Education and Poverty Social World I Observations Strong consensus, education as important...
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![Page 1: Education and Poverty Social World I Observations Strong consensus, education as important determinant of individual earnings; economic growth Exists.](https://reader036.fdocuments.net/reader036/viewer/2022062517/56649eb25503460f94bb855a/html5/thumbnails/1.jpg)
Education and Poverty
Social World I
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Observations
• Strong consensus, education as important determinant of individual earnings; economic growth
• Exists controversy around policy issues– Resources vs. outcomes– Appropriate incentive structure to improve
educational outcomes
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• Links: Education and– Health care– Homelessness– Hunger– Jobs
• Common link: poverty
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Links, Education and Poverty
• Individual level– Years of education vs. poverty rate– Recessions; job stability– Frequency, duration of unemployment
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• Aggregate level: What do poor countries lack?– Ideas– Incentives to use ideas in transforming
resources from low to high-valued uses– That is: an environment for encouraging
• Innovation
• Scientific discovery
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– Also note:• How to improve? Invest in basic
– Literacy
– Numeracy
– Result:• Increases in “size of pie”
• More resources to reduce hunger, homelessness; improve health care
• Less spending, crime; public assistance
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• Argument for– Specific education/training– General education/training
• Social, political framework appropriate for modern economic development
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Human Capital Theory
• Skills, knowledge, abilities of people
• How acquired?– Quantity of schooling– Quality of schooling– On-the-job training/experience– Family– Ability– Continuing education
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• Result: – education---> productivity---> earnings
• But note: productivity also affected by other factors– Quantity of capital per worker– Organization of work
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The Human Capital Decision
• Compare expected– Marginal benefits (most in future)
• Higher wages, linked to more years of education
• Rate of return on education? 5-15% per year
• Recent increase in skill premium
– Marginal costs• Direct spending
• Opportunity cost of time
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Human Capital Theory and Public Policy Toward Poverty
• Implication: Public investment in human capital formation would reduce poverty
• Education the centerpiece of War on Poverty
• Why necessary? Tendency for individuals to underinvest in education– Pay costs, not capture full benefits– Difficult in borrowing: problem of collateral
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Does It Work?
• What about the really poor: any difficulties in increasing quantity, quality of education?– Individuals at lowest income levels often least
well-served by schools– Resulting disadvantage in competing for jobs– Demand for education as depending on
expected return vs. opportunity cost
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– Application to• Young, single mothers
• Young, urban, non-white males
– Does compensatory education work?– Does education eliminate
• Low-paying jobs?
• Economic dislocations?
• Macroeconomic failures?
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• Is more spending on education the answer?– Ambiguity regarding relationship between
spending, student performance (test scores): negative relationship???
– What seems to affect student achievement?• Schools
• Student ability, motivation
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• Family educational background
• Peers
• Community
• Possible reforms?– More attention to
• Incentives
• Governance
• Management
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– Strict accountability, principals, teachers• Clarify goals (measurability issues)
• Hold schools accountable for student success or failure in reaching goals
• Align incentive structures with goals
• Examples: Chicago; Dallas Morning News, 11-15-98; Austin
• May require much experimentation with alternatives
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– Interesting current choice:• Continue to increase quantity? “14 years of
education for all”
• Increase quality of– Primary
– Secondary
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Other Critiques
• Education as “Screening Mechanism”– Education as recognizing, rather than creating
occupational skills– Schools identify people with natural ability for
employers– That is: educational attainment signals
(provides reliable information about) relative productivity of individual workers
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• Does it matter which hypothesis we believe? Different implications for public policy– Social rate of return may be zero under
signaling hypothesis => government subsidies to increase human capital as socially wasteful
– Even though private rate of return may be positive
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• Is education productive? – Provides a (socially useful) sorting mechanism:
gets people in the right jobs– Does seem to increase human capital
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• Marxist critique: Education as– Promoting social control– Socializing the poor into accepting the
legitimacy of the existing order– Not educate the poor for upward mobility
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Does Education Reduce Poverty?
• Long-run perspective: Changes the numbers of the poor
• Short-run perspective: Changes who is poor– Schooling, work experience seem to account
for about half of earnings variation
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– 1980s data; and • Increases in real wages, 16+ years of education
• Decreases in real wages, < 12 years of education
– Education/skill premium, and widening income disparities
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– Policy implication:• Education important; but also look at
• Barriers to skill acquisition
• Ways to increase attachment to labor markets
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In The End . . .
• Poverty, income differences due in part to differences in education
• Due also in part to differences in– Ability– Effort– Luck– Inheritance
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– Discrimination– Willingness to take risks– Past savings
• Education as a necessary but not sufficient condition for reducing poverty
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• Leave with:– How much to spend on education vs. other
public policy initiatives to reduce poverty?– Where should the dollars to education go?
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