Growth 1 – Equality O. And What Role does Education Play?

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Over the past few weeks a great controversy has struck the world of economists following the release of Thomas Piketty’s Capital in the Twenty-first Century. The book has caused a stir because it refers to the role of institutions of capitalism in the development and distribution of income, and implies that we could be headed to a more unequal society.

Other authors such as Per Krusell and Tony Smith  have also addressed the problem of income inequality, but from different perspectives. They have focused, among other factors, on the role of education and its potential significance to generate better opportunities for all. So, we must ask ourselves: How much do we know about the evolution of educational over time? Are young people today better educated than they were fifty years ago?

Before answering these questions, we need to understand what educational achievement really is and why it is important. Educational attainment is defined as the years of education attained by people within the formal education system and is one of the main components of human capital, which in turn is crucial for economic growth. There is evidence that countries with higher educational attainment experience faster economic growth and that people with higher educational attainment tend to see an increase in wages over time[1].

Now, back to the questions we asked about the evolution of educational attainment. Thanks to persistent data collection efforts by researchers Barro and Lee, we were able to analyze whether individuals accumulate further or fewer years of education today than they did in the past. By looking at the graph above we can draw two important conclusions:

• Globally, the average[2] citizen’s educational attainment improved substantially over the last sixty years. This citizen had zero years of education in the fifties and now, in 2010, has 9!
• Everyone improved! Both those individuals who had previously attained a high educational achievement as well as those who did not now enjoy a longer educational “lifespan”.

However, not all of the news is good. Globally, the education of individuals with high attainment increased to 6 years, compared to only 3 years for those with low levels of educational attainment. This implies that the gap between individuals with high and low educational attainment has actually widened over time.

Furthermore, the improvement also varies by region and country (see table below). For example, in developed countries the average individual’s educational attainment improved from 6 to 12 years, while the difference between individuals with high and low educational attainment was reduced by 1 year, from 6 to 5.

In Latin America and the Caribbean, however, we witness a different story. In the region, although the average individual went from having 3 years of educational attainment to 9 years, the difference between individuals with high and low educational attainment increased from 3 to 6 years. In Sub-Saharan Africa, where schooling levels were very low to begin with, the average individual has now advanced from 0 to 3 years of education and the difference between individuals with high and low educational attainment has escalated from 0 to 9 years.

Education systems are being reformed across the world in an effort to increase educational attainment and reduce gaps, but the task is still arduous. Usually individuals raised in poverty who have not completed school are those with the lowest educational attainment, creating vicious patterns of inter-generational transmission of poverty and lack of opportunities. As the table shows, the difference between high and low attainment levels has actually been reduced. However, the educational lifespan of those individuals in Latin America’s Low Attainment bracket is still relatively short, 6 years, which is the equivalent to a primary school education.

To close these gaps, the continued effort by various countries with the support of international organizations is necessary. In that sense, I report with pleasure on this blog that the government of Honduras just opened up 2500 new spots for secondary school students with IDB support. Thus, many more students from remote rural areas will now have access to a secondary education and will graduate, enabling them to access better opportunities and a higher income in the future. While this may seem a small step relative to the monumental challenges we face, we are on the right track to reduce the gap. Only then we will be able to offer our citizens the opportunity to stay in school and acquire the skills needed to access well-paid jobs that will guarantee them a better quality of life.