LAC Skills for the 21st century Emerging Messages - IZA by hcj

VIEWS: 17 PAGES: 38

									    Skills for the 21st
     Century in LCR
 B A N K T E A M : C R I S T I A N A E D O , I A N W A L K E R , PA B L O
     A C O S TA , A N A M A R I A O V I E D O , J AV I E R L U Q U E
C O N S U LTA N T S : T I M G I N D L I N G , G U I L L E R M O C R U C E S ,
  LEONARDO GASPIRINI, GREG VERAMENDI, NANCY
        G U E R R A , K E N D O D G E , J O H N M I D D L E TO N




                                                                       May, 2011
Outline
   Context / motivation: LCR’s declining education earnings premia: is
    the education system to blame? Does it matter? What should we do about
    it?
   Findings:
     Falling earnings premia
     Supply , demand and institutional factors underlying the
      trend
       Should we worry?
         Evidence on learning achievement and quality

         Evidence on the skill content of work and skill shortages.

       Policy take-aways
         Reasons to be cheerful; Reasons for concern.

   Future work

    2
1. What has happened on education
earnings premia?




3
Education earnings premia have
declined…….
                        Evolution of education earnings premiums in LCR
Coefficients on years of education variable from the Mincer-style monthly earnings regressions, full-time private
                                    sector employees, basic OLS regressions




4
0.16
…continuously for secondary; unevenly
for tertiary (kink around 2003) ….




5
        … but remain high, even when
        controlling for parents’ education
                      - Estimated earnings premiums by country, around 2008
        Full-time private sector paid employees (asalariados), dependent variable is real monthly earnings.
 i. OLS (not including parent's education as an explanatory variable)
                                       Chile        Brazil       Costa Rica Nicaragua           El Salvador Colombia Mexico   Peru     Uruguay
 Education Level                       (2006)       (2008)      (2008)      (2005)              (2008)      (2008)   (2008)   (2008)   (2008)
 Years of Education                    0.12         0.10        0.09             0.10           0.08          0.12   0.12     0.11     0.10
 Vs. primary inc.
 Primary comp.                         0.11         0.26        0.12             0.29           0.11          0.21   0.19     0.15     0.20
 Vs. primary comp.
 Secondary tech. comp.                 0.39         na          0.43             0.42           na            na     0.69     na       0.40
 Secondary ac. comp.                   0.32         0.25        0.32             0.37           0.38          0.42   0.62     0.26     0.45
 Vs. Secondary ac. Comp.
 Non-univ. tertiary                    0.44         na          0.25             0.31           0.42          0.43   0.30     0.37     0.53
 University comp.                      1.12         0.92        0.71             0.77           0.99          1.21   0.79     0.94     1.07

 ii. OLS (including parent's education as an explanatory variable, data only for children living with parents)
                                 Chile      Brazil     Costa Rica Nicaragua El Salvador Colombia Mexico                       Peru     Uruguay
 Education Level                 (2006) (2008) (2008)                 (2005)       (2008)         (2008)       (2008)         (2008)   (2008)
 Years of Education                    0.10         0.09        0.08             0.10           0.08          0.11   0.12     0.10     0.07
 Vs. primary inc.
 Primary comp.                         0.07         0.21        0.07             0.30           0.14          0.16   0.21     0.16     0.18
 Vs. primary comp.
 Secondary tech. comp.                 0.26         na          0.37             0.50           na            na     0.63     na       0.26
 Secondary ac. comp.                   0.22         0.22        0.26             0.40           0.33          0.54   0.55     0.29     0.28
 Vs. Secondary ac. comp.
 Non-univ. tertiary                    0.31         na          0.36             0.31           0.51          0.34   0.52     0.27     0.32
 University comp.                      0.93         0.71        0.66             0.72           0.78          0.97   0.77     0.78     0.73
           6
Note: Regressions also control for potential experience, gender and region.
2. Understanding the trends: supply
and demand factors




7
Educational expansion is transforming
emerging cohort in LCR (25-35 non students)




8
    Mean years of education




9
But other regions are doing better
                   Latin America and the Caribbean                                                                     Eastern Europe and Central Asia
     100%                                                                                                100%

     80%                                                                                                 80%

