12 Jul 1 in 6 cannot pass basic literacy tests: The economic impact of Canadians’ literacy skills

Literacy is all around us.

We use it daily to communicate, interact, and engage fully at work, with family, and in our communities. When we have strong literacy skills, we can make sense of our world and lead productive, successful lives. We also have better access to economic opportunities; people with lower literacy skills are more likely to be unemployed than those with higher skills.

As our world continues to change rapidly in terms of technology, literacy skills are no longer optional. In fact, they’re now essential to the future of our country, especially post-pandemic. A highly literate workforce increases GDP and productivity and is vital for maintaining a healthy, competitive economy.

What is the literacy rate in Canada?

According to Statistics Canada, more than one in six Canadians do not pass the most basic set of literacy tests, and approximately half of Canadian adults cannot understand information in lengthy and complex texts. This means that half of our workforce falls short of passing a high school level literacy assessment.

When comparing adult literacy and numeracy skills, Canada is below the average of other Organization for Economic Co-operation and Development (OECD) countries such as Japan, Sweden and Australia.

COVID-19 only worsened the country’s literacy gaps. Those with low literacy skills were most affected by the pandemic’s associated employment issues and financial impact. The unemployment rate for Indigenous people at the end of 2020 was 12 per cent, compared to eight per cent among non-Indigenous people. Visible minorities and lower-wage workers were also more negatively affected by the pandemic.

Impact on employment

In the past, many of Canada’s employment opportunities – such as natural resource-based work – didn’t require high literacy levels. However, as businesses begin to replace manual labour with new technologies and automation, literacy skills are now essential for most jobs in Canada.

Some of the country’s biggest industries, including manufacturing, food services and retail, are shifting to automation. As a result, Canadians with low literacy skills in positions most vulnerable to automation will have limited ability to transition to other jobs. They’re at a higher risk of being unemployed, experiencing poverty and financial strain, and developing health problems.

According to the Conference Board of Canada, as many as one in five jobs in Canada are at risk of being automated.

Competing globally requires a highly literate workforce

Strong literacy skills lead to increased work quality, productivity and profitability. Companies also experience better retention rates and health and safety records.

But unfortunately, more than 40 per cent of Canada’s workforce don’t have the necessary skills to learn new skills effectively and be highly productive at work.

Because of Canada’s low birth rate, we may soon lack enough Canadians with the necessary skills to fill all our jobs. Meanwhile, the supply of skilled people in developing countries is increasing, allowing them to compete with more developed countries like Canada, but at a lower cost.

How quickly a country can adopt new technologies and meet the skill requirements of today’s labour market depends on a highly literate, skilled workforce.

Literacy rates as an economic indicator

Besides impacting individuals and society in general, literacy rates are an indicator of economic growth.

When literacy improves, the GDP and productivity of a country’s workforce can improve. Increasing literacy skills by an average of one per cent would eventually produce a three per cent increase in GDP, or $54 billion annually. The additional tax revenue on this increase would cover the cost necessary to achieve these gains.

There is a significant connection between literacy and income – the higher the literacy level of an individual, the higher the potential income for the individual. In addition, countries with high literacy rates attract a large pool of investors and entrepreneurs, which can positively impact a nation’s economy.

The hidden costs of low literacy

When we have strong literacy skills, we’re more likely to be employed, earn more, and experience fewer periods of joblessness. We’re also more likely to volunteer or participate in community groups.

Individuals with stong literacy skills can better manage their health and seek medical treatment more easily for themselves and their families, requiring less assistance from scarce and costly health professionals. They proactively visit their doctors, resulting in more affordable healthcare than costly emergency visits. Communities with high literacy rates also have lower infant mortality rates.

Individuals with lower literacy skills face more barriers to healthcare and financial planning, which can increase crime or welfare dependence. Many prison inmates have poor literacy skills, and those who have not improved their skills before being released are likely to re-offend. Maintaining prisons, administering the courts and operating the justice system results in a high economic cost.

In addition, there is an opportunity cost of low literacy – the missed opportunities to create individual financial wealth, build healthier and more stable families, and develop individuals who can more positively contribute to society. Although the actual opportunity cost may be hard to determine, the United Nations Educational, Scientific, and Cultural Organization estimates the cost of low literacy to a country at 0.5 percent of its GDP. The wealthier the country, the more impactful the result.

The key takeaway

Literacy plays a significant role in various social and economic outcomes experienced by individuals and countries.

Individuals experience better employment and wages, a higher quality of life, and more engagement in their community. Countries with highly literate citizens can compete effectively in today’s global market and increase their GDP and productivity levels.

It’s never too late to address literacy challenges – the future social and economic success of Canada as a nation depends on it. To improve the literacy skills of adult learners in your community, access our free resources or contact us for further information.