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Two approaches to the economics of education: A methodological note
0272-7757188 $3.00 + O.OKl 0 1988 Pergamon Press plc
Eco,to,nrcs of Erlucuriort ReGw. Vol. 7. No. 2. pp. 257-2M). 1988. Printed in Great Britain.
Two Approaches to the Economics of Education: A methodological note S. J. PRAIS National
Institute
of Economic
and Social Research.
London
SW1 3HE.
U.K.
Abstract - In explaining the sources of international differences in productivity this paper argues that more comparative research is needed into the oufpurs of the education and training systems, particularly at the level of intermediate vocational qualifications.
Four prima facie relevant contrasts in education and training between Britain and Germany seem worthy of emphasis: (a) the system of obligatory day-release from work till age 18 to attend vocational classes; (b) pre-vocational instruction at school during compulsory schooling-ages; (c) schooling attainments in mathematics - especially high in Germany for those in the lower half of the ability range; (d) the attainment of “intermediate” vocational qualifications of nationally-recognised standards by the majority of the workforce.’ The details of such contrasts in initial vocational preparation (i.e. preparation while at school, or immediately after leaving full-time schooling) have implications of wide relevance, for example, for those concerned with raising the quality of US products in the face of Japanese competition; for those in developing countries on whether to put their limited resources into intermediate-level technician-training rather than into high-level university education; and for those having to decide whether pre-vocational instruction should, or should not, form part of the curriculum during the ages of compulsory schooling. For over a century perceptive observers of differences in the wealth of nations - including that great Cambridge economist Alfred Marshall have drawn attention to the longer-term economic advantages likely to accrue from their policies on schooling and vocational training to Germany and to those neighbours countries - such as Switzerland and the Netherlands following similar policies. The further recent developments in their vocational
EDWARD DENISON’S critical review’ of the British public policy conference-volume on Education and Economic Performance provides a convenient occasion to exchange ideas on two possible approaches (which we may neutrally call A and B) that applied economists may adopt to help public policy in this important and complex field. The approach taken in that volume (approach A), starts from a comparison between Britain and Germany, two countries very similar in population, area, natural resources and cultural development but with significant contrasts in economic progress in the past generation. Germany’s continuing industrial success in the production of cars and machine tools, to mention two well-known examples, contrasts with the sharp decline of such industries in Britain in the past generation; the technical quality of German products has acquired a justified renown, of a kind that in a previous generation often attached to British goods (“Made in England” was then the hallmark of quality); Germany’s manufacturing output per employee, and its real income per head, have overtaken Britain’s by a margin now obvious to the eyes of any traveller; and Germany’s youth unemployment problem seems to be under better control than Britain’s, The question to be asked is whether all this is related in some way to differences in education and training: and surely that is an entirely legitimate question which economists are obliged to try and answer. Very similar questions arise in comparing the United States and Japan. [Manuscript
received
19 February
1987: revision
accepted
for publication
257
30 September
1987.1
258
Economics
of Education
training systems are insufficiently appreciated by economists, nor is it sufficiently appreciated that the divergence has been growing from other countries (like Britain) in which increased length of compulsory schooling, focussing on general subjects, has displaced the study of vocational subjects and the industrial training previously given, say, at ages 14-16. Detailed observation of how operatives and foremen carry out their tasks in matched manufacturing plants in Britain and Germany has left us in little doubt (as previous observers found) that the systematic vocational training and qualification of the German workforce directly contributes in a very important way to greater efficiency at work.3 Comparisons of what goes on in vocational colleges in the two countries make it clear that the high standards of vocational qualification attained by such a large cross-section of the German workforce is founded on previous schooling; their system specifies syllabuses and standards for each year of compulsory schooling, and is accompanied by certifiable school-leaving standards (“high school diplomas”) covering 90% of pupils. Britain stands out in international comparisons of schooling attainnot merely for undistinguished average ments, scores, but for the high variability of its pupils’ scores in mathematics (a coefficient of variation of scores at age 13 which was 63% higher than in Germany or Japan in the IEA comparisons of 1964 and, according to provisional returns, a similar excess in 1981 when compared to Japan; Germany was not covered in this more recent inquiry).4 It is the long tail of low achievers at schools in England that has recently formed much of the hard core of the youth unemployment problem.5
THE OTHER
VIEW
Applied economist B may complain that comparisons between only two countries are insufficient to draw conclusive inferences. Further comparisons of a similar sort with France, Switzerland and Japan have been carried out, or are in progress; but Denison goes further in saying that “even more countries would not in any case be sufficient” because national income is determined by so many diverse factors that a full analysis is required (including multi-variate regression?). To this economist A has to say that more refined and comprehensive forms of analysis have not as yet
Review
