Employment Effects of Skills Around the World: Evidence from PIAAC

Abstract

Making use of an international survey that directly assesses the participants’ cognitive skills, I study the effect of skills on employment in 32 countries. On average, a one-standard-deviation increase in numeracy skills is associated with an 8.4 percentage-point increase in the probability of being employed, reducing the probability of being out of the labor force and the probability of being unemployed by 6.4 percentage points and 2.1 percentage points, respectively. After controlling for numeracy skills, the estimated employment effect of years spent in education falls by one-third from 2.7 percentage points to 1.8 percentage points. There is considerable heterogeneity across subgroups and countries. Notably, the estimated employment effect of skills tends to be more pronounced in countries with higher unemployment.