A recent report on the European Economy for 2006 by an international economic research institute devoted one of the chapters to the issue of education; highlighting once more the intrinsic link between the two. To put it all into perspective, the other chapters dealt with strictly traditional economic issues such as macroeconomic policy, economic growth, competition policy and global imbalances. This shows that education, apart from its very important social role which should never be ignored, is also an important productive input into the wealth of the country.
Research has shown that countries with a higher level of Gross Domestic Product (GDP) per capita, have a better education system that in turns strengthens further their economy. On an individual level, every additional year spent in education translates itself into higher productivity and higher wages, and therefore a higher standard of living.
Education improves the labour input into the economy both quantitatively and qualitatively. Education acquires an even more important economic dimension today because of the rapid technological change, and it is again widely recognised that a better educated workforce is more capable of reaping the benefits of new technology, which again reflects itself into a higher GDP and a higher standard of living for the people.
Given this intrinsic link between education and the economy, it becomes critical in our country to start benchmarking educational outcomes with international ones. We do have some, such as for example illiteracy levels, or the percentage of young persons who continue their education beyond compulsory schooling age, or the percentage of the total population represented by graduates.
There has also been extensive research within the University of Malta, however mainly linked to pedagogical issues rather than economic ones.
We certainly need more such research, and ideally such research is based on similar work done by international organisations such as the OECD. An interesting conclusion that has been reached so far is that differences in achievements across countries are less due to the amount of public sector spending per pupil or the economic performance of the country, but more to the way the school system is managed. This implies that level of GDP is influenced by education achievements, but education achievements are less influenced by the level of GDP - hence money does not buy you education achievements but education achievements does get you money.
This issue is particularly interesting from an economic viewpoint, as it seems that education is affected by what economists term as the "cost disease". It is generally thought that when the achievement levels in education do not match expectations, then there is the need for further investment. In Malta, this has meant that the cost of education continues to be pushed further and further upwards. This would mean that as more and more investment is put into education, the costs of education relative to output tends to rise. This is because the basic technology of education has remained the same for the last centuries - a teacher in front of an audience of children.
On the other hand, for example in manufacturing, what happens is something totally different. Investment improves productivity in that output per worker increases, and so the cost of a unit of output falls relative to the cost of labour. In contrast, in education the cost of a unit of output increases relative to the cost of labour, especially as classroom sizes get smaller. This is not a treatise that aims to reduce the labour costs in education, but a suggestion that we need to manage better education to provide us with better results.
Research undertaken in Europe so far seems to suggest that the better results are achieved when there is a combination of autonomy in the provision of education, with a strong element of meritocracy based on a centralised examination system at the end of the compulsory education years. In effect the reform wanted by government in education is driven by a desire to have more autonomy while maintaining meritocracy. The next problem will be how to measure merit, as it is becoming increasingly evident academic achievements are not the only way to measure merit.
The circle is thus completed. A better managed education system (and not necessarily more money) produces a higher level of achievement by students, and a higher level of achievements mean a stronger economy.