gone far enough to be helpful. Let us look at three fundamental limitations to the kind of research in this field that applied economist of type B may have in mind. First, past attempts to attribute differences amongst countries’ real income-levels, or rates of growth, to measurable differences in national summary variables (often only imperfect “proxy” variables) representing capital, type of labour, its education, etc. marvellous and admirable as those attempts have been - have left the greater part of the story as an unexplained Residual. For example, for the United Kingdom in 1960 only a third of the difference from the US in real income per person was explained, and two thirds was left as a Residual in Denison’s earlier analysis (1967, p. 332). This unexplained Residual has been called by Denison the “Lag in the application of knowledge, general efficiency and errors and omissions”. It is a designation that has plausibility, but it does not go beyond that. The real work of understanding the sources of those “lags in the application of knowledge, etc.” - which must to some extent be related to the extent of technical and vocational training remains to be done. Secondly, the contribution of education and training - treated as a factor of production - has usually been measured in such aggregative studies fairly simply (perhaps forgivably, given the state of knowledge of these things at an international level) by an assumed rate of return applied to the average number of years of schooling of the workforce. The rate of return is usually estimated by comparing incomes of individuals in that population having different lengths of schooling (a “cross-section” analysis). But how satisfactory is this? Income differentials in Britain, as in many other countries, have become compressed as a result of decades of egalitarian pressures (by trade unions, by progressive taxation); they thus tend to under-estimate true productivity differences and the social rate of return. On the other hand, such estimates of returns to schooling are over-estimated because more education is usually received by those of higher ability, whether innate or attributable to home conditions: to what extent is it their higher ability, or their greater educational input, that accounts for their higher incomes or higher contribution to the nation’s output? The latter bias (that is the extent to which returns to education are over-estimated because of the
Two Approaches
to the Economics
ability-factor) presumably varies from country to country, depending on the degree of selectivity of the educational system of the country concerned, that is, on how closely additional schooling is related to pupils’ abilities or initial attainments. Considering changes over time in the resources devoted to education, a crucial question is whether added resources have focussed on pupils of high ability (for example, by increasing the proportion of pupils attending universities), or whether they have been spread more evenly by raising the general compulsory school-leaving age. In the latter event, have suitable curricula of instruction been provided for pupils of these higher ages, enabling them to tackle their first jobs better than if they had gone to work younger; or have the curricula for these ages been inchoate, lacking in direction, and seemingly pointless for many pupils? The brave attempts so far to sort out these conundrums in order to arrive at the proportion of higher incomes attributable to more education, as opposed to higher ability (the “alpha” factor), have been more a matter of judgement than scientifically convincing: and, perhaps more regrettably, may have diverted attention from the serious underlying issues. Thirdly, is it adequate to measure the volume of education simply in terms of inputs into schooling or, more simply, by the average number of years of schooling? Surely the subject matter (how much poetry and drama, how much technical drawing, how much electronics), and the pace at which it is mastered (i.e. the internal efficiency of the schooling system), are very important. The difficulty in carrying out any large-scale international study of vocational attainments (qualifications below university-degree level) is that there is little international agreement as to what level of knowledge and length of study is necessary before someone is to
of Education
259
be counted, for example, as a “mechanic”, “electrician” or “accountant”; consequently, it is not easy levels of intermediate to compare countries’ vocational attainments6 Looking at the minority of the population with university degrees, whether in all subjects combined or in technological subjects specifically, is easier - but cannot be taken as a satisfactory indicator of the attainments of the whole workforce, even for comparisons amongst industrialised countries.’ The average number of years’ schooling completed is similarly inadequate since there are important differences in rates of learning; for example, at ages 13-15 pupils in the lower half of the ability-range in England are, on our estimates (Prais and Wagner, 1985), the equivalent of 2 years behind their German counterparts in mathematical attainments; a similar, and perhaps greater, lag relates to average children in the United States in relation to Japan. It is precisely because there are many important practical issues of educational policy bearing on economic growth which need to be resolved (and which have not been resolved by approach B) that economist A contends there is need for detailed research at a basic level. Its object is to elucidate the main differences among countries in schooling attainments, and in vocational training and qualifications, which bear on work-competencies and productivity. The comparisons must relate to the broad cross-section of the workforce (not simply to the percentage with university qualifications) and must relate to schooling outputs and not simply schooling inputs (such as the average number of years in full-time schooling). It is a branch of study to which more resources need to be committed.’ - This paper was prepared with the support of the UK Economic and Social Research Council
Acknowledgements
and the Nuffield Foundation.
