Basic Reading and Mathematics Skills and the Labour Market Outcomes of Young People: Evidence from PISA and Linked Administrative Data*

Abstract

This paper uses Programme for International Student Assessment (PISA) data linked to administrative data to track the educational and labour market outcomes of young people. Students with lower skills have lower rates of participation in further education. While low‐skilled men out‐earn their higher‐skilled counterparts when they are very young, their earnings are overtaken by those with higher skills when they are in their early 20s, and they earn around 15 per cent less by the age of 25. The differences among women are substantially larger – women with low skills earn approximately 35 per cent less than their higher‐skilled counterparts by age 25.