     60%                                                                                                 60%

     40%                                                                                                 40%

     20%                                                                                                 20%

      0%                                                                                                  0%
            1950
                    1955
                           1960
                                  1965
                                          1970
                                                 1975
                                                        1980
                                                               1985
                                                                      1990
                                                                             1995
                                                                                    2000
                                                                                           2005
                                                                                                  2010




                                                                                                                1950
                                                                                                                       1955
                                                                                                                              1960
                                                                                                                                     1965
                                                                                                                                            1970
                                                                                                                                                   1975
                                                                                                                                                          1980
                                                                                                                                                                 1985
                                                                                                                                                                        1990
                                                                                                                                                                               1995
                                                                                                                                                                                      2000
                                                                                                                                                                                             2005
                                                                                                                                                                                                    2010
            No educ               Primary               Secondary              Tertiary                         No educ              Primary              Secondary              Tertiary


                                         Asian Tigers                                                                          Advanced economies
     100%                                                                                                100%

     80%                                                                                                 80%

     60%                                                                                                 60%

     40%                                                                                                 40%

     20%                                                                                                 20%

      0%                                                                                                  0%
            1950
                    1955
                           1960
                                  1965
                                          1970
                                                 1975
                                                        1980
                                                               1985
                                                                      1990
                                                                             1995
                                                                                    2000
                                                                                           2005
                                                                                                  2010




                                                                                                                1950
                                                                                                                       1955
                                                                                                                              1960
                                                                                                                                     1965
                                                                                                                                            1970
                                                                                                                                                   1975
                                                                                                                                                          1980
                                                                                                                                                                 1985
                                                                                                                                                                        1990
                                                                                                                                                                               1995
                                                                                                                                                                                      2000
                                                                                                                                                                                             2005
                                                                                                                                                                                                    2010
            No educ               Primary               Secondary              Tertiary                         No educ              Primary              Secondary              Tertiary


10
… and we are still miles behind
                           Educational attainment 1990-2010
     11
     10
      9
      8
      7
      6




          1990                                                                              2010
                                                   Year

                 Latin America and the Caribbean          Advanced economies
                 East Asian Tigers                        Eastern Europe and Central Asia


11
Demand shifters seem to be the main
drivers of falling wage premia (Katz-Murphy
aproach)
  Changes in the Wage Premium and the Supply and Demand for Skilled (Tertiary
           Educated) vs. Unskilled (Other Educational Groups) Workers
                                                             Relative demand   Relative demand
                        Wage premium       Relative supply       σsu=2             σsu=3
                        1990s 2000s        1990s 2000s       1990s 2000s       1990s 2000s
          Argentina      3.5     -2.4       4.6      2.4      11.5     -2.3      15.0     -4.7
          Bolivia        7.9     -4.6       -0.2     5.1      15.6     -4.1      23.5     -8.7
          Brazil         -0.4    -3.2       1.6      4.4      0.8      -1.9      0.4      -5.1
          Chile          0.5     -1.9       3.1      1.1      4.1      -2.7      4.6      -4.7
          Colombia       2.5     -2.0       6.4      6.0      11.5     2.1       14.0     0.1
          Costa Rica     0.4     -0.2       4.0      3.4      4.9      3.0       5.3      2.8
          Ecuador                -3.2                3.4               -3.0               -6.3
          El Salvador    1.7     -0.1       5.5      -0.3     8.9      -0.4      10.6     -0.5
          Honduras       0.0     -1.9       2.6      2.3      2.6      -1.4      2.6      -3.3
          Mexico         1.8     -2.8       3.6      2.2      7.2      -3.5      9.0      -6.3
          Nicaragua      3.5     -6.9       4.6      6.6      11.6     -7.2      15.0    -14.1
          Panama         0.3     -2.3       2.3      2.4      2.9      -2.2      3.1      -4.4
          Paraguay       0.8     -5.6       5.3      6.1      6.9      -5.2      7.6     -10.8
          Peru           0.6     -2.8       0.2      3.8      1.3      -1.8      1.9      -4.6
          Uruguay        2.2     -1.3       2.9      -0.8     7.3      -3.5      9.6      -4.8
          Venezuela      1.1     -4.8       3.9      4.2      6.2      -5.4      7.3     -10.3
          Mean           1.8     -2.9       3.4      3.3      6.9      -2.5      8.6      -5.4
 Source: Own calculations based on microdata from household surveys. Details on sample years, survey and
                      methodology are available in Acosta, Cruces, Gasparini (2011).
12
in Cono Sur…
                                                                                          Argentina                                                                                                                                                                                            Brazil
                                  1.60                                                                                                                            0.25                                                     1.20                                                                                                                                            0.30
                                  1.40                                                                                                                            0.20                                                                                                                                                                                                     0.25




