Saturday, September 10, 2016
Why are Indonesians being left behind?
Lant Pritchett highlights the vast difference in performance of test takers from Indonesia and Denmark. Citing an OECD Skills Study from 2016, Pritchett points out that adults in Indonesia with tertiary education performed worse in PIAAC than those with upper secondary education in Denmark. Indonesians with tertiary education and Danes with less than secondary education had the same average score of 234.
According to Pritchett, this is an indication that the quality of education is low in developing countries. But while there is no doubt that education quality is an issue, there are a few more things to consider.
Each additional level of education adds a similar average PIAAC score in both countries. Moving from less than upper secondary to upper secondary, the average PIAAC score increases by about 37 points for Indonesia and 30 points for Denmark. Similarly, moving from upper secondary to tertiary level increases the average score in both Indonesia and Denmark by 28 points.
Additional years of schooling improve literacy skills by similar amounts in the two countries, so schools in developing countries do seem to add value. But comparing the added value of higher education across the two countries could be problematic due to differing degrees of self-selection.
The innate ability of individuals who obtain higher education relative to their countrymen with less education could be higher in Indonesia than in Denmark. This is potentially because the cost of education is higher in Indonesia. So it is not clear how much of the difference in scores between secondary to tertiary-educated individuals is due to selection and how much is the effect of more schooling.
A big part of innate ability is determined by childhood environment. An extensive body of literature finds that poor childhood circumstances affect adult outcomes, including learning. Improving the quality of schools will not be enough to raise performance without also paying attention to improving childhood circumstances.
The PIAAC score also does not take into account the effect of the labour market. After all, most individuals obtain education to improve their labour market skills and therefore earnings potential. If these skills are not adequately employed in the labour market, then they could depreciate. This rate of depreciation is likely higher in developing countries than developed countries because such skills are used less intensively.
The PIAAC created an index of the use of reading skills in work. The data reveals a similar pattern — scores for Indonesians are much lower than for Danes. But the gap is much largher for those who use higher levels of reading skills at work.
Among those who work at jobs with the least amount of reading, tertiary-educated Indonesians score between Danes with less than upper secondary education and Danes with upper secondary schooling. This still indicates a relatively lower quality of education in Indonesia.
But availability of jobs that use the skills learnt in school is also important. In general, working in a role that required higher levels of reading improved PIAAC test scores, at times by amounts comparable to adding another level of education.
What is clear is that any cross-country comparison of skills through standardised tests conflates many country-specific factors that affect skills with the quality of education. To assess education quality and develop appropriate policies, childhood circumstances and the nature of employment opportunities must also be considered.
Rashesh Shrestha is an Associate Lecturer in the Arndt-Corden Department of Economics at the Crawford School of Public Policy of The Australian National University.