What is ‘economic literacy’?
We’re always hearing about financial literacy (sometimes also known as financial capability). In the UK, an All Party Parliamentary Group on Financial Education for Young People held in 2011 recommended ‘Personal finance education should be a compulsory part of every school’s curriculum.’
As your average millennial, I know the pain of contending with financial questions without any previous knowledge. Throughout my teens and twenties I’ve avoided and freaked out about questions like: How do I open a bank account? 🤔 Pay the right taxes? 😭 Get a mortgage?! 😖
But since leaving education I’ve also become much more aware of how my life is affected by even larger questions about the economy itself. They are questions I’ve mostly found even harder to answer and gain confidence to discuss.
‘Economic literacy’ is a term that’s been around for some time. At Economy, where I work, we want to provide thought leadership to help get to the bottom of what ‘economic literacy’ really means for the present day, and how we can achieve it for everyone so we can all be part of this discussion.
What is economic literacy?
The definition of ‘economic literacy’ is a contested one. The first, and most common, way of talking about economic literacy is simply to talk again about personal financial literacy. Here’s an example from a present-day programme for economic literacy:
‘The ability to use basic economic concepts to make decisions about earning, saving, spending, and sharing money.’
Financial literacy is undeniably important.
‘Young people today grow up in an increasingly complex financial world requiring them to make difficult decisions for the future, often without the necessary level of financial literacy. Credit cards, phone contracts, and tuition fees all require young people to start making choices at a young age… The country has a duty to equip our young people properly through education to make informed financial decisions.’
Andy Mercy, MP, All Party Parliamentary Group on Financial Education for Young People
But young adults in the UK are least likely to understand financial literature, with just 8% of 18 to 24 year-olds saying they have ‘high understanding’ of it. Women, BAME minorities and people from a less privileged socioeconomic background also consistently rate themselves lower in understanding and confidence in relation to financial literacy. When asked what they’d most like added to the schools curriculum, young people are most likely to say an introduction to managing finances and financial concepts such as mortgages and bank accounts.
Most programmes which claim to address economic literacy limit themselves to the financial literacy sphere. America even has a National Financial Literacy Month ‘to highlight the importance of financial literacy and teach Americans how to establish and maintain healthy financial habits’ every April.
A wider definition for economic literacy? Critical thinking supporting our democracies
At Economy, where I’m Head of Research, we prefer a wider definition for ‘economic literacy’, one which provides a way to look at whether, as citizens, we have the tools and understanding necessary to form an informed, critical view on economic options open to us in our democracy.
Here, ‘economic literacy’ has broader impacts which resound through our lives. It means we can understand and evaluate economic concepts not only as they relate to personal finance, but also our national and global interests and in the context of our political systems.
This form of economic literacy leaves us not only more able to both make more confident decisions in our personal financial lives, but to engage more effectively in democracy. Here’s an example of some current ‘standards’ for 20 concepts that might be key to economic literacy. They go much wider than the five questions asked on a commonly-used financial literacy test (apparently only 24 percent of millennials can answer four out of five, by the way. I got four! *pride*).
Economic literacy is also about an ability to decode language and engage with ideas and our social choices, which might go some way to helping overcome our economic communication problem in the UK (Only 12% of us find politicians speak about the economy in an accessible way we can easily understand).
The sum of this is bigger than its parts. Economic literacy is about understanding the forces that shape all all our lives and the role that we play in the world around us. It involves questions of values, power and basically affects everything you use or do.
I like a quotation by an economist and bank president, Gary Stern, who said: ‘Economic literacy is crucial because it is a measure of whether people understand the forces that significantly affect the quality of their lives’.
So do we all get to access economics?
‘People instinctively understand that economics is relevant to their everyday lives — but the majority have never studied it.’ YouGov and The Economics Network poll findings, May 2017
A poll earlier this year by YouGov and The Economics Network, supported by ING, found that 60% of us identify as having had no access to economics education at all. Three quarters of us (76%) think that economics should form part of the school curriculum, with over half (55%) feeling that economics should be ‘embedded’ in general education.
In our own research, we’ve heard a similar demand from participants wishing that they’d been given the opportunity to learn the basics about economics in school as a skill that they could keep for life.
“Everyone should understand rather than a select few individuals.” Steven, 20
What would you say holds you back from being able to engage in conversations about the economy to the level you would like to?
“A lack of learning about it. It was never taught at school. I didn’t understand about it… I didn’t really know it was a subject for a long time. It was probably after high school that I probably learned that economics was a subject for the first time…
“I wish I had a bit more of an understanding. I also wish I’d had a chance to study. In certain classes that we had, your citizenship lesson, there could have been a bit about economics: ‘This is the subject of economics, is it of interest to you?’
“I would bring it in at school so that everyone in life has some form of knowledge. Everyone should understand rather than a select few individuals. If it came at a school level, then people could keep that interest throughout life.”
Steven, 20, apprentice locksmith. Stockport, North of England
At Economy, we want to close the economic literacy gap. We’re providing digital products, schools workshops, a community crash course, research reports, and spaces for discussion among economic institutions on how to communicate better on the subject. We believe a world in which everyone feels able to engage in economic discussion in our society will be a better world, and we’re keen to work with anyone interested in helping us make it happen.
Ali Norrish heads up Economy’s research into economic experiences and how we can make economics more understandable and open for everyone.
You can now read our 2017 research report Exploring How People Feel About Economics with our full findings and recommendations at ecnmy.org/research
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