                                                                                                                                                                                               Demand and Supply Indexes
     Demand and Supply Indexes




                                                                                                                                                                                                                           1.00
                                  1.20                                                                                                                            0.15                                                                                                                                                                                                     0.20




                                                                                                                                                                                                                                                                                                                                                                                   Wage Premium Index
                                                                                                                                                                          Wage Premium Index
                                                                                                                                                                                                                           0.80                                                                                                                                            0.15
                                  1.00                                                                                                                            0.10
                                                                                                                                                                                                                           0.60                                                                                                                                            0.10
                                  0.80                                                                                                                            0.05
                                                                                                                                                                                                                                                                                                                                                                           0.05
                                  0.60                                                                                                                            0.00                                                     0.40                                                                                                                                            0.00
                                  0.40                                                                                                                            -0.05                                                                                                                                                                                                    -0.05
                                                                                                                                                                                                                           0.20
                                  0.20                                                                                                                            -0.10                                                                                                                                                                                                    -0.10
                                                                                                                                                                                                                           0.00
                                  0.00                                                                                                                            -0.15                                                                                                                                                                                                    -0.15
                                 -0.20                                                                                                                            -0.20                                                    -0.20                                                                                                                                           -0.20




                                                                                                                                                                                                                                   1981
                                                                                                                                                                                                                                           1983

                                                                                                                                                                                                                                                     1985
                                                                                                                                                                                                                                                                1987
                                                                                                                                                                                                                                                                         1989
                                                                                                                                                                                                                                                                                1991
                                                                                                                                                                                                                                                                                         1993
                                                                                                                                                                                                                                                                                                   1995
                                                                                                                                                                                                                                                                                                              1997
                                                                                                                                                                                                                                                                                                                      1999
                                                                                                                                                                                                                                                                                                                              2001
                                                                                                                                                                                                                                                                                                                                       2003
                                                                                                                                                                                                                                                                                                                                                 2005

                                                                                                                                                                                                                                                                                                                                                            2007
                                                                                                                                                                                                                                                                                                                                                                    2009
                                         1986

                                                 1988

                                                           1990

                                                                         1992

                                                                                  1994

                                                                                          1996

                                                                                                    1998

                                                                                                                  2000

                                                                                                                           2002

                                                                                                                                  2004

                                                                                                                                           2006

                                                                                                                                                         2008
                                                                                                                                                                                                                                                 Relative supply                              Relative demand                                 Wage premium
                                                 Relative supply                           Relative demand                               Wage premium

                                                                                           Paraguay                                                                                                                                                                                       Uruguay
                                 1.00                                                                                                                             0.15                                                     1.60                                                                                                                                            0.45



                                                                                                                                                                                               Demand and Supply Indexes
                                                                                                                                                                  0.10                                                                                                                                                                                                     0.40
     Demand and Supply Indexes




                                 0.80                                                                                                                                                                                      1.40