NOTES 1. His review of the book edited by Worswick (198.5) appeared in Economics of Education Review, (1986) Vol. 5, no. 4. pp. 439-440. 2. For details, see the comparative studies of the German and English systems published in the National Institute of Economic Review (NIER), August 1983, February and May 1985; subsequent studies of the French and Japanese systems appeared in that Review in May 1986, and February and May 1987. 3. A comparison of metal working plants in Britain and Germany appeared in NIER, February 1985; a similar comparison of furniture manufacturing plants will be published there in November 1987; and a study of clothing manufacturing is in progress. 4. The results of the 1964 IEA study were given by HusCn (1967), Vol. 1, pp. 22-23; provisional results of the 1981 IEA study were as given by Phillips (1986). p. 67 et seq.
260
Economics of Education Review 5. In the IEA study of 1964,24% of all 13 year-old English pupils obtained a score of 5 or fewer points out of a maximum of 70; this was the highest proportion of low achievers of all the countries listed (Hustn, op. cit., p. 22); as explained elsewhere (Prais and Wagner, 1985, Appendix B), the attainments of English pupils are even lower than prima facie appears from those studies. 6. Within Europe a start has been made by CEDEFOP (the European Communities’ Centre for Vocational Training in Berlin); it has published comparisons for electricians, motor mechanics, etc. 7. The German emphasis on vocational education, which is compulsory on a day-a-week basis for all 15-18 year olds not in full-time schooling, needs to be mentioned again here. Denison (1967, p. 108) gave it little importance; he said: “One would have to attach great weight to the part-time education provided by the part-time Berufsschule to avoid the conclusion that the future position of Germany with respect to the education of the labour-force will become decidely inferior to its neighbours”(!) Our own studies of productivity in matched plants in Britain and Germany lead precisely to the opposite conclusion, namely, that great weight should be attached to that system of vocational education. 8. How easy it is to be mistaken even on basic matters is illustrated by Denison’s citing one of the contributors to that volume who took Japan as an example of a country that “emphasizes education rather than training and avoids specialisation at all levels” (that contributor, in turn, had based himself on a rather hurriedly carried out British study). The reality of Japan is very different. A quarter of all Japanese youngsters aged 15-18 attend full-time specialised Vocational Secondary Schools (engineering, commerce, nursing etc.) in which half the day is devoted to vocational studies and practical work; and another tenth of all pupils attend full-time specialised higher technical schools for two years at ages 18-19 (Prais, 1987). Thus, some 35% of the population emerge from full-time education with highly-specialised technical qualifications which on our assessment are comparable with technician qualifications in Europe. REFERENCES DENISON, E.F. (1967) Why Growth Rates Differ. Washington: Brookings. HUSBN, T. (Editor) (1967) International Study of Achievement in Mathematics. Stockholm: Almquist & Wicksell. PHILIPS, R.W. (1986) Cross National Research in Mathematics Education. In POSTLETHWAITE, T.N. (Editors) International Educational Research. Oxford: Pergamon. PRAIS, S.J. (1987) Educating for productivity: comparisons of Japanese and English schooling and vocational preparation. Nat. Inst. Econ. Rev., February, 40-56. PRAIS,S.J. and WAGNER, K. (1985) Schooling attainments in England and Germany: some summary comparisons bearing on economic performance. Nat. Inst. Econ. Rev. May, 53-76. WORSWICK, G.D.N. (1985) Education and Economic Performance. Aldershot, England: Gower.
