Saturday, January 10, 2015

Highlights from 2014: Notes from my travels

As in my previous post, I would like to continue to reflect on highlights from last year. One of the advantages of founding and directing a global center is that I get to travel a lot. In the Fall 2014, I travelled to seven countries on two continents. I cannot tell you how much I have enjoyed it, even though I had little time to do anything else, including write my blog.

There are many things that surprise me as I attend conferences, meet people, and make my way through various cities. First, it is surprising how many similarities I’ve found across countries that we usually consider to be very different. I was at a restaurant in an unnamed city that was so special it could have been a very popular dining destination in New York, London, Rome, or Hong Kong, but it was in none of those cities.  And while the food has been good, the traffic has been bad and seems to be getting worse in every city around the world; this is not just a feature of Rome or Washington, DC.
And there are differences that also work in surprising ways. We refer to countries as “developed” versus “developing” or “emerging,” of course with the assumption that the developing countries have a host of problems to solve. One of the things I have started to notice in the supposedly “developing” countries is that women are often in positions of command. I was invited to speak at a conference in an “emerging” country where the rector from one of the oldest and most prestigious universities is a woman and where women are at the top management levels of financial institutions. In another developing country where I attended a conference at the beginning of the Fall, the chair of my session was a very famous journalist and, again, a woman.  Developed countries have well-developed markets, well-developed institutions, and good education systems, yet women are paid less than men, and finding women in positions of power is often rare if not impossible.  So watch out young people (young women)!
Another thing I have observed in the “developing” countries is that young people get good jobs. It is not unusual to see directors and managers who are under 30 or 40 year old, and I did not get the impression that they were considered inexperienced or less competent because of their age. In many developed countries, the unemployment rate among the young is so high that I am not sure why we do not consider it a crisis. In my native Italy, if you leave your parents’ home before age 30 or 40, you are considered an adventurous person who does not understand what a jungle it is out there.
I think we may want to change our terminology: we may want to refer to market economies as either “mature” or “young” because the lines between developed and developing countries are starting to be very blurred and there is not always such strong evidence of progress—as the term “developed” seems to imply—on how women and young people are faring in some of these supposedly developed countries. 
These are some observations from my travel last year and I hope to keep writing while sitting on airplanes…

Thursday, January 1, 2015

Financial Literacy Highlights of 2014: The PISA data

I am starting the new year by looking back and thinking of the highlights of 2014. For me, one event stands out: the release of the Programme for International Student Assessment (PISA) data, which measures the financial literacy of 15-year-olds around the world. I am very proud that the Global Financial Literacy Excellence Center (GFLEC) hosted the U.S. release of the data and that we did it in collaboration with three of the most important institutions for financial literacy: the Department of Education, the Consumer Financial Protection Bureau, and the Department of the Treasury. While my team can tell you that the months before the event were really hectic, my preparation actually happened over several years.  It started when the financial literacy expert group that was asked to design the financial literacy assessment for PISA first met. It was in Cambridge, Massachusetts (MA), and we all felt we were starting to work on something very important. Since that meeting, I had been waiting for the day when the data would be made available. That day was July 9, 2014.

The data was accompanied by a report that was written over a period of time (hence the different timing than the data release for other PISA subjects) and that can be accessed on the OECD’s and GFLEC’s website (see  A lot has already been written about the PISA financial literacy data and rather than summarizing the many findings, I would like to highlight three main facts from these important data.

1)      There are large differences in financial literacy across the 18 countries that participated in the assessment. It is not the countries that have the most developed financial markets or the highest Gross Domestic Product (GDP) per capita that rank at the top of the financial literacy scale. On the one hand, this should be a worry for rich countries, as it shows that their youth is not well prepared to deal with the complexity of these economies. On the other hand, it shows that financial literacy is not acquired informally, simply by living in economies with sophisticated financial markets (financial literacy does not come in the milk bottle.).
2)      There are wide differences in financial literacy within the countries that participated in the assessment. One of the most interesting findings is the difference between male and female students. Many have noted that, on average, there are no gender differences in financial literacy. This requires some clarification. We have worked very hard at designing questions that are gender neutral, and the methodology itself (some questions have open-ended answers, so respondents can answer in their own words) can soften the differences we have observed in male and female responses to financial literacy questions among adults. But gender differences are still present at these early stages of the life cycle. In fact, looking deeper one finds that boys are more likely to locate at both the top and bottom levels of the financial literacy scale than girls.
3)      A sizeable amount of the variation in financial literacy is accounted for by socio-economic status; in other words, the income and education levels of parents matter for youth financial literacy. This is a finding that we have documented among other age groups, for example young adults (age 23 to 28). It shows that differences in financial literacy start to emerge early in life, and depend on the family students are from. This is a worrisome finding, and in my view, one of the main reasons why we need financial literacy in school—to try to create a level playing field. This is the topic we discussed at the conference GFLEC organized jointly with the OECD last November titled “Toward a more inclusive society.” These are also my wishes for 2015: Having financial literacy in school and a more inclusive society (the two topics are related, but, okay, I like to dream big!).

Let me return to July 9, 2014, the day of the PISA data release.  As I mentioned earlier, for the financial literacy expert group (and many were there on stage at the Washington, DC, event), it was a day we had been waiting for for many years, since that first meeting in Cambridge, MA.  And as the data was being illustrated on slides, discussions, testimonials, and reports, we felt we had laid the first brick of a financial and economic structure that includes financial literacy. For me, this was the best day of 2014.

There are a lot of advantages to organizing the release of important data. You get to invite and meet famous people. You get to bring together representatives of important institutions. You get to hear new ideas. You get to test the patience and ingenuity of your collaborators. Arne Duncan, the U.S.  Secretary of Education, came to speak at the event. He is a very charismatic leader and I got to interview him on stage. He sent me a handwritten thank you note afterward, and I have framed it!

Happy new year.