Comparative assessment of skills in Russia: An economic

rationale

T. Scott Murray

DataAngel Policy Research Inc.

dataangel@mac.com

What is old is new:

In the beginning: The US

• Key scientific advances:– Theory: The Abrams main battle tank and

insight into what makes adult reading tasks difficult. Kirsch and Mosenthal

– Applied statistics: The development of statistical techniques to summarize proficiency and to estimate errors. Bock and Rubin

– Enabled the 1985 Young Adult Literacy Survey (YALS) ETS,NCES and USDOL

In the beginning: Canada

• In Canada 25 years of Scott measuring every kind of social and economic ill and being able to explain very little of it

• Celtic allergy to empires built on unproven assertions of systemic discrimination

• The Southam survey “24% of adult Canadians had literacy skill problems”

• Conduct of the survey of 1989 Literacy Skills Used in Daily Activities (LSUDA)

Precipitated multiple rounds of data collection:

• IALS 1994 9 countries• IALS 1996 5 countries• IALS 1998 12 countries• Vanuatu, Immigrants in Ontario, the Deaf and

Hard of Hearing in Ontario• ALL 2003• ALL 2005• PIAAC 2011

What was learned for policy:

• Large differences in skill existed both within and between countries

• These differences were far larger than implied by differences in educational attainment

• The differences mattered to individual outcomes but were too large to attribute to differences in educational quality

The policy response:

• There is no problem “Our problem is the same as that of our trading partners”

• There is a problem but it doesn’t matter, “It doesn’t increase the size of the economic pie it is just an allocative mechanism”

• There is a problem, it matters to growth but it is not our problem “It is a problem for individuals and firms to correct”

The hypothesis of market failure:

• Only governments have the tools to correct market failures:– Information– Incentives

Issues that need attention: The dreaded mastery level

• All adult assessments have used 80% as a proxy for what employers expect of workers

• PISA uses 62.5% because education systems are not focused on mastery

• OECD is pushing to have the PIAAC standard changed to distance it from IALS, a step that would break the series

• Empirical analysis by Somers & Murray suggests that the Response Proficiency should vary by occupation from 40% to 95%

Brain Structure

Left to RightLeft to Right

BBaacckk ttoo FFrroonntt

brain fromthe top

Brain Structure

InformationInformation(processing-based)(processing-based)

Knowledge(thinking-based)(thinking-based)

BBaacckk ttoo FFrroonntt

Brain Structure

DecodingPET Scan

brain fromthe side

What is this brain doing?

HearingPET Scan

Brain Structure

What is this brain doing?

SpeakingPET Scan

Brain Structure

What is this brain doing?

MathPET Scan

Brain Structure

What is this brain doing?

Dr. Michael O’Boyle imagesfrom Texas Tech. University School of Medicine, Department of Neurology

ThinkingPET Scan

Brain Structure

What is this brain doing?

Brain Structure

http://www.nil.wustl.edu/labs/raichle/

Issues for further study:

• Developing a better understanding of supply, demand and the efficiency of markets

• Our analysis suggests that supply-side interventions are not enough. One needs to manage demand and improve the efficiency of markets that match workers with jobs

Theoretical Framework: a “Markets” Model of SkillMarkets

for skill:

•Education

•Labour

•Health

•Social + quality of early childhood experience+ quantity of primaryand secondary education+ quantity and quality of tertiary+ quantity and quality ofadult learning (formal, non-formal, informal)+/- immigration+/- emmigration- skill loss associated with insufficient demand+/- social demand for skill+/- economic demand for skill

Outcomes

Skill Demand Skill Supply = skill stock + net skill flow from lifelong, life-wide learning

Context MICRO MESO MACRO

  (Individuals) (Social Institutions) (Systems)

• Economic      

• Social      

• Educational      

• Health      

Skill gain and loss, the behaviour of firms and the possibility of multiple equilibria:

20 30 40 50 60 Age in 1994

200

225

250

275

300

IALS 1994

Canada

39 49 59 69 Age in 200329

ALLS 2003

Do

cum

ent

Lit

erac

y S

core

ALLS 2003 - All AdultsALLS 2003 - Recent Immigrants excluded

One way in which firms compensate for a workforce with weak literacy skills is to adopt less productive work organizations, work processes and technologies of production:

Output

Cost

The production frontier: the point where one gets the most outputat the lowest unit cost

•

•

A less productiveconfiguration

Correcting the market failure:

• Projecting down: skill profiles for small areas

• Projecting down: Skill profiles for detailed occupations and cost-benefit analyses

• Projecting out: Forecasts of skill supply and demand

• RCT’s and quasi-experimental studies to establish effect sizes and cost-benefit

• Our basic hypothesis: A failure in the literacy market

• The literacy market failure can be traced back to:– Complacency due to 50 years of economic

success– A failure to appreciate the implications of the

changes occurring in the global economy– A lack of information on the nature of the problem– A lack of tools to assess skills– A lack of efficient and effective instructional

programs

Projecting down: The local distributions of skill

Alberta - Number of Adults at Levels 1 and 2 Prose Literacy

0 - 30

31 - 60

61 - 90

91 - 120

121 - 150

151 - 180

181- 210

211 - 240

241 - 270

More than 270

No Data

175 0 17587.5 Kilometers

Projecting down: Absolute and relative risks of being in literacy shortage by occupation,

