Educational policies as an integral part of development strategy

Education is an effective vehicle for enhancing human capabilities and for promoting social and economic development in many ways.  This paper particularly focuses on linking education to human resource development as an input to raising productivity and accelerating growth in less developed countries. There is evidence to suggest that human capital formation, most ostensibly through education, facilitates investments in physical capital, enhances the development and diffusion of new technologies, and raises output per worker. However, there are many complex issues regarding how education effects human capital formation and economic performance and how these effects interact with the level of economic development in the country-specific contexts. Education reforms need to be informed by an understanding of these issues.
 The global education goals, with their emphasis on the quantitative indicators such as the enrolment rates or the number of years of schooling, may have led to too narrow a focus in linking education to human resource development. While many low-income countries have made remarkable progress towards achieving universal primary education, new challenges have emerged. There are serious doubts about the content and quality of education indicating the need for a paradigm shift in education towards learning and skill development. To keep pace with increasingly competitive and globalised markets and rapidly changing technologies, education systems need to be geared towards developing well-balanced human resources with appropriate skills and flexibility for adjustment. Increasing attention will need to be paid to post-primary education and skill-training in order to consolidate the gains made in elementary education and also to benefit from the "youth bulge" resulting from the demographic transition taking place in large parts of the developing world.
As economic growth creates demand for workers with higher education and better skills, education policymakers will need to pay increasingly more attention beyond primary and post-primary education to tertiary education as well. However, while basic levels of education can be justified as part of overall social and human development, the issues are much more complex for higher levels of education. This is where linking education to human capital formation, labour market outcomes and the overall development strategy becomes important. There are several issues that require particular consideration, such as what kind of higher education will meet the need for skills, who should pay for such education and how it should be provided (public or private), how the equity concerns can be addressed, and how the problems of educated unemployment and the brain drain of highly skilled professionals should be managed.  Beyond the goal of "education for all", a whole range of second-generation challenges thus emerge. There is also a need for rethinking global support for education in the light of these emerging issues.
 EDUCATION SYSTEMS AND DEVELOPMENT STRATEGIES: The expansion of education programmes in developing countries has been justified on grounds of high social and private returns to investments in education, which are well recognised in the case of primary education. Expenditures in schooling, along with ensuring access to education for the poor, have been expected to contribute not only to increasing productivity but also to reducing poverty and income inequality. While the importance of basic education at the primary level should continue to be recognised, there is now evidence that the returns to higher education have tended to increase in many developing countries during the last two to three decades (Psacharopoulos 2006, Bourguignon and Rogers 2008). In some countries, including those in South Asia, the returns to education are sometimes found to be even higher at the tertiary level compared to primary and secondary levels (a reversal of findings from earlier studies).
Nevertheless, programmes for expansion of education have not always been found to result in higher economic performance. There are various explanations regarding why the estimated high returns to education for households or individuals are not translated on the aggregate into substantial economic growth. It is possible that the demand for educated labour comes, at least in part, from individually profitable yet socially wasteful or unproductive activities. For example, in countries with poor governance and widespread corruption, the talent of the educated persons may be diverted to unproductive rent-seeking activities (Murphy, Shlefer, and Vishney 1991). Moreover, schooling quality may be so degraded that it does not raise cognitive skills or productivity.  This could be consistent with education contributing to higher wages if such education serves as a signal to employers of some innate ability or simply as a screening device. Yet another reason may be that, in economies with little technical progress and economic change, the expansion of the supply of educated labour could cause the rate of return to education to fall rapidly due to stagnant demand.
Policymakers in less developed countries are thus faced with a challenging question: How should the education system be organised so that the expansion of education is matched by creation of opportunities for productively utilising a better educated workforce?  In other words, how can education be a vehicle for a take-off in innovation and economic growth?  This perspective requires that educational policies be seen as an integral part of the overall development strategy. In particular, education and training systems need to be recognised as key in any development strategy aimed at increasing labour productivity and promoting technological diffusion and global competitiveness.
