The top half of German earners get little more than the top half of Britons. But the bottom half get 50 per cent more than their equivalents in this country. The reason is simple: they are more skilled.
As a nation we have scandalously neglected the education of the less academic half of our population, and we have neglected their numeracy as well as their literacy. Most people know that one in five Britons cannot read the simple instructions on a box of pills. But a similar proportion does not know what change to expect when they offer £2 for a 68p loaf and two cans of beans at 45p each. The differences between Britain and her European neighbours in the proportions who have low literacy is dramatic enough; the differences between the proportions who have low numeracy is even more so (see table).
Such failures in numeracy are, if anything, more damaging to people's success than failures in literacy. In both Britain and the US, studies of earnings always show a more powerful effect coming from a person's numeracy than from their reading and writing - and the difference is increasing as the information revolution proceeds. Even at the top end, people who had identical maths scores at GCSE and identical university degrees earn 7 per cent more if they passed maths at A-level.
What is true of individuals is also true of nations. According to one survey, if a nation raises its average level of maths and science from being just inside the top quarter of countries to being just inside the top 5 per cent, it will raise its annual growth rate by one percentage point. The most obvious example of this comes from the Pacific rim, but the result holds for other countries also.
At school, the national strategy for numeracy aims to ensure that every child achieves a satisfactory minimum level of competence by the age of 11. Like the strategy for literacy, it has been a success. Since the general election, the proportion of 11 year olds achieving the "expected" standard in numeracy for their age has risen from 54 to 69 per cent.
But it will take a generation before most adults have been educated to these standards in school. Meanwhile, we need a revolution in what is offered to 16 to 19 year olds, as well as to the millions of adults who have missed out. What can be done?
I will begin with a little-known fact. At the age of 13, numeracy in Britain is much the same as it is in Germany and Sweden. By 19 we are way behind. That is where the gap opens up. There are two reasons. First, almost everybody in Germany and Sweden continues formal education either full time or part time up to the age of 19; in Britain, one-third have stopped being educated by 17. Second, in Germany and Sweden everyone who is being educated studies some formal maths; in Britain three-quarters of 17 year olds do none.
It is now government policy that A-level students should take two extra A/S papers (each equal to half an A-level). Universities should insist that one of these is in maths. If the existing A/S maths paper is not suitable, we should have a new "use of maths" paper that can appeal to everyone not doing maths A-level.
But it is not just a matter of the more academic young people. We have to engage everyone in education up to at least 19. It can be full time or part time, but they must be learning. We must re-establish the part-time route as a solid avenue to well-regarded qualifications, leading right to the top for those who can make it. Studies of earnings show that vocational qualifications, obtained part time, have significant effects on earnings and yield rates of return to society that compare favourably with A-levels and degrees. But the previous government let our part-time route decay. Work-based training was forced to focus almost exclusively on the mechanics of how to do the job, and time spent on the "why" was cut back. If we are really to end social exclusion, we must aim at offering to every 16 to 19 year old the choice of full-time education or an apprenticeship with high-quality part-time education.
Our most tragic problem of all is the millions of adults too old to be touched by any of these reforms. We have seven million adults who cannot read the instructions on a medicine bottle or calculate the change in a shop - a terrifying total. An official committee under Sir Claus Moser has proposed a new national strategy to halve the number of illiterate adults by 2010. This means helping seven times as many to succeed as succeed at present. We have to reach people at work, at the job centre, at the supermarket and in the home. Two weeks ago Baroness Blackstone, as minister for lifelong learning, launched the crusade and David Blunkett, the education secretary, will be announcing more after Christmas. The strategy will include new national literacy and numeracy tests, which can be sat on demand like the driving test.
For too long in Britain the approach to basic skills has been to get away with the minimum. It is extraordinary how often you hear people explaining that in such and such a job you do not really need to read, or to understand percentages. Perhaps so, but we want to replace those dismal jobs with modern technology. If the workplace had fewer illiterates, employers would have to invest in modern technology to get the tasks done. But if people cannot read the manuals, there is no use investing. So we all end up the poorer.
The key is to establish a minimum level of skill for everyone. Once you have this platform, the demand for learning at higher levels will be insatiable. The first duty of government is to establish the platform.
The writer is professor of economics, London School of Economics. This article is based on a paper he gave to a Smith Institute seminar on education at 11 Downing Street