                                                                                                                                                                                                                                                                                                                                                                                   Wage Premium Index
                                                                                                                                                                  0.05
                                                                                                                                                                          Wage Premium Index
                                                                                                                                                                                                                           1.20                                                                                                                                            0.35
                                 0.60                                                                                                                                                                                                                                                                                                                                      0.30
                                                                                                                                                                  0.00                                                     1.00
                                 0.40                                                                                                                             -0.05                                                                                                                                                                                                    0.25
                                                                                                                                                                                                                           0.80
                                                                                                                                                                  -0.10                                                                                                                                                                                                    0.20
                                 0.20                                                                                                                                                                                      0.60
                                                                                                                                                                  -0.15                                                                                                                                                                                                    0.15
                                 0.00                                                                                                                                                                                      0.40                                                                                                                                            0.10
                                                                                                                                                                  -0.20
                                 -0.20                                                                                                                                                                                     0.20                                                                                                                                            0.05
                                                                                                                                                                  -0.25
                                                                                                                                                                                                                           0.00                                                                                                                                            0.00
                                 -0.40                                                                                                                            -0.30
                                                                                                                                                                                                                                   1992
                                                                                                                                                                                                                                          1993
                                                                                                                                                                                                                                                  1994
                                                                                                                                                                                                                                                         1995
                                                                                                                                                                                                                                                                  1996
                                                                                                                                                                                                                                                                         1997
                                                                                                                                                                                                                                                                                1998
                                                                                                                                                                                                                                                                                       1999
                                                                                                                                                                                                                                                                                                2000
                                                                                                                                                                                                                                                                                                       2001
                                                                                                                                                                                                                                                                                                               2002
                                                                                                                                                                                                                                                                                                                      2003
                                                                                                                                                                                                                                                                                                                             2004
                                                                                                                                                                                                                                                                                                                                     2005
                                                                                                                                                                                                                                                                                                                                              2006
                                                                                                                                                                                                                                                                                                                                                     2007
                                                                                                                                                                                                                                                                                                                                                             2008
                                                                                                                                                                                                                                                                                                                                                                    2009
                                         1995
                                                1996
                                                        1997
                                                                  1998
                                                                           1999
                                                                                  2000
                                                                                         2001
                                                                                                 2002
                                                                                                           2003
                                                                                                                    2004
                                                                                                                           2005
                                                                                                                                  2006
                                                                                                                                         2007
                                                                                                                                                  2008
                                                                                                                                                           2009




                                                 Relative supply                           Relative demand                               Wage premium                                                                                             Relative supply                              Relative demand                                  Wage premium




13
The Andes…
                                                                                                 Bolivia                                                                                                                                                                                    Chile
                                  0.80                                                                                                                            0.30                                                      0.50                                                                                                                                   0.10
                                  0.70                                                                                                                            0.25                                                      0.45
     Demand and Supply Indexes




                                                                                                                                                                                               Demand and Supply Indexes
                                  0.60                                                                                                                                                                                      0.40                                                                                                                                   0.05




                                                                                                                                                                          Wage Premium Index




                                                                                                                                                                                                                                                                                                                                                                           Wage Premium Index
                                                                                                                                                                  0.20
                                  0.50                                                                                                                                                                                      0.35
                                  0.40                                                                                                                            0.15                                                      0.30                                                                                                                                   0.00
                                  0.30                                                                                                                            0.10                                                      0.25
                                  0.20                                                                                                                            0.05                                                      0.20                                                                                                                                   -0.05
                                  0.10                                                                                                                                                                                      0.15
                                                                                                                                                                  0.00
                                  0.00                                                                                                                                                                                      0.10                                                                                                                                   -0.10
                                 -0.10                                                                                                                            -0.05                                                     0.05
                                 -0.20                                                                                                                            -0.10                                                     0.00                                                                                                                                   -0.15
                                          1997

                                                    1998

                                                                  1999

                                                                                2000

                                                                                         2001

                                                                                                   2002

                                                                                                           2003

                                                                                                                     2004

                                                                                                                                   2005

                                                                                                                                                 2006

                                                                                                                                                          2007




                                                                                                                                                                                                                                   1990
                                                                                                                                                                                                                                   1991
                                                                                                                                                                                                                                   1992
                                                                                                                                                                                                                                   1993
                                                                                                                                                                                                                                   1994
                                                                                                                                                                                                                                   1995
                                                                                                                                                                                                                                   1996
                                                                                                                                                                                                                                   1997
                                                                                                                                                                                                                                   1998
                                                                                                                                                                                                                                   1999
                                                                                                                                                                                                                                   2000
                                                                                                                                                                                                                                   2001
                                                                                                                                                                                                                                   2002
                                                                                                                                                                                                                                   2003
                                                                                                                                                                                                                                   2004
                                                                                                                                                                                                                                   2005
                                                                                                                                                                                                                                   2006
                                                                                                                                                                                                                                   2007
                                                                                                                                                                                                                                   2008
                                                                                                                                                                                                                                   2009
                                                 Relative supply                                Relative demand                           Wage premium                                                                                           Relative supply                            Relative demand                            Wage premium


