The links between a country's education system and its economic performance are mediated through labour market outcomes, such as reflected in the supply-demand match for skills, productivity gains and earnings premiums related to additional years of schooling, and the overall pattern of employment of the educated workforce. If the education systems and the associated social and economic environments are such that education adds little to a worker's competence, productivity or earnings, not only there will be low propensity of people to acquire education but also investments in education will represent largely a wastage of resources. The opposite of this is a virtuous circle of education leading to productivity growth and increase in earnings, feeding back to faster growth of demand for (and more investment in) education.
A missing link in this virtuous circle of education and economic performance is often the quality of education. While school enrolment and completion rates are easier to measure and has been a major focus, one key dimension of education has received much less attention: quality learning. There are studies that demonstrate empirically and causally that it is the cognitive skills of the workforce - and not school enrolment or number of years in school as such - that are strongly related to individual earnings, distribution of income, and economic growth (see, for example, Hanushek and Ludger Wessmann 2007). Â
Various competency tests for school children in many parts of the developing world, especially in Africa, show what may be called a learning crisis. For example, 45 per cent of grade three students in English medium schools in Uganda and 23 per cent of grade three students learning in French in Mali were found unable to recognise a single letter. And it is not just an African phenomenon. A recent study on Pakistan shows that 30 per cent of the 15- to 16 -year- olds in school cannot read the text of a basic story nor can do division. Yet, some countries are found to do better than others. For instance, only 20 per cent Zambian women who finished fifth grade can read a simple sentence; that number is 80 per cent in Malawi and 90 percent in Ethiopia. This suggests that it is possible to improve learning outcomes even in countries with very low average income levels. The quality of primary education is important not only to justify investments in higher education, but also to improve education quality at all levels, since the quality of higher education depends on improved early education.
An important problem that needs to be addressed by education reforms is that of educated unemployment, resulting in large part from skill mismatches. There is an apparent paradox here. Not only higher education has been increasing rapidly in many developing countries, but also there seems to be excess demand for such education. The evidence of excess demand can be seen from several factors: the increasing and higher rates of returns to education at the tertiary level relative to lower levels, the rapid proliferation of private higher education, and an increasing number of students opting to study abroad. Yet, the unemployment rates can be high among educated and skilled workers - even higher than in the rest of the workforce. In explaining this phenomenon, education planners have to address a number of questions: Is expansion of higher education leading only to more educated unemployment because of absence of appropriate signalling by the labour markets? What kinds of skills are in shortage? What reforms in the education systems are needed to make the college graduates employable on the one hand, and to address the skill shortages, on the other?
To some extent, higher open unemployment among educated youth may be explained by higher reservation wages and longer transition periods into a stable job. But the explanation mostly lies in skill mismatches, which may be due to low and uneven quality of higher education, outdated curriculum and learning methods, provision of public higher education without regard to the labour market demands, and rigidities in the labour markets. To satisfy social demand for higher education, governments often go for expansion of higher education of the generalist type, which costs less per student compared to technical and professional education. Moreover, public resources are allocated too thinly to ensure quality education. Outdated curriculum does not generate students with the knowledge or skills demanded by the market, leading to the co-existence of unemployment at the national level and skill shortages in specific industries or locations. It is true that in many poor economies, with little technical progress and economic change, the demand for graduates and skilled labour remains low. At the same time, in many countries, the prevailing systems of higher education do not seem to incorporate enough importance of offering vocational, technical and employability skills that could directly lead to better labour market outcomes. Â
The extent and nature of problem of supply-demand mismatch can be seen from the education and skill profiles of the educated unemployed across many developing countries. In India, for example, not only graduate unemployment is a serious problem, but also the extent of unemployment is found to increase with the level of education. Again, the available information from Latin America and the Caribbean region suggests that workers with higher education attainment do not necessarily enjoy better employment outcomes than those with less education (Mahmud 2011). With some exceptions like Argentina and Costa Rica, educated workers in these countries are generally found to suffer higher levels of open unemployment than workers with 0-5 years of schooling. One reason may be that less educated workers are more likely to suffer from disguised unemployment rather than open unemployment. It is also noteworthy that in the majority of these countries including Brazil, Mexico and Chile, workers with 10 to 12 years of schooling are found to experience higher rate of joblessness compared to workers with tertiary education (13 years of schooling or over). This suggests that higher education beyond the secondary level does improve the employment prospects. However, the reverse is true in some of the other countries, namely, Bolivia, Ecuador, Nicaragua, Panama, Peru and Venezuela. The countries with lower income per capita and with lesser diversified economic activities in the region are likely to experience higher rates of unemployment among the more educated workers, suggesting that the recent expansion of higher education capacity has not been matched by the creation of demand for more educated workers. These varying experiences across the countries point out the importance of developing a skilled labour force in parallel to and in coordination with developments in the productive sectors.
The need for skill training of those who are already in the workforce is another key element in meeting the skill needs of economic growth. This is particularly important for the South Asian countries and some countries in Sub-Saharan Africa which are experiencing accelerated economic growth but have a labour force currently consisting of a majority of illiterate or low-skilled workers. Without further training, these workers will be ill-equipped for occupational mobility associated with economic growth. Post-school learning is an important source of skill formation that accounts for as much as one-third to one-half of all skill formation in a modern economy (Heckman 1999). In many developing countries, much of this learning takes place in informal settings outside of educational institutions, often as apprenticeship and workplace training. As a result, educational technocrats and policymakers who commonly equate skill formation with classroom learning tend to neglect ways of fostering such learning and skill formation.
The skill mismatch in the labour market is also related to a country's capacity to take advantage of opportunities in the global markets, such as through technology adoption and development of new export industries. Many technologies imported by the less developed countries from more advanced countries may not find suitable local workers, hence causing labour mismatches. Adapting these technologies to local conditions require even more skills. It is the function of the government, then, to establish the policies and institutions to mitigate the mismatch and to make sure that the imported technologies are eventually adapted to local conditions, which will require new skills and education content. Without technological improvement, returns to schooling will remain low, so that the establishment of research and development that induces innovation also ensures the continued demand for quality education. Â
Technological and skill development need to be in conformity with the pattern of growth that is envisaged. In particular, greater integration of national economies into the global economy has made trade and foreign investment policies critical tools for the developing countries to stimulate growth and determine the types of knowledge and skills that are needed (such as in respect of the job-specificity or technical versus generic nature of skills). It is interesting to note that the number of jobs that are categorised as technically knowledge-intensive such as engineers, researchers and software designers still accounts for a small share of all jobs in the developing countries. This may indicate the presence of a skill gap still to be closed by these countries compared to the developed countries. Nevertheless, the education systems in many of the less developed countries will still primarily have to focus on improving the skill levels of the vast majority of workers belonging to the lower levels of the education pyramids, including the post-primary level.
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.
Education quality, skills and labour market outcomes
Wahiduddin Mahmud in the second of his three-part article titled Beyond Education for All: Meeting the Human Resource Needs of Economic Development | Published: February 26, 2014 00:00:00 | Updated: November 30, 2024 06:01:00
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