Cost of literacy: A worthwhile investment (Guest commentary)

TD’s chief economist discusses the importance of investing in training

Editor’s note: ABC Life Literacy Canada, a national non-profit organization that inspires Canadians to increase their literacy skills, recently sat down with Craig Alexander, senior vice-president and chief economist at TD Bank Financial Group, to talk about why business should invest in improving the skills of employees. What follows is a Q&A between ABC and Alexander.

ABC: Is Canada’s economy strongly connected to the literacy levels of Canadians?

Alexander: The performance of an economy is driven by two factors: first, the size and skills of its labour force; and second, the ability of its economy to innovate through productivity improvements. Literacy is the cornerstone of skills development — it is the foundation upon which other skills are built. Canada has a modern, knowledge-based, services-oriented economy. As a result, the demand for greater skilled workers is steadily climbing. Foreign competition is also leading to greater pressure on businesses to produce higher-value goods and services, which requires an ever more skilled workforce.

ABC: In what ways do low literacy levels affect the economy?

Alexander: Low literacy skills impair human capital and constrain the ability of the economy to expand. Individuals with lower literacy skills experience higher unemployment, longer periods of unemployment, lower income and poorer job opportunities. This represents a material economic cost. Almost five in 10 Canadians lack the desired level of literacy. Accordingly, the poor state of literacy in Canada is materially hampering the ability of the economy to grow which, in turn, is a headwind on a rising standard of living for Canadians.

ABC: You said earlier, “Literacy is the foundation upon which other skills are built.” How does literacy play a key role in any workplace?

Alexander: Most businesses underestimate the importance of literacy. Higher literacy skills lead to increased output, higher productivity, greater ability to do on-the-job training, reduced error rates or workplace accidents, better customer service and greater employee retention. Ultimately, this all leads to higher profitability. Businesses tend to be comfortable with investing in specific skills training, such as learning a new piece of software. Regrettably, many firms fail to appreciate the merits of investing in basic skills development, like literacy in English or French.

ABC: What economic costs are being incurred by low literacy levels?

Alexander: My estimate is weak literacy skills could be costing the Canadian economy as much as $80 billion in lost economic opportunity. This estimate is based on analysis that suggests a one-per-cent increase in national literacy scores lifts output per worker by 2.5 per cent. Improved literacy skills could create thousands of jobs and would materially help to reduce poverty in Canada.

ABC: What role can businesses play in improving literacy levels of employees?

Alexander: Businesses should be engaged in promoting literacy skills development. This could be done, for example, by helping to fund skills training for employees. For some firms, particularly small businesses, this may be too much to ask. However, studies have shown it is not the cost that is the main deterrent to skills development. In many cases, the individuals needing additional training have difficulty balancing work-life responsibilities.

Simply encouraging workers to take advantage of literacy-enhancing programs can go a long way and providing increased workplace flexibility to accommodate training can be powerful. Managers can also play a key role in encouraging individuals to pursue skills training. A regrettable challenge is many people with weak literacy skills don’t realize they have them. Managers can identify the weakness and highlight the advantages and opportunities of investing in additional education. Businesses should champion literacy as a key economic policy priority. It is good for Canadians and it is good for the bottom lines of firms.

In addition to his role at TD, Craig Alexander is a strong advocate for improving literacy levels in Canada and will be the luncheon keynote speaker at the 2010 Canadian Society for Training and Development (CSTD) conference on Nov. 19. For more information on workplace education and skills training, visit

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