                                                                                                  Peru                                                                                                                                                                                Venezuela

                                 0.50                                                                                                                             0.15                                                     0.80                                                                                                                                    0.10



                                                                                                                                                                                               Demand and Supply Indexes
                                                                                                                                                                                                                           0.60                                                                                                                                    0.05
     Demand and Supply Indexes




                                 0.40                                                                                                                             0.10




                                                                                                                                                                                                                                                                                                                                                                            Wage Premium Index
                                                                                                                                                                                                                                                                                                                                                                   0.00
                                                                                                                                                                          Wage Premium Index
                                                                                                                                                                                                                           0.40
                                 0.30                                                                                                                             0.05                                                                                                                                                                                             -0.05
                                                                                                                                                                                                                           0.20
                                 0.20                                                                                                                             0.00                                                                                                                                                                                             -0.10
                                                                                                                                                                                                                           0.00
                                                                                                                                                                                                                                                                                                                                                                   -0.15
                                 0.10                                                                                                                             -0.05                                                    -0.20
                                                                                                                                                                                                                                                                                                                                                                   -0.20
                                 0.00                                                                                                                             -0.10                                                    -0.40                                                                                                                                   -0.25
                                                                                                                                                                                                                           -0.60                                                                                                                                   -0.30
                           -0.10                                                                                                                                  -0.15
                                                                                                                                                                                                                                   1989
                                                                                                                                                                                                                                          1990
                                                                                                                                                                                                                                                  1991
                                                                                                                                                                                                                                                         1992
                                                                                                                                                                                                                                                                1993
                                                                                                                                                                                                                                                                       1994
                                                                                                                                                                                                                                                                              1995
                                                                                                                                                                                                                                                                                     1996
                                                                                                                                                                                                                                                                                             1997
                                                                                                                                                                                                                                                                                                    1998
                                                                                                                                                                                                                                                                                                           1999
                                                                                                                                                                                                                                                                                                                  2000
                                                                                                                                                                                                                                                                                                                         2001
                                                                                                                                                                                                                                                                                                                                2002
                                                                                                                                                                                                                                                                                                                                       2003
                                                                                                                                                                                                                                                                                                                                              2004
                                                                                                                                                                                                                                                                                                                                                     2005
                                                                                                                                                                                                                                                                                                                                                            2006
                                         1997

                                                 1998

                                                           1999

                                                                         2000

                                                                                  2001

                                                                                          2002

                                                                                                   2003

                                                                                                          2004

                                                                                                                  2005

                                                                                                                            2006

                                                                                                                                          2007

                                                                                                                                                   2008

                                                                                                                                                           2009




                                                                                                                                                                                                                                             Relative supply                            Relative demand                                Wage premium
                                                        Relative supply                            Relative demand                               Wage premium



14
…and Central America
                                                           Costa Rica                                                                                                                                                Honduras
                             1.40                                                              0.20                                                      0.80                                                                                                                         0.05
                             1.20




                                                                                                                             Demand and Supply Indexes
 Demand and Supply Indexes




                                                                                                                                                         0.60                                                                                                                         0.00
                                                                                               0.15




                                                                                                                                                                                                                                                                                              Wage Premium Index
                                                                                                        Wage Premium Index
                             1.00                                                                                                                        0.40
                                                                                                                                                                                                                                                                                      -0.05
                             0.80                                                              0.10                                                      0.20
                             0.60                                                                                                                                                                                                                                                     -0.10
                                                                                               0.05                                                      0.00
                             0.40
                                                                                                                                                                                                                                                                                      -0.15
                                                                                                                                                         -0.20
                             0.20
                                                                                               0.00                                                                                                                                                                                   -0.20
                             0.00                                                                                                                        -0.40

                             -0.20                                                             -0.05                                                     -0.60                                                                                                                        -0.25




