Why doesn’t investing in education create more jobs in poor countries?

February 04, 2015

Broadly speaking, public policy has been much more successful at increasing the supply of education than the supply of jobs the educated want in many poor countries. This is particularly true of sub-Saharan Africa (SSA) and South Asia and it is the mismatch between the rapidly increasing supply of such labour and the demand for educated labour by firms which is the focus for the dissatisfaction with the jobs that are available.

 

In this policy note two approaches to job creation are identified. The first sees the problem in terms of the jobs that are being created and this approach focuses on the means to create ‘decent’ jobs. The second begins with a focus not on job type, but on the productivity and income available from the economic opportunities that are being created.

 

These different starting points lead to the divergent paths to a solution. For the ‘decent’ jobs agenda skill creation is seen as the essential pre-condition for the productive transformation of poor economies into a more urbanised economy dominated by a modern sector with formal rather than informal jobs being the main source of employment. For the ‘productivity/income’ agenda the lack of connect between the increased supply of educated labour and the lack of jobs for them is the failure to focus on productivity within an enterprise which may be a farm, a business run by a self-employed entrepreneur or a small or larger firm. Skills are one determinant of differences in productivity across enterprises but may well not be the most important.

 

The evidence for the two approaches is presented and evaluated in this briefing note and the extent of the divergent policy prescriptions from the two approaches outlined.

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The distribution of Incomes is much more dependent on where you work than what you know.