when ALL was conducted were born in 1987. This cohort would have experienced much different family and school conditions than, say, those born ten years previously because of changes in family structure, levels of parents' education, school expenditures, teaching methods, and so on. One of the most important secular changes affecting literacy skills is increased participation in formal schooling, which can affect literacy skills in two ways: people are likely to have higher literacy skills than the generation before them not only because they are more highly educated, but also because on average they will have grown up in families with more highly educated parents. Period effects stem from particular events that affect the trajectories of all people over a particular period. For example, the rapid increase in access and use of information and communication technology over the ten years prior to ALL is likely to have had a period effect on people's literacy skills.

Ideally one would use longitudinal data to track change at the individual level for multiple cohorts in order to isolate age, period and cohort effects, and to understand what factors influence or explain the observed changes over the full distribution of outcomes. Unfortunately, the collection of longitudinal data is expensive and time consuming, to the point that it often only yields its insights long after decisions have had to be taken.

The approach used in this study entails using "synthetic cohorts", which enables one to get more timely information. Rather than tracking change at the individual level, a synthetic cohort analysis tracks changes for different sub-groups of the population. This level of information is generally sufficient to inform social and economic policy. It can tell us whether the direction and level of change are as expected, and if not, it can provide direction for policy makers to consider what scope there is for influencing the pace of change over the short, medium and long terms, and what kinds of intervention may be most effective.

In the analyses that follow, the literacy scores of the same population groups observed at two time points nine years apart are compared. For example the average skills of adults aged 15 to 24 years in 1994 are compared with adults aged 24 to 33 years old in 2003 and a difference is computed. This analysis also allows one to look at the magnitude of net skill gain or loss for different demographic groups.  One can then extend the analysis by introducing additional characteristics that are believed to underlie skill loss or gain. The result is that one begins to approximate the underlying distribution of individual trajectories by showing the extent to which differing groups gained or lost literacy skills over the study period.

One of the confounding variables that may influence skill loss over the period is influx of immigrants. Thus, in comparing the synthetic cohorts, people who immigrated to Canada during the period spanned by the two studies are excluded from the analysis. This affords a relatively conservative estimate of skill loss, as those adults who were recent immigrants prior to 1994 were likely to have made skill gains on the literacy measures as they increased their knowledge of English or French. This is evident in the results in the next section.5


1. The term refers specifically to Level 1 proficiency as defined in the International Adult Literacy Survey (IALS). 

2. Many observers have suggested that processes of informal learning add considerably to the stock of skill available to the labour market and broader society. Although the estimates of the volume of informal learning collected by the ALL study are large, there is little evidence that the small differences observed among population sub-groups or countries lead to any long-term economic advantage for those countries with higher levels of participation.

3. The IALS study measured prose literacy, document literacy and quantitative literacy whereas the ALL study measured prose literacy, document literacy, numeracy and problem solving skill.

4. See for example the UK's Skills for Life initiative and the recently announced skills initiative in Australia.

5. It is not possible to account for two additional skill flows in the current analyses: the loss of skill through emigration and the loss of skill through death. The impact of the former flow is likely to be limited because of the small number of individuals involved and the latter will only have a marked impact on results at older ages.