Numerical Literacy in Microentrepreneurs

This month we share with you findings from a study on the numerical capabilities of microentrepreneurs.  As you well know, running any business requires a basic knowledge of arithmetic to calculate change due on a sale, profit and loss, commissions on product sales and interest rates on loans.  We gave a basic arithmetic tests to 198 microentrepreneurs, of which 85% had a 10th pass education or more.  The test was not time bound and was done first by manual calculation (by hand) and then they were given a calculator with a fresh answer sheet to redo the questions with the calculator.  We were very surprised by the results.  Maybe you will be too.

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First, a substantial fraction made mistakes even on the simplest whole number operations but when it came to subtracting a larger number from a smaller number (such as 3-10) only 41% were able to solve the problem.  This kind of operation is essential for calculating whether you have a profit or loss. The calculator certainly helped a lot but a full 30% were still unable to solve it with a calculator.  Decimal operations came with substantially more error.  Calculating correct change relies on this.  But finally, the concept of percentage was very poorly understood.  Only 14% could convert a number like 3/12 into a percentage. Numerical literacy is not the only factor that drives enterprise success.  However, without knowing what a percentage actually is how can our customers understand the interest rate on the loans they take from us?  How can they calculate the commissions they receive on product sales?  These results are also a poor reflection on our education system.  Indeed education level was only weakly correlated with both numerical literacy scores and income.

Numerical Literacy in Microentrepreneurs
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