Eco,to,nrcs of Erlucuriort ReGw. Vol. 7. No. 2. pp. 257-2M). 1988. Printed in Great Britain.
Two Approaches to the Economics of Education: A methodological note S. J. PRAIS National
Institute
of Economic
and Social Research.
London
SW1 3HE.
U.K.
Abstract - In explaining the sources of international differences in productivity this paper argues that more comparative research is needed into the oufpurs of the education and training systems, particularly at the level of intermediate vocational qualifications.
Four prima facie relevant contrasts in education and training between Britain and Germany seem worthy of emphasis: (a) the system of obligatory day-release from work till age 18 to attend vocational classes; (b) pre-vocational instruction at school during compulsory schooling-ages; (c) schooling attainments in mathematics - especially high in Germany for those in the lower half of the ability range; (d) the attainment of “intermediate” vocational qualifications of nationally-recognised standards by the majority of the workforce.’ The details of such contrasts in initial vocational preparation (i.e. preparation while at school, or immediately after leaving full-time schooling) have implications of wide relevance, for example, for those concerned with raising the quality of US products in the face of Japanese competition; for those in developing countries on whether to put their limited resources into intermediate-level technician-training rather than into high-level university education; and for those having to decide whether pre-vocational instruction should, or should not, form part of the curriculum during the ages of compulsory schooling. For over a century perceptive observers of differences in the wealth of nations - including that great Cambridge economist Alfred Marshall have drawn attention to the longer-term economic advantages likely to accrue from their policies on schooling and vocational training to Germany and to those neighbours countries - such as Switzerland and the Netherlands following similar policies. The further recent developments in their vocational
EDWARD DENISON’S critical review’ of the British public policy conference-volume on Education and Economic Performance provides a convenient occasion to exchange ideas on two possible approaches (which we may neutrally call A and B) that applied economists may adopt to help public policy in this important and complex field. The approach taken in that volume (approach A), starts from a comparison between Britain and Germany, two countries very similar in population, area, natural resources and cultural development but with significant contrasts in economic progress in the past generation. Germany’s continuing industrial success in the production of cars and machine tools, to mention two well-known examples, contrasts with the sharp decline of such industries in Britain in the past generation; the technical quality of German products has acquired a justified renown, of a kind that in a previous generation often attached to British goods (“Made in England” was then the hallmark of quality); Germany’s manufacturing output per employee, and its real income per head, have overtaken Britain’s by a margin now obvious to the eyes of any traveller; and Germany’s youth unemployment problem seems to be under better control than Britain’s, The question to be asked is whether all this is related in some way to differences in education and training: and surely that is an entirely legitimate question which economists are obliged to try and answer. Very similar questions arise in comparing the United States and Japan. [Manuscript
received
19 February
1987: revision
accepted
for publication
257
30 September
1987.1
258
Economics
of Education
training systems are insufficiently appreciated by economists, nor is it sufficiently appreciated that the divergence has been growing from other countries (like Britain) in which increased length of compulsory schooling, focussing on general subjects, has displaced the study of vocational subjects and the industrial training previously given, say, at ages 14-16. Detailed observation of how operatives and foremen carry out their tasks in matched manufacturing plants in Britain and Germany has left us in little doubt (as previous observers found) that the systematic vocational training and qualification of the German workforce directly contributes in a very important way to greater efficiency at work.3 Comparisons of what goes on in vocational colleges in the two countries make it clear that the high standards of vocational qualification attained by such a large cross-section of the German workforce is founded on previous schooling; their system specifies syllabuses and standards for each year of compulsory schooling, and is accompanied by certifiable school-leaving standards (“high school diplomas”) covering 90% of pupils. Britain stands out in international comparisons of schooling attainnot merely for undistinguished average ments, scores, but for the high variability of its pupils’ scores in mathematics (a coefficient of variation of scores at age 13 which was 63% higher than in Germany or Japan in the IEA comparisons of 1964 and, according to provisional returns, a similar excess in 1981 when compared to Japan; Germany was not covered in this more recent inquiry).4 It is the long tail of low achievers at schools in England that has recently formed much of the hard core of the youth unemployment problem.5
THE OTHER
VIEW
Applied economist B may complain that comparisons between only two countries are insufficient to draw conclusive inferences. Further comparisons of a similar sort with France, Switzerland and Japan have been carried out, or are in progress; but Denison goes further in saying that “even more countries would not in any case be sufficient” because national income is determined by so many diverse factors that a full analysis is required (including multi-variate regression?). To this economist A has to say that more refined and comprehensive forms of analysis have not as yet
Review
