Who Values Education?
Education is an important variable as it significantly determines:
Investment, productivity and hence household income
Wellness and health awareness and ultimately life expectancy
and these influence the future shape of the country.
However, there are large differences between countries in terms of the standard of education offered to, and achieved by, their citizens. Obviously the more affluent countries can afford to spend more on education than less affluent ones. However, even within the same broad level of affluence (as measured by GDP per capita) there are differences in the proportion of GDP allocated to education. This reflects the value placed on education by the society (or the rulers of that society who may not actually reflect the values of that society).
This Insight looks at the relative spend of 81 countries on education and gives some insight as to which ones might be expected to prosper in the future and which ones may continue to lag behind.
Note: While Global Demographics covers 109 countries, not all publish data of enough detail in the area of education. As such this analysis is restricted to the 81 countries for which complete data on education is available.
While causality is not proven there is nonetheless a statistically significant relationship between the level of education of the adult population of a country and each of the following variables: Birth Rates. Fixed Capital Investment and Productivity per worker.
1. Birth rate per thousand women aged between 15 and 59 years.
The better educated a society (and females in that society) the lower the birth rate with the best educated countries having birth rates at around 40 per thousand women of child beating age.
This is important as it slows population growth to a more manageable rate. Ironically it also enables education to improve faster as the demand for education (i.e. the number of school age children) typically flattens out and the spend on education can shift its focus from quantity of education to quality of education.
What ever one might think about China’s ‘One Child Policy’ the simple fact is that amongst other things it enabled the country to offer compulsory and free education to all children aged between 6 and 12 from 1984 onward. The results of that on the well being of the society as measured in terms of affluence and emerging middle class are well evident. Especially when compared with India which has only just got to that stage (but has progressed well on sending a rocket to the moon – go figure!).
Figure 1: Education Standard and Birth Rate 2017
Note: Education Index: This is a simple scaling variable given a weight of 1 to the proportion with completed primary education,2 for lower secondary and 3 for upper secondary, vocational or tertiary education (this is necessary as some countries the highest category is upper secondary and above education – ideally there should e an additional weight for post-secondary). A weight of 200 typically means that half the adult population have at least lower secondary education. This is a better measure of the capability of a population than, say, the proportion of the population with upper secondary and above. Such an approach will not differentiate between a country with a large proportion with lower secondary education and no primary or less education versus one with very high proportion with primary or less.
2. Fixed Capital Investment
There is a relationship between the education standard of the adult population of a country and the level of fixed capital investment that takes place. Global Demographics uses Accumulated Fixed Capital Investment per worker’ as the measure of the resources available to the worker rather than the annual Fixed Capital Investment which fluctuates short term and influences results depend on the year selected.
Figure 2: Education Standard and Accumulated Fixed Capital Investment per worker 2017
Accumulated Fixed Capital Investment per worker is the sum of Fixed Capital Investment over the last 10 years depreciated at 10% per annum divided by the number of employed persons.
As this Figure suggests, countries with a workforce with a relatively low standard of education have difficulty attracting Fixed Capital Investment to lift productivity of the worker – probably because such investment does not provide good returns in that environment. It needs to be able to leverage an educated worker.
But also note that education is a necessary but not sufficient condition for attracting investment. As Figure 2 shows, there are many countries where the education standard Is relatively high but the level of accumulated Fixed Capital Investment per worker is low. This reflects other influences such as tax on investment, foreign ownership regulations etc.
The additional investment means the educated worker is even more productive and hence this lifts their incomes and lifestyle further. The ability of education to ‘attract’ investment is evidenced in China where the level of investment per workers is much higher in the Eastern Provinces where the education standard is now also much higher than the Western and Central provinces
The benefits of educating society is reasonable clear and while the degree of causality might be debated most people would probably accept that education does play a positive role.
But the issue with education is it takes time – a person is not ‘educated’ overnight. It takes at least 20 years for the improvement in the quantity and quality of education facilities to work through to a more productive workforce. The Six-Year-Old today does not represent a significant part of the workforce at least until they are 26 years of age, and probably later. As such it requires a societal and political will to stick with the development – and specifically to spend social money on something that does not have an immediate (electoral) benefit. Politicians in a democracy struggle with it and Dictators (with some obvious exceptions) normally don’t worry about it at all.
To get a measure of the extent to which a country ‘values’ education it is best to look at the proportion of the GDP that is spent on education. However, the simple measure of percent of GDP spent on education is unfair in some respects.
First countries have quite different age profiles and as such those with a very young population have over a quarter of their population of school age (5 to 14 years) and should be devoting more of their GDP to education. Uganda at 28% of its population aged 5 to 14 years is a case in point. This contrasts with the older affluent countries in Western Europe and Asia where that same age group is around 10-12% of their total population.
To adjust for this, we effectively create a ‘students share’ of total GDP and then express the amount spent on education as a percentage of that. That is the share of the total population that students represent is applied to the total GDP and the amount spent on education is expressed as a percentage of that. To adjust for countries where the education system extends significantly into tertiary level (an index value greater than 200) 50% of the 15 to 19-year age group is included in the calculation to get a more accurate measure of spend per student. Otherwise to just use age 5 to 14 would understate the number of students
Table 1 lists those countries where the share of Student GDP that is spent on education is over 30% (which is the average for all countries). With few exceptions they are all counties with a high standard of education as measured by the ‘education index’. Therefore, these are really countries that have a strong position and are consolidating it. This probably will have beneficial effects on their GDP growth.
Table 1: Countries spending above average on education after adjusting for student population.
But do note that considerable variation in the absolute amount spent. For example, the Republic of Moldova. The unfortunate reality is that this and the other countries of a similar level of spend) are poor countries and even though they are doing the right thing in terms of devoting funds to education the amount available is small and this will disadvantage them to some extent.
The second Table is countries that are spending below average on education after adjusting for student share of population. There are really two groups of countries in this set. Those who are ‘coasting’ and those that are simply limiting the future of their population.
Table 2: Countries spending below average on education after adjusting for student population.
The ‘Coasters’ are countries which already have a high standard of education as measured by the ‘Education Index’. That is a score over 200. The nature of education is such that the education profile of a population does not decline in quality immediately – it takes time. As such a country can afford to spend less on education for a period when other priorities (such as Fixed Capital Investment) exist. This probably applies to the top 18 countries in this Table.
The others are countries where the current level of education of the adult population is low (below 150 on the index) and they are relatively poor countries. The failure to spend above average on education means that the human resource is not developed and in all probability the economic development of the country is constrained.
This Insight was prepared using our on-line database.
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The data for all 109 countries and every region and city of China runs from 2005 to 2043.