While trying to understand the structural economic issues of the country, it is important to take stock of the state of education in Pakistan. We have discussed previously how the government’s excuse for not investing in productivity growth has been that their funds had to be directed toward meeting the needs of the growing population instead. The needs mentioned in Vision 2025 were education, health, housing etc. We have already covered the abysmal state of housing in Pakistan, so let’s dive into education and health now.
We don’t spend enough
Public expenditure on education in Pakistan (2014-2019)
Starting with education in Pakistan, the country’s public expenditure on education is just over 2% of GDP, which is less than half the average of 4.7% in other emerging markets. This spend seems low but before the 18th Amendment, when education was devolved as a provincial subject, spend used to average between 1.7-1.8% of GDP. Additionally, if you take private expenditure on education in Pakistan into account, spend would actually be in line with emerging market averages.
According to I-SAPS, parents privately spent PKR 829 billion on education in Pakistan, with half (PKR 398 billion) going to private schools and the rest to the “shadow sector” which includes tuition centers. While the state is constitutionally ‘responsible for eradication of illiteracy and provision of free and compulsory education up to secondary level’, over 40% of students in Pakistan study in private schools. Limited provision of quality education has led to parents spending almost as much as the state itself on education (2% of GDP). Similar to the case of housing, where inadequate provision by the state has led to Pakistanis allocating an outsized amount of their consumption on housing, private education also adds to high consumption levels in Pakistan. If this 2% of GDP is directed towards domestic savings instead, it could help reduce the investment deficit in the country.
Literacy is a problem
However, when discussing education, we should not just talk about the money allocated but also outcomes. Punjab has consistently spent more than other provinces on education but that is due to its larger population. In 2018, on a per capita basis, Punjab actually spent 40% less than Balochistan. That is partly because the two are in different phases of development as Punjab has led the education reform agenda since 2003 in Pakistan, with support from the World Bank. The outcome of these reforms in Punjab has been encouraging, with literacy rates highest in the province.
Comparison of literacy rates within Pakistan vs. regional benchmarks
While the merits of literacy rate as an indicator can be debated, it provides a decent comparison point across provinces for outcome of education reform. It also provides a comparison point across countries. In 2010, United Nations Development Program moved on from using adult literacy rate as an indicator of human development to years of schooling, but Pakistan lags behind in both.
Pakistan had an adult literacy rate of 57%, which is lower than Sri Lanka’s 92% and India’s 69%. Another metric tracked earlier by UNDP was the proportion of secondary educated population, where Pakistan also lagged behind other regional peers. While 57% of Pakistanis above 15 years of age can read and write, only 37% of those above 25 years of age have some secondary school (12 or 13 years of education). The new metric used in the Human Development Indicators is mean years of schooling, which indicates how many years on average, a citizen has completed in education. The latest numbers suggest that the average Pakistani has completed 5.2 years of schooling as compared to Bangladesh’s 6.1 years, India’s 6.5 years, Iran’s 10 years and Sri Lanka’s 11.1 years. Across most metrics, you will notice education in Pakistan lagging behind other countries.
To get rich is glorious
We’ve used ‘to get rich is glorious’ several times in Macro Pakistani articles. The phrase comes from the Chinese leader Deng Xiaoping who believed that the path to growth was to allow some people to get rich first and then let the rising tide lift all boats. His policies unshackled China’s economy and created the tycoons and super-growth we see today. While the policies worked for China, its income inequality, by almost all measures, are one of the highest in the world. Pakistan’s income inequality levels are actually quite modest for now but are set to worsen over time.
Comparison of educational outcomes by income level
As discussed before, Pakistan’s level of intergenerational mobility is quite low, which means there is a higher likelihood that rich will remain rich for generations to come. A primary reason for this is the disparate access to education for the rich and the poor in the country. While the average literacy for the country is at 60%, the level for the richest and poorest households is 83% and 35% respectively. If we consider qualitative outcomes for education as well, the richest perform significantly better than the poor do. For general knowledge, Urdu comprehension and word problems, the highest quartile of wealth holders performed almost twice as well as the lowest quartile. As the poor continue to be left behind in education, they will be left behind in access to better job opportunities as well. This cycle will continue to perpetuate and lead to increasing income inequality in the country.
Money buys higher scores
The causal relationship between higher income and education is a bit unclear. Does being rich lead to better education or does a better education lead to becoming rich? However, what is clear is that developed countries with higher incomes are more likely to have better educational outcomes.
Global comparison of education quality vs. income levels
One of the indicators used to measure educational outcomes at a country level is harmonized test scores. This helps judge the quality of education through harmonized testing around the world. Plotting that metric against income levels shows how test scores from low-income countries are lower than those from high income developed economies. If you observe the highlighted countries in the chart above, a few things should jump out.