                                                                                                                                                                 1991


                                                                                                                                                                               1993


                                                                                                                                                                                         1995


                                                                                                                                                                                                       1997


                                                                                                                                                                                                                     1999


                                                                                                                                                                                                                               2001


                                                                                                                                                                                                                                             2003


                                                                                                                                                                                                                                                       2005


                                                                                                                                                                                                                                                                     2007


                                                                                                                                                                                                                                                                               2009
                                     1989
                                     1990
                                     1991
                                     1992
                                     1993
                                     1994
                                     1995
                                     1996
                                     1997
                                     1998
                                     1999
                                     2000
                                     2001
                                     2002
                                     2003
                                     2004
                                     2005
                                     2006
                                     2007
                                     2008
                                     2009
                                                                                                                                                                         Relative supply                             Relative demand                           Wage premium
                                     Relative supply       Relative demand      Wage premium

                                                            Mexico                                                                                                                                                   Panama
                             1.40                                                               0.40                                                     1.20                                                                                                                         0.10
                                                                                                0.35                                                                                                                                                                                  0.05
                             1.20                                                                                            Demand and Supply Indexes   1.00
 Demand and Supply Indexes




                                                                                                0.30




                                                                                                                                                                                                                                                                                              Wage Premium Index
                                                                                                                                                                                                                                                                                      0.00
                                                                                                        Wage Premium Index



                             1.00                                                                                                                        0.80
                                                                                                0.25                                                                                                                                                                                  -0.05
                             0.80                                                               0.20                                                     0.60
                                                                                                                                                                                                                                                                                      -0.10
                             0.60                                                               0.15                                                     0.40
                                                                                                                                                                                                                                                                                      -0.15
                                                                                                0.10                                                     0.20
                             0.40                                                                                                                                                                                                                                                     -0.20
                                                                                                0.05
                             0.20                                                                                                                        0.00                                                                                                                         -0.25
                                                                                                0.00
                             0.00                                                               -0.05                                                    -0.20                                                                                                                        -0.30
                                                                                                                                                                 1982

                                                                                                                                                                        1984

                                                                                                                                                                                  1986

                                                                                                                                                                                         1988

                                                                                                                                                                                                1990

                                                                                                                                                                                                              1992

                                                                                                                                                                                                                     1994

                                                                                                                                                                                                                            1996

                                                                                                                                                                                                                                      1998

                                                                                                                                                                                                                                             2000

                                                                                                                                                                                                                                                    2002

                                                                                                                                                                                                                                                              2004

                                                                                                                                                                                                                                                                     2006

                                                                                                                                                                                                                                                                            2008
                                     1989
                                     1990
                                     1991
                                     1992
                                     1993
                                     1994
                                     1995
                                     1996
                                     1997
                                     1998
                                     1999
                                     2000
                                     2001
                                     2002
                                     2003
                                     2004
                                     2005
                                     2006
                                     2007
                                     2008




                                         Relative supply      Relative demand      Wage premium                                                                          Relative supply                             Relative demand                           Wage premium



15
In both decades changes in skills demand
reflect mainly “within” sector effects




  16   Source: Own calculations based on household surveys. Details on sample years, survey and methodology
                             are available in Acosta, Cruces, Gasparini (2011).
Minimum wages likely played a role in
compressing secondary skill premia
                                Evolution of Real Minimum Wages, 1995-2007
     300




     250



                                                                                                      Argentina
     200
                                                                                                      Brazil
                                                                                                      Chile
                                                                                                      Colombia
     150
                                                                                                      Costa Rica
                                                                                                      El Salvador

     100                                                                                              Mexico
                                                                                                      Peru
                                                                                                      Uruguay

     50




       0
           1995   1996   1997   1998   1999   2000   2001   2002   2003   2004   2005   2006   2007

 Source: Oficina Internacional de Trabajo (ILO), Santiago office, "Evolucion de los salarios en America Latina,"
 mimeo, Santiago, October 2008
17
…when the MW (blue line) trends up,
secondary premium (red line) trends down
  Comparing the real minimum wage index with secondary and university earnings premia
  2.00                                                    1.40
                         Brazil                           1.20
                                                                                  Chile
  1.50
                                                          1.00
                                                          0.80
  1.00
                                                          0.60
  0.50                                                    0.40
                                                          0.20
  0.00
                                                          0.00
                                                                 1990 1992 1994 1996 1998 2000 2003 2006
                 University       Secondary     Real MW                   University Secondary    Real MW

