The role of foreign aid in education and economic development
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¶ … Social Science Research Problem
"PIPA Policy Work Wonder Worker Bees"
From: Robert Lloyd, PIPA Executive Director Joshua
USAID foreign aid grant, education, and development
The standard of living of people and their per capital income are steadily increasing globally. Many factors contribute to the increase in the higher income, and these factors include education, globalization, and economic stability across countries. However, there is a positive correlation between higher earning and level of education. Education is defined as a formal learning that assists individuals to acquire knowledge, and skills to improve their standard of living and make them becoming useful members of society. Education is a critical tool to improve performances of individuals. On the other hand, income is defined as amount of money that individuals can make at a regular basis. Typically, income levels depend on the level of skills and knowledge that an individual has acquired over the years. Education is a critical tool that can assist people to acquire necessary skills and competencies in order to receive a regular income. Typically, education is very effective in fighting poverty, and education opens doors to different opportunities nationally and globally. People with a minimum level of education are able to secure good jobs and run a successful business that translate in higher standard of living. For example, people with secondary education or university education are likely to receive high incomes that can make them enjoying high standard of living. Skill development is very vital in reducing inequality, unemployment, and poverty. Skill development is a critical tool for enhancement of economic growth. Every $1 spent on education is able to generate between $10 and $15 in economic growth. (UNSCO, 2013) Education stimulates economic growth and reduces poverty within a country. Typically, quality education accumulates people's skills, knowledge and self-reliance needed to expand employment opportunities and increase income.
"Education is a key way of tackling poverty for women, and makes it more likely for them not just to be employed, but also to hold jobs that are more secure and provide good working conditions and decent pay." (UNESCO, 2014 p 25).
Many countries have realized the urgent needs to develop skills of a general population to enhance economic growth. A country that focuses on people's prosperity in a rapid global changing economy should pay a greater attention to the development of skilled workforce through educational attainment in order to assist them preparing fully for the national and global economy.
Despite the benefits of education towards economic growth, there is an argument centered on whether foreign aids for both primary and secondary educational programs can contribute to an increase in economic growth and income level. Within the last few years, some group of people have criticized a correlation between level of education and GNP per capita. The argument is that many low income countries receive foreign aids for primary and secondary education, yet these countries lag behind economically. On the other hand, some people believe that countries with higher number of people in secondary and tertiary institutions have recorded higher GNP capita level. Thus, many scholars believe that investment in education can lead to higher income level for a country. (Bloom, Canning, & Chan, 2006).
The report generates the following hypothesis to enhance a greater understanding whether more education can generate more income levels for a country.
H1: Increase in the educational levels of people contributes to higher income and GNP per capita of a country.
Ho: Increase in the Educational levels of people does not contribute to higher income and GNP per capita of a country.
The report tests the hypothesis by collecting data from World Bank. To test the hypothesis, the report demonstrates that if level of education is correlated to higher income, countries with higher level of education enrollment are likely to record high GNP per capital. In the contemporary educational environment, primary school education is a basic education and perquisite to secondary education, however, people with primary school education cannot be categorized as being educated. In essence, the number of people enrolled in a primary education will affect the number of enrollment in secondary education. Increase in the number of people in primary education enrollment will increase the number of secondary school enrollment. Thus, secondary education can make people to acquire skills and competencies to contribute meaningfully into the economy. On the other hand, tertiary education prepares individuals to integrate in a complex business world. People with tertiary education are likely to deliver a meaningful contribution to a country economic development.
The report establishes relevancy of primary education enrollment to secondary education enrolment. Moreover, the study establishes the correlation between the percentages of secondary school enrollment to GNP per capital level in a respective country. The essence of the report is to establish that how level of education contributes to GNP per capita of a country.
Fig 1: GNP vs. Primary Enrollment
For example, Madagascar recorded enrolment of 92 at the primary level in 1997 with income of $260. However, Denmark recorded 103 for the primary school enrolment, yet the country recorded $33, 040 in the same year. The data revealed that there was a small difference of primary school enrolment between Madagascar and Denmark yet Denmark recorded very high GNP per capital than Madagascar . Another significant comparison is between Nepal and Norway as being revealed in Table 1. Nepal recorded 113 enrolment at primary education; however, the GNP of the country is $210. On the other hand, Norway recorded 100 at primary level, yet, the GNP of the country is $34,310. Based on the data collected on the primary education enrollment and GNP per capita of all countries, it is revealed from the graphical illustration that the primary education does not have a positive correlation on the GNP per capita of a country. Thus, the report argues that the impact of primary education is to prepare people for secondary education since the graph reveals that there is no direct relationship between primary school enrollment and GNP per capital. Increase in the primary school enrollment does not have impact on the GNP per capital of a country.
