Catalog

Country context

Although the general rule holds, that creating jobs for young people requires sustained economic growth, the experiences of India, Indonesia, Philippines, and Thailand are divergent with regard to the education system itself.

Viewing the countries in economic terms, it is well known that India has emerged from several decades of "lost growth" after independence to become one of the world's strongest-growing economies. A high investment rate, exceeding 38% of GDP in 2007, augurs well for continued expansion. The 11th Five-Year Plan focuses on "inclusive growth" for a wider distribution of its benefits.

Of the three Southeast Asian countries, Indonesia and Thailand (the most directly affected by the financial crisis) have moved to lower growth trajectories and have endured permanent losses in income. They have also suffered huge changes in economic structure: industrialization, for example, has gone into reverse; industrial labor productivity has been virtually stagnant since the crisis; and national unemployment rates (i.e., the share of the unemployed in the labor force) have moved and stayed higher. In Indonesia, growth has slowed to an average of 4.9% in 2001– 2006 compared with 7.8% a decade earlier. Investment has seen some recovery in recent years in Indonesia, standing at 23.2% of GDP in 2007, but its effects are yet to be felt.

Thailand's postcrisis growth has slowed markedly both relative to precrisis rates and to longer-run trends. Its investment rates tumbled following the crisis and are only now beginning to climb again, having reached 26.8% in 2007. Nevertheless, growth is once more expanding and, despite political disturbances, Thailand has maintained its status as a middle-income country.

The Philippines has had a much weaker growth record than either Indonesia or Thailand but was comparatively sheltered from the crisis. In recent years, its growth performance has strengthened, but investment rates remain very low, at 14.7% in 2007. Growth and investment are increasingly concentrated in non-labor-intensive services, and there is little evidence of growth of a dynamic industry sector.

In addition to a favorable economic climate, strengthening the job outcomes for young people requires improvements in education systems, since they have such a critical influence on employment skills and hence employment. In the short run, higher education and high-quality education improve the immediate job prospects of young people. A better educated and more skilled workforce promotes long-run economic growth and the general employment prospects of young people.

In this regard, Indonesia and Thailand are performing relatively well, in a context of rising education enrollment. The Philippines, though, is less fortunate, as it has a serious problem of school dropouts, particularly in rural areas (World Bank 2003). Moreover, its elementary school participation fell from 97% to 84% between 1999/2000 and 2005/06, following the reduction of education spending as a share of GDP from 4% to 2.4% during 1998–2005 (World Bank 2007a). India, too, is struggling educationally: although 40% of its population is under 18, 25% of its young workers are illiterate and 30% have incomplete elementary education. Government schools—the mainstay of education for poor children—suffer from a shortfall in buildings and education materials, lack of accountability, and widespread teacher absenteeism. One result is that in nine Indian states, more than 30% of village children attend private schools, where teachers are more accountable (Pratham 2008).

Central government spending on education also varies widely among the four countries: it comes to only 4% of central government expenditure in India, but is as high as 21% in Thailand (Figure 2.1.3). However, based on broad national accounts data, these numbers may underestimate the real level of spending on education. For example, adding state-level education spending to that of the central Government in India improves the figures to 12.8% of total government expenditure and 3.8% of GDP in 2004/05 (Government of India 2007). Similarly, including the subnational data for Indonesia, Arze del Granado et al. (2007) show a more accurate assessment of total education spending, which has been increasing in recent years: in 2006, it was estimated at 16.9% of government expenditure and 3.8% of GDP.

Notwithstanding the size of public spending, to a greater or lesser degree the education systems in the four countries suffer from weaknesses such as outdated curricula, poor education quality, low enrollment and high dropout rates, uneven regional pattern of education participation, limited avenues for vocational training and skills development, and weak education infrastructure.

All four countries boast national youth programs. However, these are relatively few or have had limited success. Lack of impact evaluation of their implementation is the key issue. Absence of labor-market information systems, mismatches among regions in demand for and supply of different skills types, inadequate rural–urban transportation linkages, and inadequacy of urban wages to cover the cost of risk from migration are common to all the countries. Given such failures, the private sector shies away from investment that could support job creation.

Another common factor is that young people are disadvantaged in their search for work compared with adults (Figure 2.1.4). But trends diverge sharply across the four countries. India and the Philippines appear to have maintained a stable ratio of youth to adult unemployment. In Indonesia the ratio is falling whereas in Thailand it is increasing. It would seem that since the crisis, the lower growth trajectory in Thailand has made the school-to-work transition more difficult for young people, whereas the moderate improvement in the relative position of young people in Indonesia reflects perhaps a return to farm and off-farm work, which absorbs excess labor.