Education and growth

A recent paper by Hanushek and Woessmann titled 'Poor student learning explains the Latin American growth puzzle' looks at why Latin America has performed badly, despite good educational levels. The answer lies in the quality of schooling and improvement in cognitive skills. They have put up an interesting graph linking skills to growth and not surprisingly Asia come out at the top, with Latin America and Sub-Saharan Africa at the bottom of the line.

Though this graph puts Asia at the very top, for us in India, the need for education reform and raising skills is well known. I had written a piece in the Financial Express last month, excerpts below:

As the accompanying table shows, in India unemployment is largely a problem of the youth. Experience counts more than education as labour stays in low skill jobs, learning as they go along. Just 2% of population in the age group 20-24 has had vocational training, while this percentage is more than 50% in developed countries, even Mexico and Peru are higher than India at 28% and 17% respectively. This shows up in a severe productivity problem, with low incomes for the earners, while industry faces a shortage of skilled labour.

	Unemployment rates (%) for various age groups using Usual Principal Activity Status
		Age Group
Educational Level	15-20 years	21-25 years	26-30 years
Not literate	3.1	1.3	0.5
Literate w/o formal school	6.0	1.6	1.6
Total Literacy Campaign	4.5	1.8	1.6
Others	7.6	4.0	2.4
Literate below primary	4.7	2.5	1.2
Primary	6.5	2.2	1.2
Middle	9.0	5.6	2.6
Secondary	18.9	11.2	5.1
Higher Secondary	30.8	17.3	6.2
Diploma/Certificate course	36.6	27.5	16.1
Graduate	-	31.7	12.4
Postgraduate and above	-	35.8	15.4
Total	8.7	8.1	3.5
Source: Indicus Analytics estimates from NSSO 61st round, 2004-05

As the India Labour Report 2008 pointed out, a three strand approach is needed in India:

The first strand, employment reform (to match labour supply to demand) should include changing labour laws to simplify definitions, compliance etc, that currently hinder expansion of organized employment, converting Employment Exchanges into Career Centers that offer assessment, counseling, apprenticeships, jobs and certifications etc.

The second strand is employability reform, which has already begun, to some extent, with the National Skill Development Policy 2008 and the PPP model for ITIs. Much more needs to be done though, e.g the NREGA could be used for providing apprenticeships and funding skill development.

The third strand in the strategy would be to prepare the supply for demand – education reform – which requires a policy shift from accreditation and regulation of capacity to measuring and publicizing outcomes and quality. Government financing has to be separated from delivery, which can be done through a broad based voucher programme. The list of change would include greater autonomy and governance reform in institutions, creating a performance management system for government school teachers with rewards and punishments for attendance and learning outcomes, creating a National Qualification Framework to allow two-way fungibility between vocational, college and school education with appropriate transfer of credits etc.

All this may seem a tall order, but without it, the country is destined to plod along slowly, developing internal fissures that may be beyond repair.