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Symposium 2009

Proposal - Overcoming Inequality through Education

The Challenge

According to the International Labor Organization, income inequality has increased in about two thirds of countries world since the 1990s. The financial crisis and the accompanying global recession ...

According to the International Labor Organization, income inequality has increased in about two thirds of countries world since the 1990s. The financial crisis and the accompanying global recession are expected to widen the gap further between the rich and the poor.

1. The demographic window

The level of schooling attained by the economically active population (EAP) of a country has strong connections to its productive and innovative capacity. Many emerging countries are going through major shifts in the structure of their age pyramids. In Brazil, projections for the next decades point toward a far greater participation of the EAP in the total population, as the birth rate declines and today’s children and adolescents join the workforce. This represents a demographic window, or an opportunity to ensure that better income distribution will be achieved, provided there is enough investment in education and, at the same time, that this investment is correctly focused. If the necessary actions are not taken now, the window will be progressively closed as the falling birth rate makes it more difficult to educate the EAP.

2. The distribution of education

National school systems often incorporate policies aimed at promoting universal access to education, as well as incentives targeted at specific groups or subjects (in the form of competitions, awards and scholarships). Furthermore, many countries have implemented policies that are explicitly targeted at affecting the distribution of education among social and ethnic groups. This raises the issue of how to evaluate these policies, not only in the technical sense of how to assess outcomes, but also in the political-philosophical sense of what is considered a desirable outcome (the so-called Social Choice Theory).

There are many different schools of thought regarding social choice (Stiglitz, 2000 and Sen, 1999). Among the most notable of these are utilitarianism and Rawlsianism. In the utilitarian perspective, an outcome is considered desirable as long as it propitiates a positive shift in average individual welfare, even if it leaves some individuals worse off. On the other hand, for Rawlsians, social welfare should be measured exclusively as a function of the worst-off individual, and outcomes are desirable only as long as they improve that individual’s well-being.

It is a trait of many social choice theories that an outcome can be considered acceptable even if it increases inequality. For instance, for utilitarianism, a policy that increased the educational level of the richest, while holding constant the education provided to other groups, would be considered acceptable. Some theories attempt to incorporate “social justice” by postulating an explicit link between social welfare and inequality (as measured, e.g., by the Gini index of the welfare distribution).

Thus, social choice admits many different mutually-exclusive definitions, which lead to contradictory evaluations of outcomes as “desirable” or not. Furthermore, no theory is demonstrably “correct”, as in the final analysis they are all based on personal moral judgments.

One must acknowledge though, that there may be a situation in which a change in the characteristic of educational policy will benefit from increasing both the worse-off and the average individuals at the same time.

There is ample literature on the technical issue of how to evaluate outcomes, but the various conclusions must be put into perspective by the continual development in methodological approaches for measurement and analysis. One particularly clear-cut conclusion, however, is that economic returns to schooling are unequally distributed among the population.

Therefore, in an environment with limited resources, it is advisable for government policies aimed at expanding public access to education to focus on those sectors of the population that have the highest potential gain. For Brazil, returns to schooling for different groups were estimated by Simonsen Leal and Werlang (1991). Nevertheless, it seems advisable also to ponder the duality between maximizing the aggregate return of investing in education and reducing social inequality. Moreover, it seems plausible that a situation can exist in which a change in the characteristics of the educational system will benefit from the possibility of improving both at the same time (inside the production possibility frontier, or PPF). As will be argued below, information and communication technologies (ICTs) may contribute to weaken or even circumvent this duality.

3. New information and communication technologies

The digital inclusion of more disadvantaged sectors of the population, as well as the incorporation of new ICTs into schools, may result in significant shifts in economic outcomes, although these have not yet been fully assessed. Some results of pilot programs in Brazil are available (World Economic Forum, 2005).

From the individual point of view, familiarity and competence with ICTs represent entry to the ever-growing range of job positions requiring this kind of know-how, in all sectors of the economy. Thus, closing the digital gap is a fundamental part in making the job market open to all sectors of the population. It is interesting to note that competence with ICTs may represent either a complementary or substitute good to traditional (school) education.

The potential benefits of introducing ICTs into schools include allowing more (and more diversified) content to be delivered to students at greater speed, providing the basis for new teaching and student-interaction formats, and, in some cases, reducing the costs usually incurred by schools in distant locations, such as isolated communities (e.g., in the Brazilian Amazon Forest). In this sense, ICTs may be able to shift the production possibility frontier of education (average versus worst-off) of a given country upwards.

4. Assessing the quality of education

The level of formal education, as represented by years of schooling, is not an accurate measure of the effective cognitive ability of an individual. Assessing the quality of education is essential to understand its economic effects.

The quality of education can be evaluated at three levels:

a) In terms of the cognitive ability with which it endows students. This can be measured through tests such as the PISA.
b) In terms of to what extent it provides training to students, thus producing workers that satisfy the demands of the job market. This can be measured directly through surveys with companies and employment agencies, or indirectly through such measures as salaries and number of job openings.
c) In terms of the increases in productivity that it brings to the economy. Arguably, endowing students with the ability to think creatively and to innovate is the ultimate goal of the educational system. It is a near-consensus in growth economics that these abilities, along with technological advance, form the basis of productivity growth. However, isolating the contribution of education to the economic development of a country is a difficult task.

These three levels of evaluation are not mutually exclusive, but rather represent different proxies or correlates by which to assess the quality of education received by students.

5. The incentive structure in education

To ensure that access to education translates into social and economic benefits, it is necessary to alter the incentive structure associated with the school system. This involves providing incentives not only to teachers and school managers, but also to students and their families (through exams such as the National High School Exam, or ENEM). The appropriate incentives can be achieved only through performance evaluation and compensation.

6. The dangers of short-term policy decisions

The deepening and prolongation of the economic crisis, especially in developing countries, may reduce the flow of resources to education and divert these investments toward social programs that have more short-term results.

The long-run implications related to these decisions are not always clear for policymakers. This is especially true in cultures where government leaders are not used to the concept of intellectual capital, and where education is all too often viewed as a current expenditure, not as an investment.

To ensure that decisions in this area are taken in a consistent manner, based in sound economic principles and in an accurate evaluation of the long-term costs and benefits of different policies, requires the development of a strategic plan to serve as a guideline and decision-making framework. Fundação Getulio Vargas has a long tradition of aiding public and private sector institutions in strategic planning.


References

Sen, A. (1999). Development as Freedom. First Edition. Knopf. New York.
Simonsen Leal, C. I. and Werlang, S. R. da C. (1991). “Retornos em Educação no Brasil: 1976/89.” Pesquisa e Planejamento Econômico. Vol. 21, nº 3., pp. 559-574.
Stiglitz, J. E. (2000). Economics of the Public Sector. Third Edition. Norton. New York.
World Economic Forum (2005). “Orchestrating Demand and Supply in a Sustainable Eco-System for Digital Inclusion — the ITAFE initiative.”

(http://www.weforum.org/pdf/Initiatives/Brazil_Executive_Summary_Jan05.pdf).


*President, Getulio Vargas Foundation
July 2009

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