gone far enough to be helpful. Let us look at three fundamental limitations to the kind of research in this field that applied economist of type B may have in mind. First, past attempts to attribute differences amongst countries’ real income-levels, or rates of growth, to measurable differences in national summary variables (often only imperfect “proxy” variables) representing capital, type of labour, its education, etc. marvellous and admirable as those attempts have been - have left the greater part of the story as an unexplained Residual. For example, for the United Kingdom in 1960 only a third of the difference from the US in real income per person was explained, and two thirds was left as a Residual in Denison’s earlier analysis (1967, p. 332). This unexplained Residual has been called by Denison the “Lag in the application of knowledge, general efficiency and errors and omissions”. It is a designation that has plausibility, but it does not go beyond that. The real work of understanding the sources of those “lags in the application of knowledge, etc.” - which must to some extent be related to the extent of technical and vocational training remains to be done. Secondly, the contribution of education and training - treated as a factor of production - has usually been measured in such aggregative studies fairly simply (perhaps forgivably, given the state of knowledge of these things at an international level) by an assumed rate of return applied to the average number of years of schooling of the workforce. The rate of return is usually estimated by comparing incomes of individuals in that population having different lengths of schooling (a “cross-section” analysis). But how satisfactory is this? Income differentials in Britain, as in many other countries, have become compressed as a result of decades of egalitarian pressures (by trade unions, by progressive taxation); they thus tend to under-estimate true productivity differences and the social rate of return. On the other hand, such estimates of returns to schooling are over-estimated because more education is usually received by those of higher ability, whether innate or attributable to home conditions: to what extent is it their higher ability, or their greater educational input, that accounts for their higher incomes or higher contribution to the nation’s output? The latter bias (that is the extent to which returns to education are over-estimated because of the
Two Approaches
to the Economics
ability-factor) presumably varies from country to country, depending on the degree of selectivity of the educational system of the country concerned, that is, on how closely additional schooling is related to pupils’ abilities or initial attainments. Considering changes over time in the resources devoted to education, a crucial question is whether added resources have focussed on pupils of high ability (for example, by increasing the proportion of pupils attending universities), or whether they have been spread more evenly by raising the general compulsory school-leaving age. In the latter event, have suitable curricula of instruction been provided for pupils of these higher ages, enabling them to tackle their first jobs better than if they had gone to work younger; or have the curricula for these ages been inchoate, lacking in direction, and seemingly pointless for many pupils? The brave attempts so far to sort out these conundrums in order to arrive at the proportion of higher incomes attributable to more education, as opposed to higher ability (the “alpha” factor), have been more a matter of judgement than scientifically convincing: and, perhaps more regrettably, may have diverted attention from the serious underlying issues. Thirdly, is it adequate to measure the volume of education simply in terms of inputs into schooling or, more simply, by the average number of years of schooling? Surely the subject matter (how much poetry and drama, how much technical drawing, how much electronics), and the pace at which it is mastered (i.e. the internal efficiency of the schooling system), are very important. The difficulty in carrying out any large-scale international study of vocational attainments (qualifications below university-degree level) is that there is little international agreement as to what level of knowledge and length of study is necessary before someone is to
of Education
259
be counted, for example, as a “mechanic”, “electrician” or “accountant”; consequently, it is not easy levels of intermediate to compare countries’ vocational attainments6 Looking at the minority of the population with university degrees, whether in all subjects combined or in technological subjects specifically, is easier - but cannot be taken as a satisfactory indicator of the attainments of the whole workforce, even for comparisons amongst industrialised countries.’ The average number of years’ schooling completed is similarly inadequate since there are important differences in rates of learning; for example, at ages 13-15 pupils in the lower half of the ability-range in England are, on our estimates (Prais and Wagner, 1985), the equivalent of 2 years behind their German counterparts in mathematical attainments; a similar, and perhaps greater, lag relates to average children in the United States in relation to Japan. It is precisely because there are many important practical issues of educational policy bearing on economic growth which need to be resolved (and which have not been resolved by approach B) that economist A contends there is need for detailed research at a basic level. Its object is to elucidate the main differences among countries in schooling attainments, and in vocational training and qualifications, which bear on work-competencies and productivity. The comparisons must relate to the broad cross-section of the workforce (not simply to the percentage with university qualifications) and must relate to schooling outputs and not simply schooling inputs (such as the average number of years in full-time schooling). It is a branch of study to which more resources need to be committed.’ - This paper was prepared with the support of the UK Economic and Social Research Council
Acknowledgements
and the Nuffield Foundation.
