Issue XI: 32-35: The Value of Education in a Changing Society

VOX - The Student Journal of Politics, Economics and Philosophy

It states that beyond the threshold level of fundamental functionings, resources should be devoted in ways that allow the higher achievements of some to benefit the lower achievement of others. While this framework does not provide a theory of educational equality, it nevertheless helps in providing a possible answer to the debated question of what constitutes educational equality for children with disabilities and special educational needs. i(notes available online) Bibliography Anderson, E. (1999) What is the Point of Equality?, Ethics, 109.3, pp. 283–337.

Brighouse, H. (2003) Educational Equality and Justice, in: R. Curren (ed.) A Companion to the Philosophy of Education (Oxford, Blackwell

Publishing), pp. 471–486.

Nussbaum, M. (2000) Women and Human Development: The Capabilities Approach (Cambridge, Cambridge University Press).

Rawls, J. (2001) Justice as Fairness: A Restatement (Cambridge, Harvard University Press).

Sen, A. (1992) Inequality Reexamined (Oxford, Clarendon Press).

Sen, A. (1999) Development as Freedom (Oxford, Oxford University Press).

Terzi, L. (2007), ‘Capability and Educational Equality: The just distribution of resources to students with disabilities and special educational needs’, Journal of Philosophy of Education, 41 (4) 757-774.

Terzi, L. (2008) Justice and Equality in Education: A Capability Perspective to Disability and Special Educational Needs (London and New York, Continuum).

_____________________________ Lorella Terzi is a professor at the School of Education, Roehampton University

THE VALUE OF EDUCATION IN A CHANGING SOCIETY

By Associate Professor Ana Ferrer

T

HE EMPIRICAL STUDY OF THE ECONOMICS OF EDUCATION HAS

become one of the most prolific research areas in economics. One reason is that the framework employed by economists to study education, human capital theory, provides a simple but very powerful explanation of why and when individuals choose to accu32

mulate labour market skills. The basic mechanism that is proposed postulates that individuals forego present wages in low productivity occupations in order to obtain the skills that will allow them to enter high productivity, high wage occupations in the future. Second, research into the economics of

Issue XI - Spring 2010

education has also become popular because there is a relative abundance of quality data that allows us to test many of the predictions of the model.

Third, and perhaps most importantly, the policy implications of the model are of immense relevance. From the point of view of governments, investments in the education of the population will affect economic productivity and growth. Further, thanks to additional theoretical insights that introduce financial diversity and the issue of access to education, economists have established a link between education and both inequality and poverty.i Concerns about growth and inequality have placed the study of the economics of education at the core of the policy agenda. In this article I will highlight the answers that this abundance of research can provide for two problems affecting modern economies.

Whether viewed from the social or private perspective, education is generally thought to provide net benefits. Whereas governments are generally concerned with the influence of education on measures of economic performance or well being, such as social integration or innovative activity, individuals are primarily concerned with the effect of education on wages and/or employment. Hence most studies focus on estimating the returns to education – the increment in wages that can be expected with additional education or training. Estimates of these returns motivate education relat-

ed policies, like school enrolment, subsidies to education and regulation of tuition fees, and public investment in training programmes for unemployed youth or displaced workers. Hence, the central question in empirical microeconomic studies on education is: How much is education worth? The conclusion from the myriad of studies that try to answer this question is unanimous: Education substantially enhances the wages of the educated.

However, these returns show such variability across different individual characteristics, such as gender, ethnicity, and occupation, that the question arises of what we are really measuring in these studies. What policy makers need is some absolute measure of the value of education. Somehow they need to know whether providing everybody with training or education will increase the wages of the educated individuals by the amount estimated by economists. Unfortunately, economists have trouble answering this question. Because empirical studies are based on comparison between those who get an education and those who do not, the estimates of the worth of education are likely to include other generally unobserved individual traits that influence wages. For instance, if those with better aptitude for learning are the ones who get an education, our estimates of the economic worth of education may be inflated, with much of the apparent effects coming not from education itself, but from that 33

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higher learning ability. Further, providing access to education may not have an effect on inequality if the returns to education do not depend on education per se but on other characteristics that just happen to be associated with education, like personal connections.