Considering the relationships between GNP per capital and secondary education, it is revealed that there is indeed a correlation between secondary education and GNP per capita of a country. The Figure 2 establishes that there are indeed relationships between percentage of secondary education enrollment and the GNP per capital level of a country. Based on the data in Table 1, the enrollment of Secondary education for Ethiopia is 12 and GNP per capital was $100. However, Austria recorded 103 for the secondary school enrolment, and its GNP per capital was $26,830.
Fig 2: GNP vs. Secondary Education
Table 1: Country
Per Capital GNP $(1998)
Primary School Enrollment (1997)
Secondary School Enrollment
Ethiopia
43
12
Congo, Dem. Rep.
72
26
Burundi
51
7
Eritrea
53
20
Niger
29
7
Malawi
17
Mozambique
60
7
Nepal
42
Tanzania
67
6
Chad
58
10
49
13
Cambodia
24
Madagascar
92
16
Yemen, Rep.
70
34
Sudan
51
21
Nigeria
98
33
Uganda
74
12
Lao PDR
29
Togo
27
Zambia
89
27
Gambia, The
77
25
Kenya
85
24
Vietnam
57
Nicaragua
55
Tajikistan
95
78
Benin
78
18
Kyrgyz Republic
79
Moldova
97
81
Mongolia
88
56
Mauritania
79
16
Armenia
87
90
Azerbaijan
77
Senegal
71
16
Guinea
54
14
Lesotho
31
Cameroon
85
27
Zimbabwe
50
Indonesia
56
Congo, Rep.
53
Cote d'Ivoire
71
25
Albania
38
Sri Lanka
75
Papua New Guinea
80
14
Uzbekistan
78
94
Georgia
88
77
Syrian Arab Republic
1 020
43
Philippines
1 050
78
Jordan
1 150
71
57
Bulgaria
1 220
99
77
Morocco
1 240
86
39
Egypt, Arab Rep.
1 290
78
Macedonia, FYR
1 290
99
63
Kazakhstan
1 340
98
87
Romania
1 360
78
Ecuador
1 520
50
Algeria
1 550
63
Guatemala
1 640
88
26
Iran, Islamic Rep.
1 650
98
77
Paraguay
1 760
47
Dominican Republic
1 770
94
54
El Salvador
1 850
97
37
Namibia
1 940
62
Tunisia
2 060
64
Thailand
2 160
89
59
Belarus
2 180
98
93
Latvia
2 420
96
84
Peru
2 440
73
Colombia
2 470
67
Lithuania
2 540
98
86
Costa Rica
2 770
48
Panama
2 990
69
Botswana
3 070
65
Turkey
3 160
58
South Africa
3 310
95
Estonia
3 360
94
Venezuela, RB
3 530
91
40
Lebanon
3 560
81
Malaysia
3 670
64
Slovak Republic
3 700
94
Mauritius
3 730
65
Mexico
3 840
64
Poland
3 910
96
98
Gabon
4 170
56
Hungary
4 510
98
Trinidad and Tobago
4 520
99
74
Croatia
4 620
87
82
Brazil
4 630
62
Chile
4 990
75
Czech Republic
5 150
99
Uruguay
6 070
85
Saudi Arabia
6 910
76
61
Argentina
8 030
73
Korea, Rep.
8 600
94
Slovenia
9 780
98
92
Portugal
10 670
Greece
11 740
93
95
Spain
14 100
New Zealand
14 600
Israel
16 180
98
88
United Arab Emirates
17 870
89
80
Ireland
18 710
Canada
19 170
Italy
20 090
95
Australia
20 640
United Kingdom
21 410
Hong Kong
23 660
94
73
France
24 210
Finland
24 280
99
Netherlands
24 780
Belgium
25 380
Sweden
25 580
Germany
26 570
Austria
26 830
United States
29 240
97
Singapore
30 170
94
74
Japan
32 350
Denmark
33 040
Norway
34 310
Switzerland
39 980
97
Based on the data collected, the increase in the level of enrollment in the secondary education leads to an increase in the GNP per capital of countries. For example, Japan recorded 103 in the enrollment in the secondary education; however, the country recorded $32,350 GNP per capital. Comparative analysis of the secondary education enrollment and GNP per capital level of low income, lower middle and high-income country reveals that low-income countries recorded low percentages of secondary school enrollment compared to lower middle-income level. Moreover, high income countries recorded higher secondary school enrollment than middle income level country. Typically, the average secondary school enrollment for low-income country was 33. However, average secondary school enrollment for middle-income country was 63. The average secondary school enrollment increased to 76 for middle-income country. The average secondary school enrollment was 109 for high income country. Consequently, the study supports the hypothesis that states that more education level increase the country level of income. Countries with low level of secondary school education record lower GNP per capital compared to country with higher secondary enrollment, which record higher GNP per capital. Based on the analysis, secondary education is one of the most important factors for a country level of GNP per capital.
