Page 71 - Education for Development:George Psacharopoulos University of Illinois at Urbana-Champaign, USA

Education for Development: What Policies?c7

outcomes documenting high returns to investment in education, especially at the

basic level. As a result of such finding, the World Bank in the 1990s changed
dramatically its lending portfolio towards basic education. In the last ten
years or so, the significance of education for development has been reinforced

following the documentation of a series non-market effects of education such as
better health, less crime and better civics.
The higher the level of educational attainment of a person the more likely

for that person to participate in the labor market. The education effect in this
respect is particularly strong for women (OECD, 2009). As evidenced in many
countries, the higher the level of a person’s educational level the lower the
probability that the person would be unemployed (OECD, 2014).

Before blaming the educational system, i.e. the supply side, that is not
producing the right number and types of graduates to be employable in the

market, one should look at the demand side. High unemployment could be due
to a structural or institutional factor. Excessive labor market inflexibility by
means of a minimum wage, labor hiring-and-firing laws and the non-wage cost
of labor, deter employers from hiring, especially the young.

It is a universal fact with no exceptions that, on average, better-educated
persons earn more than the less educated. The education earnings premium is

especially high in developing countries.

Education returns

The higher earnings of graduates were obtained at a cost, equal to their
foregone earnings while studying and the resources needed to operate schools

and universities.
Two types of returns are usually estimated, each answering a different