The Business Of Literacy

Author:  |  Category: Communication Skills Training

Submitted by: Larry HansonSmith


The cost to business at $4 billion per year,

The cost of Canadian society has been estimated at $10 billion per year,


$60 billion annually in loss to U.S. companies,


Experts estimate $225 billion a year in loss to the American economy

If these headlines had appeared on the front page of your news outlet, they might have grabbed your attention. The reality, however, is that they appeared under the radar, in what most people would consider dull “White Papers”.

The actual abstracts are:

……The cost of illiteracy to Canadian society has been estimated at $10 billion per year, the cost to business at $4 billion – Journal article YLB.

…… And if measured in terms of financial interest, it means literacy problems cost corporate America about $60 billion a year in lost productivity – National Institute for Literacy.

……Experts estimate that low literacy costs the American economy $225 billion a year in lost productivity – Carnevale, Gainer & Meltzer, The American Society for Training and Development, 1988 and The Secretary’s Commission on Achieving Necessary Skills, U.S. Department of Labor, 1991.

North America’s business community is well aware of the implications of this data. It s been trying to curtail these and future losses for decades with resources that have proved insufficient given the size of the problem.

In 1990, Southwestern Bell received 15,000 job applications; only 800 passed the company’s basic skills test.

In Texas, which ranks second behind only California in its quantity of technology workers, an estimated 34,000 skilled technology jobs go unfilled.

500,000 Information Technology jobs in the U.S. went unfilled last year. This number is expected to surpass 1 million in two years.


The state of Massachusetts discovered that more than one-third of its 3.2 million workers are ill-equipped to meet the demands of a rapidly changing economy. Of that one-third, many have high school diplomas but lack the basic math, reading, writing and analytical skills needed to perform adequately in the workplace. (The Massachusetts Institute for a New Commonwealth)

General Motors devotes more than 15% of the $170 million it spends yearly on job training to remedial education.

50% of Fortune 500 companies underwrite remedial training for employees. The cost? $300 million a year.

According to labor data, bypassing intelligent, hard working, ambitious applicants due to skills deficiencies risks running out of applicants altogether. In 1987, Xerox Corporation chairman David Kearns foresaw the necessity of hiring unqualified employees for the sake of company expansion. According to Kearns, businesses throughout the U.S. could be forced to hire one million entry-level employees annually who are unable to read or write. Recent government statistics support Kearns’ prognosis: between 1995 and 1998, the number of companies suffering shortages of skilled labor surged.

Polaroid established the first on-the-job basic skills program in the early 1970s. Other companies followed. Still, 90% of American companies lack job training programs. An exception is Hershey Foods in Pennsylvania, which sends any employee without a high school diploma to GED classes. (“Illiteracy in the Workplace”, Jane A. Malonis, Encyclopedia of Business;, Nov., 2008,

Springfield, MA-based Smith and Wesson has been using the University of Massachusetts since the late 1980s as a source for training in remedial skills and English as a Second Language (ESL). In 1996, with production work diversifying, it expanded its skills training.

“We needed something more formal and aggressive,” said Bob Pion, director of training for Smith and Wesson. “So we turned to a professional organization dedicated to skills issues.” Enter Workplace Education Group (South Hadley, MA), called upon to advise Smith and Wesson on its workforce training needs.

But implementation costs can be preemptive. Start-up costs range from $2,500 to $100,000. Few companies can afford the $35 million on literacy training that Motorola, Inc. had expended by 1993. The training afforded the company the luxury of turning away job applicants whose reading and writing skills fell below the seventh-grade level. And even though a minimum of an eighth-grade literacy level increasingly disqualifies applicants in today s workplace, as a starting point for training, it is much more cost effective.

Only 13% of American companies offer remedial training to employees in literacy and math, down from a high of 24% in 1993, according to an AMA study released last year. The decrease belies a crucial finding of the study: 38% of applicants lacked the necessary reading, writing and math skills to do the jobs they sought, a 15% increase in the past two years alone.

According to statistics published in 1998 by the National Institute for Literacy, skills deficiencies cost businesses more than $60 billion annually, an amount comparable to Mobil Corporation’s 1997 revenues. (America s 60 Billion Problem, D A N N A H B A Y N T O N)

The 2003 National Assessment of Adult Literacy (NAAL) indicated that in 1993, 29% of adults who scored below basic on the prose scale of the National Adult Literacy Survey (NALS) were employed full-time. This number rose to 35% in 2003. Translation: 10.8 million adults were working full-time in the United States with the lowest level of literacy skills. An additional 10%, over 3 million, were working part-time at this level, a two percent increase from 1993.

The increase suggests a need to revive the federal government s National Workplace Literacy Program (NWLP) of the late 1980s through the mid-1990s. The NWLP provided grants for developing and delivering adult literacy, numeracy, and English language educational programs directly in, or in close proximity to, places where low literacy adults work. (Tom Sticht, International Consultant in Adult Education)


According to a United Nations survey, the U.S. ranks 49th out of 158 participating nations in adult literacy.

