Indicator One: Investment in Human Capital

By “investment in human capital,” this study means investment in people through formal education. At least as far back as Becker (1975), scholars have documented a significant positive relationship between education and earnings. Kabeer and Natali (2013) argue that education plays a critical role in helping to maximize women’s contribution to economic growth. Different levels of education matter for accessing either job- or career-oriented pathways. Literacy and completion of primary education are associated with lower fertility levels and positive health-seeking behavior. Completion of uppersecondary and tertiary education is needed to enter many, if not most, occupations associated with careers.

US EDUCATION PATTERNS AND DRIVING FACTORS

Some interesting education patterns emerge from Goldin’s work on the United States, focusing on women’s attainment of secondary education and the importance of expanding it to facilitate the jobs-to-careers transition (Goldin 2006; Goldin and Katz 2008a, 2008b). In the United States, the shift from Phase I to Phase II—that is, from agriculture and factory work to clerical work—was accompanied by an increase in high school (upper-secondary) graduation rates and the growth of secondary educational institutions from the 1910s to the 1940s (Goldin 2006). US overall high school graduation rates increased from 9 percent in 1910 to 27 percent in 1928. In the states outside the South, the corresponding increase was from 11 percent to 32 percent, and then to 56 percent by 1938.

Education levels result from both supply-side factors (the presence, distribution, and quality of public and private schools as well as government requirements for education) and demand-side factors (reflecting individuals’ or families’ decisions to invest in education). Several studies that explore measures of both the supply and demand sides around the world show that both play critical roles in determining educational outcomes (Goldin and Katz 2008a, 2008b). In the United States particularly, state expenditures on public colleges and universities created a powerful incentive for youths to graduate from high school.

Although Goldin and Katz (2008a) suggest that compulsory schooling and stricter child labor laws did not play the most pivotal roles in increasing US secondary school graduation rates, evidence from other countries suggests that such laws have been effective, particularly when accompanied by large increases in education access and spending. The researchers argue that US secondary school enrollment expanded because of factors such as the substantial wage returns to each additional year of school, increased family wealth, and greater school access. Governments can always invest in providing more education, so we focus on the more nuanced demand-side investment decision.

Children’s parents affect the decision to stay in school, and family wealth affects whether they encourage children to stay in school after lower-secondary education or to enter the workforce. The decision to send one’s children to school or perhaps even to invest in more schooling for oneself depends on both direct costs (such as tuition, fees, and supplies) and indirect costs (such as forgone earnings) as well as on the longerrun benefits that come in the form of higher lifetime earnings. Market factors influence these higher lifetime earnings—referred to as “returns to education” or “returns to human capital.”

Market factors can also affect the earnings workers would forgo by choosing to stay in school rather than entering the workforce. For example, Goldin and Katz (2008b) find that the expanding US manufacturing sector was a deterrent to high school graduation, especially in the US South and select industrial states in New England. More recently, Atkin (2016) finds a similar result from the expansion of Mexican manufacturing along the US-Mexico border. Therefore, the expansion of apparel employment in low- and middle-income countries (LMICs) might make working more attractive than staying in school and thus might slow the transition from jobs to careers.

EDUCATION PATTERNS IN THE CASE COUNTRIES

What has happened with education levels in our sample countries in recent years? Although our study has limited time series (generally of only five to seven years), it consistently finds that the share of females with some formal education has increased (table 2.1). In Cambodia, Egypt, and Pakistan, the shares of women who completed primary and lower-secondary education rose. Lower-middle-income Sri Lanka and Vietnam resemble the trends in Turkey, an upper-middle-income country, where the share of Turkish women completing upper-secondary and tertiary education increased.

To the extent that years of education are comparable across countries, it is useful to compare the 7.4 average years of education observed in the United States in 1900 (before US women were transitioning to clerical occupations) with the current education levels in apparel exporting countries. The results show that education policies are clearly much more relevant in some countries than others.

In the first year for which we have data, women in all the case countries except Sri Lanka have lower average education levels than US women did in 1900. In contrast, Sri Lanka shows average years of education similar to the United States in 1940, which was toward the end of its Phase II.

By the latest years of data, women in Egypt and Vietnam and working women in Turkey also have average education levels similar to US women in the early 1900s. In these countries, more than one in every two women have at least completed lowersecondary education, and one in every three women have completed upper-secondary education.