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Why education matters for economic development

The building BRICS

“Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for a lifetime.”- Laozi 
There are still 124 million children and adolescents not attending school. Also, more than 250 million school children cannot read, even after several years of schooling. 

I decided to gather and share data on the topic of education and its impact on economics after having a debate with my teammates of the African Business Club. Our purpose is to become a bridge between young people wishing to start a business in Africa, and the ecosystem of companies present on African soil. Was the topic of education relevant for our activities?

What education is

Education is the process of facilitating learning, or the acquisition of knowledge, skills, values, beliefs, and habits.
In 2012, the United Nations adopted the Millennium Development Goals, a set of development goals for the year 2015, more specifically, “to ensure that by 2015, children everywhere, boys and girls alike will be able to complete a full course of primary schooling.” That same year, the World Education Forum met in Dakar, Senegal, and adopted the Dakar Framework for Action reaffirming the commitment to achieving Education for All by the year 2015.
At the time, according to UNESCO, only 57% of African children were enrolled in primary schools, the lowest enrollment rate of any region surveyed. The report also showed marked gender inequalities: in almost all countries enrollment of boys far outpaced that of girls. However, in some countries, education is relatively strong. In Zimbabwe, literacy has reached 92%.

The causal impact of economic growth

Since the late 1980s, much of the attention of macroeconomists has focused on long-term issues, notably the effects of government policies on the long-term rate of economic growth.

Education directly affects economic growth insofar as it is essential to improve human capital. An economy’s production capacity depends on different factors. These include physical capital, technology and the number of workers, as well as their quality. This quality is largely determined by what is called human capital (the stock of knowledge, skills and habits). An increase in workers’ educational level improves their human capital, increasing the productivity of these workers and the economy’s output.
Many researchers argue that the quality of schooling is more important than the quantity, measured, for example, by years of attainment. Barro and Lee (1998) discuss the available cross-country aggregate measures of the quality of education. Hanushek and Kimko (2000) find that scores on international examinations — indicators of the quality of schooling capital — matter more than years of attainment for subsequent economic growth.
Overall, another year of schooling raises earnings by 10 percent a year. This is typically more than any other investment an individual could make. The average years of school attainment at the secondary and higher levels for males aged 25 and over has a positive and significant effect on the subsequent rate of economic growth.

In 1950 the average level of schooling in Africa was less than two years. It is more than five years today. Progress in under way, however, there is still a long way to go. Wise investment in talent development is an important step that every company needs to take to succeed in Africa. 
First, technological change and global competition demand the mastery of competencies and the acquisition of new skills for many. To promote success in today’s labor market, one needs to invest early, and then invest in the relevant skills. For example, « Generations », a global nonprofit organization, originally founded by McKinsey&Company, has the purpose to bridge the gap between youth who lack job training and employers who struggle to find the skills they need for business growth. Each training location offers immersive bootcamps targeted at building job readiness in diverse areas such as retail and financial sales.

Second, as we said, quality is more important than quantity. Countries need to improve quality, strive for excellence, and expand opportunities, based on efficiency and equity – particularly women’s advancement. This means ensuring that disadvantaged youth enroll and succeed. Possible solutions include government funding, either to build infrastructure, finance schools or incentivize parents to send their children to school. The process will include securing adequate funding (ideally the legislature will commit to several years of funding from the outset, in order to ensure a sustained effort in increasing attendance rates), targeting the right students, reporting and attendance tracking, as well as installing payment mechanisms and regulation. Public-Private partnerships can also be an interesting win-win complement.

Finally, in Africa, external factors such as lack of proper schooling facilities, global water crisis or military conflicts do harm the effort made to improve education on the continent. Military spending is causing education spending to decrease immensely. According to a March 2011 report by UNESCO, armed conflict is the biggest threat to education in Africa. 

To go further:

Causal Impact of Education on Economic Growth – Harvard
The Role of female education on economic growth – Researchgate
The pivotal role of education in Africa’s development

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