• Saturday, September 20, 2014

Education, Human Capital and Economic Development

Where Does Bangladesh Stand?

Wahiduddin Mahmud

CONSIDER the following facts of modern economic history. Following World War II, Germany and Japan re-emerged as global economic powerhouses, after having had their physical infrastructure nearly reduced to rubble.  And since then, South Korea provides the lone example, besides the island state of Singapore, to have graduated from the status a developing country to that of a developed industrialised one. The explanation in each case lies in the key role of human capital.  Research has shown that human capital is the most basic determinant of long run economic growth, affecting all other growth-inducing factors like how effectively we use physical capital, or how efficiently we can adopt productivity enhancing technologies or even how well we can govern ourselves.

Developing countries facing resource constraints may face a choice between educating their population broadly or deeply; the former represents a universalist approach of providing basic education for all while the later an elitist approach of emphasising quality higher education for the most talented. In East Asia, and especially in South Korea, the achievement of high economic growth driven by manufacturing exports and without worsening of income distribution is attributed in part to the early emphasis on increasing the quality of the overall workforce through the expansion of universal basic education. On the other hand, India's ability to take advantage of the new possibilities in high-tech activities such as IT-related service exports largely resulted from its long-standing investments in quality higher education.

    The contemporary less developed countries, however, may not necessarily have to make this choice. 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. Unfortunately, we have done poorly in either of these educational strategies. True, Bangladesh has achieved remarkable progress in achieving universal primary education and is recognised as a star performer in getting female children to school at both primary and secondary levels. However the quantitative enrolment targets seem to have been achieved only at the cost of quality. What we are witnessing today is nothing short of a “learning crisis” in our education system. The grade inflation in recent years in the Secondary and Higher Secondary examinations only help to hide the extent of this looming crisis.

    My experience regarding the academic preparations of students who enter university tells me that perhaps it is the secondary level education that is the most crucial missing link in our education system. I have come to this conclusion by observing their competency levels in both mathematics and language skills that are supposed to be acquired while studying in secondary schools – the basic concepts of algebra and geometry or comprehension of a written paragraph. Some recent studies using cross-country data have found strong links between the mathematical proficiency of secondary school graduates with income levels and economic growth performance. While our entire education system suffers from serious governance problem, perhaps the worst victims are the secondary schools, most of which are run by private school boards although in large part funded by the government. The highly politicised school boards often have members who are not school graduates themselves.   

As Bangladesh is 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 little room for complacency even in respect of further improvements in school enrolment rates. The secondary school enrolment rates for girls, which represent Bangladesh's most outstanding educational achievement, have become stagnant in the recent years.  As regards boys' secondary school enrolment, we have in fact become a laggard again in global comparisons. The poor quality of education in terms of skill development can be a factor, but the deficient demand for skill-intensive employment opportunities also matter. Recent research has drawn attention to the curious phenomenon of girls outperforming boys in the rate of attending secondary school, while being discriminated against boys in the household food distribution; this perhaps reflect the prevailing brawn-based, rather than brain-based, nature of the male labour market.

Bangladesh's economic growth outside agriculture has been driven so far by a “replication” approach – in respect of low-productivity ready-made garment export, export of low-skilled labour, and expansion of micro-enterprises.  For the next stage of growth, we need to switch from replication to innovation in terms of productivity increase and skill development. For this, the education system needs to be geared towards developing well-balanced human resources with appropriate skills and flexibility for adjustment to keep pace with increasingly competitive and globalized markets and rapidly changing technologies.        

Our employment markets suffer from a serious problem of skill mismatch, resulting in a problem of educated unemployment. There is an apparent paradox here. Not only higher education has been increasing rapidly, but also there seems to be excess demand for such education as evidenced by the rapid proliferation of private higher education. Yet, the unemployment rates can be high among educated and skilled workers – even higher than in the rest of the workforce. Clearly, the prevailing systems of higher education do not seem to offer enough technical and employability skills that could lead to better labour market outcomes.

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 and appropriate education content.

There are also important equity issues to be addressed, as increasing returns to higher education along with unequal access may lead to a deepening of income and social inequalities. Studies have shown that the degree of access to education has replaced the family ownership of land and other assets as the main vehicle of transmission of poverty and inequality from one generation to the next. Our education system has not been able to respond efficiently to increasing demand, let alone extend access on an equitable basis. How far children from poor households can compete in a merit-based system of entry into higher education will depend on their access to quality education at the primary and secondary levels. So far the policy focus has been on getting these children to school in the first place. The time has come to shift emphasis in our education agenda - from “education for all” to providing access to quality education and to higher education for the children from disadvantaged families.

The author is Chairman, Economic Research Group. This is an abridged version of a Public Lecture organised jointly by International Growth Centre and Brac University and can be accessed  at http://www.theigc.org/sites/default/files/Mahmud%202014.pdf

Published: 12:00 am Tuesday, August 26, 2014

TAGS: education economic development human capital

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