Robert Gregory, Guest Columnist
The challenge of development confronts us in every sphere of value-creating enterprise and endeavour in Jamaica. We ask why it is so difficult to get things done and to find competent people to engage in the process of development and wealth creation.
Those of us who have broader frames of reference compare how easily and efficiently transactions are concluded in an increasing number of overseas jurisdictions, and praise the productivity and know-how of their workforces. It could be reasonably argued that their core success/failure ingredient is an educated, and therefore trainable, population.
The more than 25-year decline in Jamaica's total factor productivity (the basic measure of our economy's international competitiveness) is said to be attributable to a multiplicity of factors, including the less-than-optimal availability of productivity tools at all levels of the Jamaican workplace and the absence of a truly enabling and facilitating public regulatory and administrative environment.
However, the dysfunction of our secondary education system - only 30 per cent of the graduating-age cohort are able to engage in sophisticated job training and certification and/or higher education - is also key to our failure.
Education and training are used by countries in response to the demands of today's knowledge-based global economy. Education is used to transform labour, a once cheap and available factor of production in the agriculture or manufacturing eras, into human capital.
The efficiency and effectiveness with which Jamaica processes all its citizens through quality early childhood, then primary and secondary education, and subsequently facilitate the maintenance of their professional and intellectual competitiveness through higher education and training as a lifelong learning imperative for all, is the core ingredient for Jamaica's equitable success and sustained prosperity.
COST/BENEFIT TO EDUCATE AND EXPORT
For the 2012-13 fiscal year, the total public expenditure budget for the entire education system is approximately J$72 billion. In addition to that public expenditure, parents, students themselves, family and other private financial supporters of our students conservatively contribute, say, another 25 per cent of the public expenditure, for a total of J$90 billion, or US$1.05 billion (@J$85 to US$1; the dollar has since moved to US$1: J$94).
Since the discussion about educating for export focuses on tertiary graduates, let us use basic undergraduate tuition costs at UWI, Mona, as an indicator for the tertiary system. The annual tuition fees for students at J$230,000 are said to cover only 20 per cent of the full economic cost of the education service provided. Therefore, the public purse annually contributes J$920,000 of the full annual tuition of J$1,150,000 per student. So, for a full three-year programme, the cost would be J$3.45 million.
If we assume the country produces 15,000 tertiary graduates per year, the total cost to the students and the public combined is J$51.75 billion, or about US$600 million.
The discussion supporting education for export, buoyed by World Bank statistics suggesting that the region is already losing 80 per cent of its tertiary graduates to migration, contends that this strategy is the most viable for two reasons: (1) Jamaica does not have the capacity to absorb all our tertiary graduates, and (2) they would earn much more overseas and would remit some of their earnings home. Jamaica lists remittances as one of the top two sources of foreign exchange inflows at US$2 billion annually.
On the surface then, we spend about US$600 million to produce 15,000 tertiary-trained graduates, of which we will lose to migration 80 per cent, or 12,000, at a cost to Jamaica of J$41 billion, or about US$490 million. Jamaica, therefore, gains four times as much in remittances than it spends each year. Case open and shut.
However, tertiary graduates represent Jamaica's prime supply of human capital, critically needed to operate the globally competitive 21st-century, knowledge-based economy it needs to compete and prosper.
MORE COST-BENEFIT ANALYSIS
Let us address two questions: What would be the opportunity cost of exporting 80 per cent of our human capital, presumably in exchange for remittance inflows? And, second, what categories of occupations actually send remittances home? Are they really our tertiary graduates?
Recently, the former prime minister of Barbados, Owen Arthur, citing CARICOM statistics, indicated that between 2000 and 2010, all 14 CARICOM countries combined issued approximately 87,000 work permits to allow entry to foreign skills not available locally. He noted that of this number, about 66,000 were issued to extraregional professionals.
Notwithstanding the obvious mismatch between the types of skills tertiary institutions graduate and the types of skills in demand in the region's economies, we export 80 per cent of our graduates, because we claim we do not have enough jobs to gainfully absorb them.
In regard to the opportunity cost, Jamaica, in recent years, has enjoyed higher-than-normal levels of foreign direct investment inflows, but has not been able to produce the commensurate economic growth and employment increases. The reason cited is the economy's low absorptive capacity. By this, it is meant that when investment dollars flow into the economy, the investors, be they foreign or local, seek to use this money to hire world-class professional skills and/or to procure locally, world-class goods and services.
With the local unavailability of either, the inflows go back out to pay for foreign professional know-how and/or to import the world-class goods and services needed. The ability of an economy to absorb and convert investment inflows into economic and enterprise growth and the employment of Jamaicans depends on one key element: the availability and quality of world-class Jamaican professional know-how and service providers.
This key element is largely the product of the Jamaican tertiary education system, so how can the country create this needed absorptive capacity while exporting 80 per cent of its tertiary graduates?
As for remittances, and the presumed return on the investment from exporting Jamaica's tertiary graduates, here are some interesting facts gathered from a 2010 Bank of Jamaica survey of national remittance recipients and their senders. Of all remittances, 62 per cent come from the USA, followed by the UK at 17 per cent, Canada at nine per cent, and Cayman at four per cent. Senders described as 'other relatives' remit 25.3 per cent of all remittances, followed by friends, at 17.7 per cent; siblings, at 17.4 per cent; and spouses, at 14.6 per cent, parents at 13.9 per cent; and children, at 9.7 per cent.
In our effort to confirm if our exported tertiary graduates are indeed responsible for the bulk of the inflows, we examined the occupational categories of the senders. The largest occupational group of senders is nurses, at 16.6 per cent; followed by construction workers, at 5.3 per cent; business owners, at 3.6 per cent; wage workers and teachers, at 3.1 per cent each; engineers, doctors and accountants, at 1.4 per cent, 1.4 per cent, and 1.5 per cent, respectively. These data would suggest that the assumption that our exported tertiary graduates provide the bulk of the remittance inflows is false.
GUIDING STATE SPENDING
The focus of government education expenditure should be on the following, in order of importance:
1. Complete the transformation of the secondary education system to effectively and efficiently educate and certify 95 per cent of the graduation-aged cohort, making them ready for higher education and/or high-value employment.
2. Ensure that all tertiary programme standards are world-class benchmarked and that the programme outputs are aligned with the skill needs of the major sectors of the economy.
3. Promote the changing investment profile of the Jamaican economy from a low-skilled low-wage workforce, to a high-skilled, high-wage knowledge workforce. This new profile will attract higher-quality job-creating investments, producing job opportunities that require educated, highly trainable graduates and pay good salaries.
By taking this approach, we will deepen the economy's absorptive capacity, lift the standard of living, grow the middle class, stem the brain drain, and sustain prosperity for the majority of our people.
Robert L. Gregory, former executive director of HEART/NTA and president of JAMPRO, is an associate at Mona School of Business and Management. Email feedback to email@example.com.Reprinted from MSB Business Review