Introduction
Education is generally thought to lead to economic development. This notion is based on the human capital theory which hypothesizes that investment in the acquisition of attributes, aptitudes, and competencies in an individual should lead to increased productivity and should therefore be expected to have economic returns (Fleischhauer, 2007). This accumulation of competency is said to rely on one’s naturally endowed capabilities (OECD, 2007). Based on this assumption, countries have committed significant portions of their national budgets to education expansion intending to achieve economic development and poverty reduction. In so doing, it is hoped that the skills acquired by the individuals who undergo education would lead to increased productivity at the individual level and subsequently, with enough buildup of productive individuals, at the community level and ultimately at the national level. However, this does not always work that way. In this essay, I will show that when working towards the attainment of economic development and poverty reduction, education is not an investment for a country to make.
To provide systematic proof, this paper will be divided into two sections. The first will examine the efficiency of education in achieving economic development while the second will assess the capability of investing in education to attain poverty reduction.
Issue I
The principal argument for the proponents of the human capital theory as a vehicle for economic development and poverty reduction is the assumption that economic development and poverty reduction are hindered by a shortage of human capital. This is however not always the case. Olaniyan and Okemakind (2008) however argue that while this might work if a shortage of labor were in existence, additional investment in education leading to a surplus of human capital might itself be detrimental to economic growth. For instance, a study that was carried out to account for the slow growth of the Philippines relative to its neighbors showed that the Philippines ’ lagging could not be primarily blamed on human capital constraints (Son, 2010). The human capital theory bases its measurement of productivity on the increased earnings of educated persons relative to those who are uneducated. However, this is not the best yardstick for the measurement of productivity since remunerations for work done do not always rely on one’s productivity (Son, 2010).
Proponents of the human capital theory have however argued that investment in human capital development is usually accompanied by economic growth and development. For instance, based on an international comparative analysis of human capital development levels, employment levels and economic performance, Wilson and Briscoe (2004) concluded that the significance of human capital development to economic development can no longer be in question. Aghion et al (2006) also found out that there was a correlation between the provision of high-brow education and economic growth in developed countries. Conversely, it is the provision of low-brow education that was found to end in similar results in developing countries (Wilson and Briscoe, 2004).
Such arguments might seem plausible but on closer examination, it becomes clear that their validity is questionable. Foremost, the existence of a direct causal relationship between human capital development and economic growth has yet to be ascertained. While investment in human capital, economic growth, and poverty reduction have mostly been found to take place concurrently, it does not necessarily mean that they are correlated. For instance, it could be argued that increased investment in human capital development enables more resources to be committed to human capital development (Son, 2010). At the same time, improved employment levels would lead to more disposable incomes at the family level leading to their investing more in the education of their children (Spence, 1973). It should therefore not be so readily concluded that human capital development causes poverty reduction and economic development. The vague relationship between them therefore should not be taken to present a conclusive relationship of causality.
Issue II
As far as poverty reduction goes, as shall be shortly found, education is still not the most critical investment area for national governments. The provision of education as a means towards poverty reduction relies on the assumption that investment in education is made with those who need to be lifted from poverty in question. However, this is not the case. For instance, in a study carried out to examine the success of education in the reduction of poverty in Kenya, Tanzania, and Ethiopia, it was found out that, consistently, more educational recourses ended up being appropriated by the rich than by the poor (Yamada, 2005). Tanzania had the highest of its primary school education resources going to the richest quartile at 40%. The richest quartile benefited most from secondary education from Ethiopia while “the poorest quartile benefits the least from public expenditure on primary education in Tanzania and on secondary education in Ethiopia and Kenya” (Yamada, 2005).
Similar problems of equity of access were found in a study done on Rwanda. It was found out that despite the adoption of national policies of equity which stipulates that education resources should be channeled to “out-of-school children and unskilled adults,” there were no commensurate measures put in place to ensure that the poor had access to education beyond the basic level (Hayman, 2005). Similarly, the most vulnerable people in society such as girls and susceptible children were left out in the conceptualization of this equity program (Hayman, 2005).
Statistics on personal earnings have however been used as proof of the ability of education to uplift the financial wellbeing of individuals. For example, McIntosh (2004) revealed that “even though there are discrepancies in the returns to educational investment on the lines gender, level, and type of education, there generally was evidence to show that it led to an overall increase in personal earnings”. These returns were also seen to differ depending on whether one worked in the public or private sector (McIntosh, 2004). Increased individual earnings are then seen to lead to the improvement of living standards at the household, community, and ultimately national levels (IIEP, 2009). Education also led to change in behaviors, some of which were found to lead to poverty alleviation too (IIEP, 2009). Such behaviors for instance include better health practices, lower birth rates, lower infant and child mortality, and the likelihood of higher educational attainment in generations to follow (IIEP, 2009).
It should however be noted that, in the developing countries, where the highest number of the poor is to be found, more jobs are created in the informal sectors rather than in the formal sectors that most require education qualifications (World Bank, 1995). This, therefore, implies that investment in higher education that has been previously thought to be a precursor to economic development is not necessarily true. At the same time, poverty is not only a result of a lack of low human capital endowment but also a factor of labor market discrimination (World Bank, 1995).
Therefore, governmental effort in poverty reduction should not only be made in the education sector but also in such areas as the leveling of the labor markets to ensure equity of access. Similarly, the human capital theory on which the thinking that education leads to poverty reduction is derived from assumes the availability of employment opportunities for those who undergo the education process (Bowles and Gents, 1975). This is not necessarily the case. The existence of educated unemployed would be detrimental to poverty reduction. Therefore, investment in other sectors of the economy, such as physical capital, should be prioritized to help achieve poverty reduction.
Conclusion
As the discussion above shows, education should not necessarily be the most obvious recipient of investment towards the attainment of poverty reduction and facilitation of economic growth. Since it is not a human capital deficiency that necessarily affects ailing economies. Such an assumption might lead to resources invested in the education sector as a remedy turning to waste. While economic growth has been seen to usually accompany increased investment in human capital development, this in itself does not mean that investment in human capital development leads to economic development.
As regards poverty reduction, research has clearly shown that investment in education by national governments does not always target the poor. The larger share of such investments ends up benefitting the richest population quartiles of such nations. Even if education has been noted to increase the incomes of individuals, households, and communities in developing countries, a closer assessment of the source of such earnings shows that they mostly come from the informal sector which is not very reliant on education.
References
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