Canada 2006:

Colleges are admitting large numbers of low skilled youth:

Percent of Population at Levels 1-3 Enrolled in Collegeby Province - by Literacy Level

0% 10% 20% 30% 40% 50% 60%

Manitoba

Prince Edward Island

Saskatchewan

New Brinswick

British Columbia

Nova Scotia

Quebec

Alberta

Newfoundland andLabrador

Ontario

Level 1 Level 2 Level 3

Fixing the flow: Quality of secondary graduates is not improving, large percentages have skills below those needed to take full advantage of PSE, and there are

large social inequities

Projecting out: How the distribution of performance by level is likely to change 2001 - 2031

Population Projections - Population at various Literacy Levels Province (All) - Immigration (All) - Age

Group (All) - Education Level (All)

0%10%

20%30%40%50%

60%70%80%

90%100%

2001 2005 2015 2031

Literacy Level

Po

pu

lati

on

Level 4/5

Level 3

Level 2

Level 1

59-B.C. 0% -1% 1% -1% 1%

Literacy demand rising rapidly and literacy supply flat: Shortages will grow over coming decade

Understanding the learning needs of low-

skilled adults: The transition from learning to read to reading to learn:

225 275 325 375 500

Learning to read

0

Reading to learnProficiency dominated by mechanics of reading

Proficiency dominated by cognitive strategies

Level 1 Level 2 Level 3 Level 4 Level 5

Literacy market segments in Canada:

Segments in the Canadian literacy market:

• The efficiency of the market for literacy: Balance of total supply and total demand (in points)

The efficiency of the market for literacy: Literacy skill surpluses and shortages by level of the job (in workers)

Figure 4.3A Number of workers in literacy skill surplus and shortage by literacy proficiency level, all

occupations, 48-Alberta, 2006

-600,000

-400,000

-200,000

-

200,000

400,000

600,000

1 2 3 4 5

Proficiency level

Skill

short

ag

e/s

urp

lus

(work

ers

)

50% of workers in Alberta are in shortage:

Estimated benefits are clear:

Issue for further study: Improving our understanding of how skill drives

productivity and wages• Two competing hypotheses:

– Skill is a general driver of productivity growth across the whole spectrum of occupational demand

– Skill only pays in jobs where demand for use is high

– Reder: Skill pays but only in bad times

33% of wage variation in Canada is attributable to skill differences:

0 10 20 30 40 50

Canada

Finland

United Kingdom

Norway

New Zealand

Australia

United States

Ireland

P ortugal

Hungary

Denmark

Slovenia

Netherlands

Belgium (Flanders)

Switzerland

Sweden

Chile

Czech Republic

Germany

P oland

Educational attainmentLiteracy proficiencyExperience

Standardised regression w eights x 100

Source: International Adult Literacy Survey, 1994-1998.

Countries are ranked by the magnitude of the effect parameter associated with educational attainment

The impact of skill on individual labour market outcomesEarnings and literacy proficiency, controlling for education and labour force experience… literacy explains a significant fraction of wage variability in Portugal, but less than education or experience …a sign of an inefficient labour market or low demand…

PRC

A Framework for Thinking about Essential Skills at the Individual Level:

Resolution Processes

ChangingSkill Demands

• Tasks to be accomplished/imposed by society/economy

•Changes associated with the life course

• Individual goals/aspirations

• Functioning in socially heterogeneou s groups

• Acting autonomously

• A well functioning, equitable economy and society

IndividualOutcomes(MICRO)

SocietalOutcomes(MACRO)

Reliance on Physical tools• Reliance on fluid and creative cognitive and meta-cognitive tools

Mechanisms

• Reliance on practical and crystallized cognitive tools

• Reliance on others• Avoidance

• Successful institutions

•firms

•families

•communities

•schools

Outcomes forSocial Institutions(MESO)

Issues for further study: The impact of

skills on health outcomes and costs:

• Adults with low health literacy scores remain 2.5 times more likely to be in fair or poor health even after adjusting for a wide range of variables

• Elimination of skill shortages using “best practice” interventions would break even if it saved 1% of health costs and would yield large economic benefits

Issues for further study: The impact of skills on health outcomes and costs:

• Need to understand biochemical pathway that links skill to health

• Need an RCT to know

• Hypothesis:– Low skill = bad outcomes = chronic stress =

high blood cortisol =impaired immune response = higher rates of CVD, diabetes and cancer

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Qatar

Russia

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Russia

Assessment the old way:

• Technically demanding

• Costly

• Operationally demanding

• Slow

Assessment the new way:

• web-based• adaptive • multi-purpose, • low cost• Immediate results for:

– Prose literacy– Document literacy– Numeracy– Reading components– Oral fluency