According to the OECD, human capital refers to the knowledge, skills and competencies embodied in individuals (OECD 1999 in Kearns & Papadopulos 2000, p.35).

From an adult literacy perspective, Hartley and Horne viewed human capital as the 'notion in which workers are vehicles for the economic progress of the nation' (2006, p.7).

Literacy skills are connected to human capital through the measurement of individual skill levels that accrue to a national skills picture through instruments such as the International Adult Literacy Survey (IALS; 1994) and the Adult Literacy and Life Skills Survey (ALLS; 2003).

As in other studies, Hartley and Horne point out the significant relationship between investments in human capital (literacy levels) and a country's subsequent economic growth and labour productivity. Coulombe, Tremblay and Marchand (2004) concluded that a rise of 1% in a country's literacy score relative to the international average (that is, their average literacy and numeracy skills level as measured by the International Adult literacy Survey [IALS]) is associated with an eventual 2.5% relative rise in labour productivity and a 1.5% increase in gross domestic product.

This fact is often repeated in an attempt to get government and industry to 'engage' with literacy development issues.

Although impressive it has not resulted in an increase in effort in Australia.

The OECD provides this definition of literacy in relation to measurement in international surveys:

Many previous studies have treated literacy as a condition that adults either have or do not have. The IALS no longer defines literacy in terms of an arbitrary standard of reading performance, distinguishing the few who completely fail the test (the "illiterates") from nearly all those growing up in OECD countries who reach a minimum threshold (those who are "literate"). Rather, proficiency levels along a continuum denote how well adults use information to function in society and the economy. Thus, literacy is defined as a particular capacity and mode of behaviour: the ability to understand and employ printed information in daily activities, at home, at work and in the community - to achieve one's goals, and to develop one's knowledge and potential. Differences in levels of literacy matter both economically and socially: literacy affects, inter alia, labour quality and flexibility, employment, training opportunities, income from work and wider participation in society.

The Adult literacy and Life Skills Survey provides information on knowledge and skills in the following four domains:

• Prose literacy: the ability to understand and use information from various kinds of narrative texts, including texts from newspapers, magazines and brochures
• Document literacy: the knowledge and skills required to locate and use information contained in various formats including job applications, payroll forms, transportation schedules, maps, tables and charts
• Numeracy: the knowledge and skills required to effectively manage and respond to the mathematical demands of diverse situations
• Problem solving: goal-directed thinking and action in situations for which no routine solution is available

To access the findings from the Adult Literacy and Life Skills Survey 2006, click here.

Other useful links

Statistics Canada: International Adult Literacy Survey: relationship between literacy scores, human capital and growth across 14 OECD countries by Serge Coulombe, Jean-Francois Tremblay and Sylvie Marchand 2004

UNESCO: The economic benefits of increased literacy by John Cameron and Stuart Cameron 2006