In the developing countries that are poised to benefit from a "demographic dividend" in terms of a youth bulge, the challenge for the education systems is to leverage the advantage of rapid growth in the labour force.  This youth bulge, combined with the successful campaigns for universal primary education, is leading to huge increases in the supply of semi-educated labour. There is enormous potential for utilising this workforce productively by expanding post-primary education and training on the one hand, and by creating commensurate employment opportunities on the other hand. There is also an opportunity for further gains in economic growth and labour productivity through skill-biased technological changes, given the limited capacity of low-income countries to increase productivity through physical capital accumulation. An opposite scenario is one of so-called "jobless growth" or even economic stagnation with the huge numbers of primary school graduates finding that hey have nowhere to go.
Less developed countries facing resource constraints may face a choice to educate their citizens either "widely" or "deeply".  The "wide" or "universal" approach seeks to provide the same basic education to the country's entire population without emphasising higher education initially. In contrast, the "deep" or "elite" approach concentrates on providing the most talented individuals quality higher education at home, while giving somewhat less attention to universal education at primary and secondary levels. South Korea provides an example of the first approach, India of the second approach and China lying somewhere in between. The contrasts in the education pyramids resulting from the different approaches can be seen to be even more striking in the case of formal technical education, with South Asia having in fact an inverted pyramid emphasising only higher level skills.
The alternative approaches in the educational systems have implications for the patterns of development and income distribution. In East Asia, the achievement of high economic growth driven by manufacturing exports and without worsening of income distribution is attributed in part to a universal approach to education.  On the other hand, India's ability to take advantage of the new possibilities in high-tech information services largely resulted from its long-standing investments in higher education. In fact, India's success in IT-related export is sometimes interpreted as a new model of service-sector-led growth supported by high quality professional education. The popular belief in the existence of this new model is supported by the fact that (a) services have been the main source of economic growth in South Asia, particularly in India, for the last 25 years; (b) the average level of workers in the service sector in South Asian countries is higher than in industry; and (c) in addition, the fastest growing services have been the most education-intensive (Dahlman 2010).  There are, however, doubts about the sustainability of this kind of skill-intensive service-led growth. The supply and quality constraint in higher education as well as the market constraint in service exports may threaten to choke economic growth unless there is faster growth in manufacturing. India's IT industry is said to be already suffering from a 'Bangalore bug' - an Indian version of the so-called 'Dutch disease'. For many less developed countries, it may also be difficult to achieve enough agglomeration of high-level skills in order to utilise such skills efficiently.   
There are important lessons to be drawn from the experiences of countries following different approaches to their education systems. The contemporary less developed countries can take advantage of whatever potential they may have in accelerating growth based on higher education, such as by promoting high-tech activities, especially IT-related service exports.
But this should not take attention away from the fundamental objective of increasing the overall quality of the workforce through the expansion of more basic education and training. China and Vietnam, for example, expanded primary and higher education simultaneously, recognising that success required both universal literacy and a cadre of highly skilled individuals capable of absorbing advanced technology.
According to some recent estimates, more than half of the labour force in South Asia and Sub-Saharan Africa was either illiterate or did not complete primary education (Mahmud 2011). Many countries in these regions that are now poised for higher economic growth are likely to experience a rapid increase in the demand for better-educated workers. As mentioned earlier, the successful campaigns for universalising primary education now provides an opportunity for producing huge numbers of semi- and medium-skilled workers, particularly through further education and skill-training for the primary school graduates.  An analysis of education and skill levels of workers across the hierarchy of jobs in both manufacturing and service sectors show that there can be large benefit from such a transformation of the work force in a growing economy.
The article by Professor Wahiduddin Mahmud, a member of the UN Committee for Development Policy, was presented as the key-note paper at a public lecture, titled 'Beyond Education for All: Meeting the Human Resource Needs of Economic Development' that was organised by International Growth Centre (IGC) and Institute of Governance Studies (IGS) of Brac University in Dhaka on February 23, 2014.