Numeracy and literacy still count

A world of constantly-changing technologies brings the challenge of keeping workplace skill updated. While everyone agrees education is the key, uncertainty about the future of Gonski reform funding and quixotic views of coding classes for every kid at school show how myopic the debate can travel.

The truth is that, despite an ever-increasing public spending in recent years, Australian students are learning less today than they did a decade ago. If they cannot read or count proficiently, plans to teach them computer coding are just an unworkable endeavour.

The solution is back to the basics: in order to tackle missing working skills in troubled job markets, numeracy and literacy proficiency are the foundational skills to lift youth employability.

Our research outlines evidence that skill mismatches might be adding to rising youth unemployment figures — and that Australia should pay more attention to education outcomes if we are to deal with the rising problem.

Labour market mismatches occur when there is a gap between the supply and demand of workers, in particular when employers seek a certain set of skills not offered in the supply of jobseekers. Such an imbalance between the supply and demand of skills (i.e. skill mismatches) may ultimately create higher youth unemployment.

For the young jobseeker, with limited pool of skills and work experience, skill mismatches constitute a major challenge. In response, the best help would come from a solid educational base, especially in foundational subject sets such as numeracy and literacy, which have the potential to empower young workers with the basic skills needed to learn new ones on demand.

In economics, the inverse relationship between unemployment and job vacancy rates is captured by the Beveridge Curve — named after the economist William Beveridge’s research on the topic. In good times, job vacancies are up, unemployment is down; in bad times, the converse holds true.

The Figure below shows the Beveridge Curve for young jobseekers in two distinctive periods in Australia. The red curve refers to the quarterly data prior to the Global Financial Crisis, from 2003 to 2008; the blue one represents the most recent period post-crisis.

The undeniable outward shift of Beveridge curve after the GFC represents a worsening in Australia’s labour market for young Australians, with a growing mismatch between young jobseekers and vacant positions.

The phenomenon is not unexpected, and indeed is similar to the picture for overall unemployment rates. Among many forces at play behind the shift, we cannot ignore the impact of skill mismatches in the labour market.

In our fast-changing working environment, mushrooming demand for new specific occupational and trade skills are the rule, and the ability to quickly adjust someone’s skills is paramount for a smooth labour market adjustment.

Predicting the demand for skills, with a top-down micromanagement of skill resources, is often an ineffective and expensive fiscal exercise.

Better instead to empower young workers with the ability to properly and quickly adjust to a constant-changing demand for skills, enabling the market to equalise demand and supply through efficient price signalling (i.e. higher wages). For young jobseekers, a strong focus on numeracy and literacy is the baseline foundation of skill learning abilities.

In this regard, it is a concern that thousands of Australian students are showing very low levels of literacy after spending four or more years at school; including underperforming in both numeracy and literacy according to the National Assessment Program – Literacy and Numeracy (NAPLAN) results.

A 2009 COAG agreement has since pushed for higher Year-12 completions throughout Australia. Although lifting schooling years is laudable, it is more important to make sure that Australian students are actually learning the basic educational skills in order to achieve their future potential.

A good foundation of numeracy and literacy directly enhances productivity at work. In addition, such foundational skills also have the potential to lower skill mismatches in the job market by better equipping young workers with the foundation needed to learn new skills.

In short, learning matters for youth employability. Merely keeping youth at school is not the answer.

Dr Patrick Carvalho is a Research Fellow at the Centre for Independent Studies and author of the research report Youth Unemployment in Australia.