Based on the information presented in the Fig 1 that provides the correlation between primary school enrolment and GNP of countries, there is evidence that the percentage or number of people enrolled in the primary school are not relevant to the GNP per capital of a country. However, primary school education is still a useful foundation for a secondary school and tertiary education. Without a primary school education, it will be challenging an individual to pursue secondary school or tertiary education. However, individuals who only attain primary school education will not be able to contribute to the economic development of a country because these individuals are not equipped with basic literacy level to make them contribute to an economic development of a country. Their literacy level is just to read and write, which makes them an average citizen. Nevertheless, their level of education does not give them basic skills to contribute meaningfully to the economic front of a country. This group of people is categorized as unskilled labor because they are neither competent nor qualified based on their level of primary education. Based on this argument, their level of education is neither consistence nor correlated to the income level of a country.
Figure 3
The illustration in Fig 3 supports the argument that level of primary education does not contribute to the income level of a country. It is revealed that high-income country (102) and lower middle country (101) have almost the same level of primary school education enrolment, yet this group of countries record large a difference in the GNP per capital. Thus, the report reveals that there is a negative correlation between primary education enrolment and income level. The data also reveals that the attainment of primary education does not necessary make an individual to enroll in secondary or tertiary education.
Typically, there were average 85% of people enrolled in primary education in the low-income country, however, 33% of enrollment for secondary education. The data recorded implies that some people drop out of the educational system upon completing the primary school education. By consequence, countries with high level of drop out end up recording extremely low level of number of secondary school graduate, which consequently make them not having direct impact to the GNP per capita of country. Thus, there is no correlation between primary school education and income level of a country. In essence, primary school only opens opportunities for secondary and tertiary education.
Figure 4
Overview of Fig 4 reveals that there is a correlation between number of secondary enrollment and income level. Typically, increase in the number of secondary school enrollment leads to higher income in a country. As being revealed in Fig 4, the average number of secondary school enrollment is 33 for low-income country, however, average GNP per capita is $357. However, average number of secondary school enrollment increase to 63 for lower-middle country leading to an increase of $1,648 per capita in the lower-middle income country. In the middle-income country, the number of secondary school enrollment increased to 78 leading to an increase in average GNP per capital ($4,402). Similar event happens in high-income country because the average number of secondary school enrollment increased to 109 leading to an increase in GNP per capital ($22,898). The graph reveals that increase in the secondary school enrolment leads to an increase in the GNP per capital.
Several reasons are attributed to the positive correlation between secondary school enrollment and GNP per capital.
First, secondary level education can provide employment opportunity for people in both formal and informal sectors. Moreover, secondary level education can assist individuals to accumulate addition competitive skills that can be useful in a labor market. In essence, secondary level education is a foundation for a labor market. An individual with secondary education will be able to secure a lucrative employment in a labor market. More importantly, the secondary education can assist an individual to gain a useful employment in both white collar and blue-collar sector. Based on this argument, people with secondary school education are likely to contribute directly to the level of economy. Thus, without tertiary education, individuals with secondary school education can contribute to an economic development.
Moreover, secondary education can prepare an individual for tertiary education because with secondary school education certificate, people can acquire skills in tertiary education, which can make them developing skills and competencies that can assist them to work meaningfully in both blue collar and white collar sectors. Typically, people who are able to further their education have a bright prospect because they have a wide opportunity of being considered for job positions than people without education. Apart from pursuing their education in tertiary institutions, people with secondary education can acquire additional skills in several part time schools that can assist them to acquire skills to make them contribute meaningfully in a job market. These opportunities will make them acquire skills that can make them contribute effective to the economy. Thus, secondary education provides additional potential opportunities to contribute meaningfully to economic development of a country.