  1.40                                                    1.40
  1.20
                     Colombia                             1.20
                                                                             Costa Rica
  1.00                                                    1.00
  0.80                                                    0.80
  0.60                                                    0.60
  0.40                                                    0.40
  0.20                                                    0.20
  0.00                                                    0.00
          1997                2003            2008               1998   2000     2002   2004    2006   2008
                 University      Secondary      Real MW                    University    Secondary     Real MW



 18
     3. Should we worry?




19
Secondary expansion has not eroded
learning attainment
                      - PISA results
                 Math                  Read
                 2000      2009        2000   2009
     Argentina   387       389         412    399
     Brazil      334       386         391    412
     Chile       383       421         409    450
     Mexico      390       418         422    425
     Peru        293       365         323    370
                 2003      2009        2003   2009
     Uruguay     422       427         435    426
                 2006      2009        2006   2009
     Colombia    370       381         385    413
     Source:
     OECD
20
     Better grade-age correspondence is an
     important trend …..

                       Average Grade Attainment in PISA
                                      2000 2009        
                    Argentina           9.6    9.4     
                    Brazil              8.5    9.1     
                    Chile               9.5    9.7     
                    Mexico              9.4    9.5     
                    Peru                9.3    9.8     
                                      2003 2009        
                    Uruguay             9.5    9.4     
                                      2006 2009        
                    Colombia            9.6    9.7     
Authors´ elaboration based on OECD.
       21
…linked to improved equality of
educational opportunity in many countries




 22
… and contributing to improved PISA scores,
apart from Argentina and Uruguay.
           Importance of Grade Attainment on PISA Mathematics scores
 Country         BASE YEAR (BY)   YEAR 2009        ADJUSTMENT      % EXPLAINED BY
                                                                       GRADE
              (STR_BY*SCORE_BY) (STR_09*SCORE_09) (STR_09*SCORE_BY) STRUCTURE
                      A                 B                 C          (C-A)/(B-A)
 Base year 2000
 Argentina           387               388               366           -2,100%
 Brazil              334               386               355             41%
 Chile               383               421               398             40%
 Mexico              390               418               392              7%
 Peru                293               365               312             26%
 Base year 2003
 Uruguay             423               427               415            -200%
 Base year 2006
 Colombia            370               381               373             27%

 STR: Estimated structure



   23
 Tertiary quality also appears stable,
 based on analysis of earnings variance
            Comparing the coefficient of variation of real monthly earnings to earnings premiums for workers with
                                                      university education


2.00
1.80                                 Brazil                                         3.00
                                                                                                                      Chile
1.60                                                                                2.50
1.40
                                                                                    2.00
1.20
1.00                                                                                1.50
0.80
0.60                                                                                1.00
0.40
                                                                                    0.50
0.20
0.00                                                                                0.00
       1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008                    1990    1992      1994      1996     1998      2000      2003      2006
            Earnings Premiums for University Complete Education (Basic
                                                                                            Earnings Premiums for University Complete Education (Basic
            regressions, full-time paid employees)
                                                                                            regressions, full-time paid employees)
            Coefficient of Variation (for the earnings of those with a university
                                                                                            Coefficient of Variation (for the earnings of those with a university
            complete education)
                                                                                            complete education)

2.50                                                                                1.20
                                  Colombia                                                                       Costa Rica
2.00                                                                                1.00
       24                                                                           0.80
1.50
But there ARE reasons to worry

    East Asian trends look very different
    The quality gap for LAC in PISA scores
     remains large
    LAC’s pattern of occupational expansion is
     not at the cutting edge
    Signs of skill shortage and mismatch




    25
Asian tigers: a contrasting pattern of
increasing attainment AND premia




26
Based on PISA, LCR’s secondary quality gap
remains big, versus OECD

                       Comparison of LAC countries and OECD in PISA*
                    MATH                                                  READING

 550                                                  550

 500                                                  500

 450                                                  450

 400                                                  400

 350                                                  350
                                                      300
 300
                                                               2000       2003        2006       2009
        2000      2003          2006     2009
               OECD (Non LAC)      LAC                                    OECD (Non LAC)        LAC

       * LAC line represents the average performance of Argentina, Brazil, Chile, Mexico, and Peru in PISA.
       Source: Own elaboration based on OECD.