NOTES 1. His review of the book edited by Worswick (198.5) appeared in Economics of Education Review, (1986) Vol. 5, no. 4. pp. 439-440. 2. For details, see the comparative studies of the German and English systems published in the National Institute of Economic Review (NIER), August 1983, February and May 1985; subsequent studies of the French and Japanese systems appeared in that Review in May 1986, and February and May 1987. 3. A comparison of metal working plants in Britain and Germany appeared in NIER, February 1985; a similar comparison of furniture manufacturing plants will be published there in November 1987; and a study of clothing manufacturing is in progress. 4. The results of the 1964 IEA study were given by HusCn (1967), Vol. 1, pp. 22-23; provisional results of the 1981 IEA study were as given by Phillips (1986). p. 67 et seq.
260
Economics of Education Review 5. In the IEA study of 1964,24% of all 13 year-old English pupils obtained a score of 5 or fewer points out of a maximum of 70; this was the highest proportion of low achievers of all the countries listed (Hustn, op. cit., p. 22); as explained elsewhere (Prais and Wagner, 1985, Appendix B), the attainments of English pupils are even lower than prima facie appears from those studies. 6. Within Europe a start has been made by CEDEFOP (the European Communities’ Centre for Vocational Training in Berlin); it has published comparisons for electricians, motor mechanics, etc. 7. The German emphasis on vocational education, which is compulsory on a day-a-week basis for all 15-18 year olds not in full-time schooling, needs to be mentioned again here. Denison (1967, p. 108) gave it little importance; he said: “One would have to attach great weight to the part-time education provided by the part-time Berufsschule to avoid the conclusion that the future position of Germany with respect to the education of the labour-force will become decidely inferior to its neighbours”(!) Our own studies of productivity in matched plants in Britain and Germany lead precisely to the opposite conclusion, namely, that great weight should be attached to that system of vocational education. 8. How easy it is to be mistaken even on basic matters is illustrated by Denison’s citing one of the contributors to that volume who took Japan as an example of a country that “emphasizes education rather than training and avoids specialisation at all levels” (that contributor, in turn, had based himself on a rather hurriedly carried out British study). The reality of Japan is very different. A quarter of all Japanese youngsters aged 15-18 attend full-time specialised Vocational Secondary Schools (engineering, commerce, nursing etc.) in which half the day is devoted to vocational studies and practical work; and another tenth of all pupils attend full-time specialised higher technical schools for two years at ages 18-19 (Prais, 1987). Thus, some 35% of the population emerge from full-time education with highly-specialised technical qualifications which on our assessment are comparable with technician qualifications in Europe. REFERENCES DENISON, E.F. (1967) Why Growth Rates Differ. Washington: Brookings. HUSBN, T. (Editor) (1967) International Study of Achievement in Mathematics. Stockholm: Almquist & Wicksell. PHILIPS, R.W. (1986) Cross National Research in Mathematics Education. In POSTLETHWAITE, T.N. (Editors) International Educational Research. Oxford: Pergamon. PRAIS, S.J. (1987) Educating for productivity: comparisons of Japanese and English schooling and vocational preparation. Nat. Inst. Econ. Rev., February, 40-56. PRAIS,S.J. and WAGNER, K. (1985) Schooling attainments in England and Germany: some summary comparisons bearing on economic performance. Nat. Inst. Econ. Rev. May, 53-76. WORSWICK, G.D.N. (1985) Education and Economic Performance. Aldershot, England: Gower.