Another significant correlation between secondary education and GNP per capital is that economy of all countries depend on SMEs (small and medium enterprises), and these enterprises depend on people with secondary education. It is essential to realize that it is not necessary to run a business with only people from tertiary education, typically, many smaller organizations employ large percentages of secondary school leavers to run a business. Although, they employ few college or university graduates to assume managerial positions, nevertheless, many small enterprises can be entirely ran by secondary school leavers because several small businesses offer product and services to fill the market gap. However, they do not require people with advanced education to run their businesses, secondary school can fill all posts in the small enterprises.
Moreover, many medium enterprises require people with secondary education to fill some posts. For example, medium enterprises can use secondary school leavers to fill the posts of clerical works, secretarial jobs and other non-managerial positions. More importantly, people with secondary school education who have accumulated some years of experiences can assume the managerial positions in some companies. Based on this analysis, it is revealed that people with secondary level education can contribute a significant impact to the GNP per capita of a country. The graph has substantiated the point that percentage of secondary school enrollment has a direct proportion to the GNP per capita of a country.
In essence, a certificate acquired from a secondary school is very useful in gaining admission for tertiary education and an undergraduate diploma acquired from tertiary institutions increases the chance of individuals to land a lucrative job in medium and large enterprises. Typically, many big companies in the United States and other countries required people with tertiary education to hold managerial positions because these set people wills assist the company in a planning and control. Moreover, people with tertiary education can assist organizations in research and development since many companies rely on the outcome of research and development to develop and launch new product. Research and development also assists organizations to create an innovative product and services that can enhance economic development. Thus, countries with large number of people with college and university graduate diplomas will increase their GNP per capital level. Despite the benefits that a country can derive from the tertiary education, the secondary education is a stepping-stone to tertiary education. Increase in the number of secondary school enrollment will increase the number of enrolment in the tertiary education, which will consequently improve a country per capital income level.
Policy Recommendations
The report has established that education is very critical to the level of the GNP per capita of a country. However, secondary education is more useful than primary education because of its direct impact on the economy. Considering the costs of education in low-income countries, the USAID should disburse the foreign aids appropriate educational channel to make the funds having a direct impact on the economy. The USAID ought to realize that primary school education is a stepping-stone to secondary education. Without primary school education, attainment to secondary school education will be impossible.
Overview of the level of education in developing countries reveals that the provision of secondary school education is not enough because many people drop out after completing primary school education. The report recommends that the USIAD should disburse more foreign aids for secondary school enrolment than primary school enrolment since secondary school education has a direct impact to the GNP per capita of a country. Moreover, the level of secondary school enrolment is very low in low-income countries compared to the high-income countries, the USAID should disburse more foreign aids for low-income countries to increase the number of secondary school enrollment. However, disbursement of foreign aids to increase secondary education is not enough; the USAID should supervise how the aids have been used in the developing countries. The major reasons that make previous foreign aids not having a direct impact on GNP per capita level of low income countries is that these aids are not being directed towards the education-planned programs in developing countries. Many of the leaders in developing countries embezzle these funds at the expenses of educational development. Thus, the USAID should follow up the disbursement and implementation of these aids to ensure that they are being directed towards secondary educational developmental program in developing countries.
The paper also recommends that the USAID should collaborate with aids receiving governments to make adequate publicity to parents to educate them on the advantages of sending girls to secondary and tertiary educational institutions. Experience has revealed that large percentages of girls are being forced to drop out from schools because of the issue of marriages. Thus, the paper suggests that the USAID should make receiving governments to meet the target of the number of enrollment for the secondary education before they can be qualified for the USAID forthcoming aids. If the USAID provides aids for a country, the Agency should order the receiving country to meet certain number of secondary enrollments within few years before they can qualify for another aids on education. Using this strategy, the Agency will be able to increase the number of secondary school enrolments in the developing countries.
Reference
Bloom, D. Canning, D. & Chan, K. (2006). Higher Education and Economic Development in Africa. Human Development Sector Africa Region.
UNESCO (2013).EFA Global Monitoring Report 2013. United Nation Education Scientific and Cultural Organization.
UNESCO (2014).Teaching And Learning: Achieving quality for all Gender Summary. United Nations Education Scientific and Cultural Organization.
World Bank (1998). World Bank Development Indicator 2000. World Bank.
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