This problem, called selection bias, has made it difficult for economists to give the question on the worth of education an unequivocal answer.ii How well we measure the returns to education becomes particularly relevant when we are concerned with the effects of education on inequality, particularly with respect to its ability to alleviate problems brought about by rapidly changing technologies and the shifting structure of the labour force. Technological change – especially advances in information and computer technologies – and globalization of production have resulted in a growing demand for highly skilled workers that can adapt rapidly to these changes. In addition, western economies are experiencing substantial demographic transformations. An aging cohort of baby-boomers leaving the labour force has also contributed to create a vacuum of experienced workers. Partially as a result, immigration has increased to unprecedented levels in most developed countries.

Both of the above outlined changes have placed access to education at the heart of much of today’s labour market inequalities. Low skilled 34

workers face a high risk of long term unemployment and low wages, with few benefits and possibilities of improvement. This is not the only group at risk. The pace of technological change is such that displaced workers, such as adult women who interrupted their careers for child rearing or adult men who lose their jobs, may also be left out of main stream jobs and confined to low end jobs unless they can update their education or skills. Even highly skilled immigrants are susceptible to a similar fate if their credentials are not recognized. Given this environment, current public interest in the returns to education is focused on these two issues: What is the value of updating the skills of the existing labour force, particularly those that may lose their jobs because of changing technologies and increased globalization?

And is education enough to integrate an increasingly foreign population into the labour market and hence into our societies?

The value of updating the skills of the current labour force varies depending on the type of training acquired. Government-sponsored training is mostly concerned with providing general skills that increase individual employability in a variety of workplaces and focuses on workers at high risk of social exclusion (unemployed workers and disadvantaged workers with limited skills). Privately-sponsored training, on the other hand, is usually

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firm-specific, provided to those with already high levels of skills, and who may even be currently employed. In general, the returns to privately-sponsored training finds positive effects on labour market outcomes such as wages or promotions. The magnitude of the returns varies depending on the type of training studied and the methodology employed. Government sponsored training, however, has a mixed record, raising earnings of some groups (adult women and displaced workers) but having little or no impact on earnings of others (disadvantaged adult men and youths). Even when they are positive, the impacts on earnings are modest and are usually not large enough to substantially reduce poverty rates. iii Regarding the second question, the study of immigrant economic assimilation in immigrant recipient countries suggests that foreign education is not enough to ensure a smooth transition into the host country economy. Even countries that receive largely skilled immigrants by virtue of their selection system, like Australia and Canada, report that recent immigrants have trouble assimilating into the labour force in terms of earnings and employment. The main problem seems to be with the difficulty in recognizing and evaluating foreign skills. Informal learning, such as experience acquired on the job, is hard to assess and, therefore, it becomes highly discounted by local employers.iv Even formal learn-

ing encounters significant barriers in being recognized by local employers, particularly in health professions and engineering.

Overall, research on the returns to education and training agrees that, for the most part, public education and training is desirable for displaced workers and immigrants. However, public programmes should be made more efficient than they have been in the past.

Crucial design features include careful targeting of the participants most likely to benefit from education, keeping programs small in scale, including a strong work experience component to establish links with employers, and having programmes that produce a certification that is recognized in the labour market. In addition, problems associated with low skills more generally should be addressed much earlier in the life cycle. Research shows us that education is strongly linked to productivity and individual well being.

It seems, however, that if we want demographic and technological changes to increase individual well-being, we should promote educational policies that address the inequalities created by these changes and do not disregard the lessons learned from the study of the returns to education. i (notes available online)

_____________________________ Ana Ferrer is Associate Professor at the Department of Economics at the University of Calgary 35

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VOX Summer Issue 2010: ‘Control’ VOX, the Student Journal for Politics, Economics and Philosophy is calling for articles to be submitted for the Summer Issue 2010, with the broad theme “Control”. Articles should be between 1,000 and 1,250 words in length. If you would like to write on this theme, please e-mail vox@clubofpep.org.uk by 26 March 2010 You may wish to write on a topic from the list below: • Managing the market (trade, planned economy, managing inefficiency) • Controlling poverty • To what extent are our lives dominated by technological rationality?

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