As with literacy and years of schooling, Pakistan lags behind Bangladesh, India, Sri Lanka and Iran. However, it also slightly lags behind Afghanistan, which is a much poorer country. On the other hand, Vietnam, which is a low-middle income country like Pakistan, has test scores comparable to most developed countries like the United States. While some cite sampling issues as a concern, it is clear that Vietnam is doing something right. It spends almost 6% of GDP on education, has a well-defined curriculum for math and science and a strong work ethic that commits both teachers and students to learning.
The middle is missing
The problem Vietnam faces now is that they do not have enough places in tertiary education. With a demographic boom, similar to Pakistan’s, there is intense competition for university places. Only 15% of total enrollment is in private universities. These problems are in stark contrast to Pakistan’s where 7% of total enrollment is in private and public tertiary institutes combined. Tertiary institutes include vocational training and degree colleges in addition to universities.
Student enrollment by institutions in Pakistan (2014-2019)
University enrollment is an indicator of the quality of a country’s workforce. With a more qualified workforce, better job opportunities emerge and income levels rise. The issue of lagging tertiary education in Pakistan actually begins in middle school. Growth rates for enrollment in middle school are the lowest across all other education levels. With around 2% growth in population, 4.3% growth in primary schooling is encouraging. However, this growth falls to 3.4% when we progress to middle school, signaling that fewer people are moving past grade 5 in Pakistan.
We don’t like the middle
Most Macro Pakistani readers will know we enjoy connecting macro data with micro data to see if the story makes sense. While growth rates in enrollment at a macro level indicate that fewer students are graduating to middle school from primary school, another fantastic district level survey in Pakistan confirms that through dropout rates.
Proportion of students dropping out by class level in Pakistan
The survey measures dropout rates at each class level and shows that the rate grows from almost zero in Class 1 to 19% in Class 6. As compared to 2014, dropout rates across class levels fell in 2019 but the highest proportion of students continued to dropout in Class 6, when they enter middle school. According to the Annual Status of Education Report (ASER) 2019, 57.35% of out-of-school children from wealth quartile 1 (poorest 25%) and 53.84% out-of-school children from wealth quartile 2 reported poverty as the reason for leaving or never enrolling in school. This shows the impact that economic status continues to have on enrollment decisions in Pakistan. According to UNICEF, 44% the total population between the ages of 5 and 16 years are out of school. This means nearly 23 million students either never enrolled or have dropped out of education in Pakistan.
Higher education gets more money
The issue of dropping out in middle school is important because it reduces the pool of future students that can be enrolled in secondary and later tertiary education. While there are cultural reasons behind denying students education in Pakistan (particularly for females), there are rational economic reasons too. For each additional year of schooling, especially at older ages, parents from low income households weigh the opportunity cost of ‘wasting’ another year of not earning income versus investing in education for future higher returns.
Marginal income benefit from additional years of schooling by gender in Pakistan
Dropping out in middle school is actually a rational choice for wageworkers because the value add from just enrolling in middle and lower secondary school is negative. The negative returns to middle schooling are even greater for females than males. This implies that middle and lower secondary school educated dropouts have less value in the job market than primary school dropouts. This should make intuitive sense since the skills gained in classes 6-8 only prepare you for coursework in class 9 and above. The next significant returns to education after primary school are experienced in higher secondary and tertiary education. These returns imply scarcity of both secondary school and university graduates, for whom there is demand in the job market.
They do care for us
Most Pakistanis are not aware that Pakistan actually has a conditional cash transfer program to keep children in school. Though its reach is limited to 50 districts across the country at present, the Waseela-e-Taleem program has managed to keep 3.2 million students in school by providing support of PKR 750 per quarter to families.
Students impacted by Waseela-e-Taleem program by area
Conditional cash transfers are payments made to households subject to the fulfillment of pre-defined conditions, such as sending their kids to school. These programs with strings attached have seen success in other geographies. A community based transfer program saw literacy rates rise significantly for children who were out of school previously in Tanzania. In Equador, it helped raise the probability of enrollment by 8 to 9 percentage points while in Argentina it improved secondary school attendance only for boys between the ages of 15 and 17 years. There have also been cases where similar programs have not been successful and Macro Pakistani will do a complete deep dive to discuss them later.
For now, the PKR 12 billion spent on Waseela-e-Taleem as part of the Benazir Income Support program since 2012, deserves appreciation. The conditional cash transfer program requires primary education enrollment for students between 4-12 years of age with a 70% attendance record. Recently, the amount disbursed was increased to PKR 1,000 per quarter specifically for girls, in recognition of the prevalent gender divide. The current government also plans to expand the program to 100 districts by 2020. The spend for this program stands at 0.03% of GDP, well below the 0.6% Argentina spends on its program, so there is room to grow. A lot more effort will be required to bring the state of education in Pakistan up to regional standards and ensure the necessary human capital development that future growth will require. We will discuss another important component of human development of health next time.