Below are the literacy rates of three of the top ten locations where U.S. businesses outsource accounting, IT, services and manufacturing positions:

Russia – 98%

Philippines – 94%

India – 65.38%

Philippines, ranking high at 94%, is home to many bilingual citizens – Filipino and English are widely spoken.

A study released from the University of California at Berkeley says the U.S. lost more than 1 million white-collar jobs in the 1990s and “hundreds of thousands more since the turn of the century.” The study also shows that outsourcing is accelerating.

“If you simultaneously read Indian newspapers and U.S. newspapers, you’re going to get a good correlation between layoffs here and jobs being created there,” said Ashok Deo Bardhan, a researcher for the study. He added that as many as 30,000 jobs were lost to India in June alone, and that 14 million U.S. service jobs are vulnerable. (Hiawatha Bray, The Boston Globe, Nov. 2, 2003)

An emerging global economy is shaping economic conditions in the U.S. The phenomenon is profoundly altering the nature of work. Jobs that require repetitive tasks are declining and their pay rates are decreasing. The manufacturing industry is particularly vulnerable. Multi-national corporations can conduct operations anywhere in the world, often choosing locations based on optimum wage levels and productivity. Routine processes are increasingly performed in third world countries at wages inadequate for workers in developed countries. Living wages in developed countries are earned by jobs that require advanced skills and increased productivity. Service industries, especially those that do not require face-to-face customer interaction, are following manufacturing s lead. (Reich, 1992)

The National Adult Literacy Survey (Kirsch, Jungeblut, Jenkins & Kolstad, 1993) shows that about 50% of American adults perform at the lower two of five literacy levels reported by the survey. Both are considered functionally illiterate.

The 18- to 30-year-old age bracket represents the highest levels of functional illiteracy. Someone from this age group may already be working next to you. Nearly 2 million students graduating from high schools annually are in this group – functionally illiterate – a frustrating reality for American business and industry we are all paying for.

Does literacy really pay off? Companies took it upon themselves to find out. Zircoa, manufacturer of nonclay refractories in Solon, Ohio, measured the productivity and profits of 10 workers in 10 different jobs. After remedial skills training, the total profit from these workers jumped from $14,000 to $75,000. Marine Mechanical, a Euclid, Ohio-based supplier of propulsion systems, tracked specific machine-related productivity levels during its training programs. A 60% decline in parts deviations resulted.

One company reported improved attendance and decreased worker s comp claims. Two others reported lower scrap and waste levels. And one boasted that its scrap costs declined from $256,900 to $168,200 after just one year of training.

Over the past two decades, there has been an increase in workplace-based literacy programs. The growth is likely to continue. Workplace technology and organizational restructuring are altering the nature of jobs. Workers are learning new skills or finding employment in different areas. These changes mean more training, producing the collateral effect of improved literacy skills.

True literacy is a necessity to remain employable in an increasingly competitive job market. It gives potential employees an edge. Statistics show that pre-employment literacy training or the use of a “Self Directed” program such as the Literacy Pod makes candidates far more desirable and financially successful.

A look at the relationship between national literacy rates and per capita Gross National Product (GNP) suggests a strong correlation between literacy and increased income levels.

Literacy Rate GNP per capita

below 40%less than $600

above 98% more than $12,000

The message, at least in individual economic terms, is that literacy pays off.

Illiteracy may also mean income loss for society as a whole. In 1993, according to the National Adult Literacy Survey, adult illiteracy in the U.S. carries an estimated price tag of more than $17 billion per year, including lost income, tax revenue, welfare, unemployment, crime and incarceration, and training costs for business and industry. This suggests that the price of illiteracy for society outweighs the cost of getting people literate.


The military spends $70 million per year on remediation for recruits.

50% of the chronically unemployed are not functionally literate.

An adult without a high school diploma earns 42% less than an adult with a high school diploma.

High school dropouts have an unemployment rate 4 times greater than that of high school graduates.

41-44% of adults who scored at Level I on the National Adult Literacy Survey (1992) were in poverty, compared with 4-6% of adults who scored at the highest level. (Ohio Literacy Resource Center)

Some researchers support the view that literacy skills should be taught in a discrete, carefully sequenced way. This approach is thought to be appropriate for people at an especially low level of skills, some of whom might have learning disabilities that make traditional methods ineffective. (Shaywitz & Shaywitz, 2001)

One study found that with an incremental approach, ” almost 70 % of workers reported math and/or reading improvements. They noted improved work accuracy, more confidence, a greater sense of company loyalty and, in the end, a more efficient workday. Supervisors observed a greater openness to change among employees, a general attitude improvement in teamwork, and identified broader options for promotion.”

Another study concluded the matter most persuasively:

“Experts estimate that low literacy costs the American economy $225 billion a year in lost productivity. Improved workplace literacy can increase employees’ efficiency, effectiveness, and productivity on the job. As a result, employers experience greater customer satisfaction and process improvement, a lower incident of accidents, reduced waste, and fewer errors.”

That’s a cost we can live with.

About the Author: For more on what you can do about illiteracy please visit


Permanent Link:

Comments are closed.