  27
      and LCR under-performs, relative to
      income level

           2009 PISA MATH SCORE AND GDP PER CAPITA                          2009 PISA READING SCORE AND GDP PER CAPITA
600




                                                                      550
                                                                      500
500




                                                     MATH SCORE




                                                                      450
                                                                                                          CHL
                                    URY
                                     CHL
                                    MEX    TTO
400




                                                                                                      URY
                                                                                                      MEX
                                                                                                 COL BRA        TTO
                                   ARG




                                                                      400
                               COL BRA
                                                                                                     ARG
                             PER PAN

                                                                                                PER PAN

                                           LAC

                                                                      350
300




                                                                                                                LAC
                                                                      300
200




                                                                            -2        0           2                   4   6
      -2           0           2                 4                6                       LOG GDP PER CAPITA
                       LOG GDP PER CAPITA




      28
     LCR skill quotients are inferior to USA,
     for high end “new economy” skills (Autor-
     Levy-Murnane approach)

                         Distribution of skills in the labor force1
                                                           Costa                         El
                                      USA        Brazil    Rica       Mexico   Nicaragua Salvador
Non routine Cognitive Analytical      3.04       2.81      2.80       2.76     2.66      2.65
Non Routine Cognitive Interpersonal 3.10         2.95      2.95       2.95     2.90      2.86
Routine Cognitive                     3.13       3.05      3.03       2.94     2.93      2.99
Routine Manual                        2.47       2.63      2.72       2.63     2.76      2.70
Non Routine Manual Physical.          2.31       2.55      2.58       2.60     2.70      2.62
1/ Scale 1 to 5. A score of 5 denotes high importance of skill.




       29
Suggesting possibility that LCR skill use
evolution reflects supply constraints….
      Dynamic trends in skill distribution in Brazil, Costa Rica and Nicaragua compared with
                                               the USA
                         USA                                       BRAZIL
      70                                                     70
      65                                                     65
      60                                                     60
      55                                                     55
      50
                                                             50
      45
                                                             45
      40
                                                             40
      35
                                                             35
      30
                                                             30
                   1980                       2008
                                                                         1981               2009
            NRCA          NRCI    RC     RM           NRMP
                                                                  NRCA      NRCI       RC   RM          NRMP



                            COSTA RICA                                      NICARAGUA
      70                                                     70
      65                                                     65
      60                                                     60
      55                                                     55
      50                                                     50
      45                                                     45
      40                                                     40
      35                                                     35
      30                                                     30
                   2001                   2009                           2001                    2009

            NRCA          NRCI   RC      RM          NRMP         NRCA          NRCI   RC   RM          NRMP

            NRCA: Non Routine Cognitive Analytical, NRCI: Non Routine Cognitive Interpersonal,
 30                    RC: Routine Manual, NRMP: Non Routine Manual Physical
Home country education quality correlates to
immigrant graduate skill uses in US market
- Correlation of education quality in migrants’ country of origin and skill content of work
                                      done in the USA
                COGNITIVTE SKILLS AND ANALYTICAL SKILL                                                                                                 COGNITIVTE SKILLS AND INTERPERSONAL SKILL
                  CONTENT OF LABOR FORCE BY COUNTRY OF ORIGIN                                                                                                 CONTENT OF LABOR FORCE BY COUNTRY OF ORIGIN




                                                                                                                                         3.25
                                                         Argentina                                                                                                                                   Argentina
3.3




                                                                                                                                                                             Panama
                                                                     Interpersonal skills - scale 1 to 5




                                                                                                                                            3.2
                                                             Chile                                                                                                                                       Chile
3.2




                                 Panama                                                                                           Cuba
                                                                                                                                                                                                                                Uruguay   Cuba




                                                                                                                                         3.15
                                                                                                                                                                                                                   Costa Rica
3.1




                                                                                                             Costa Rica Uruguay
                                                 Colombia
                                                                                                                                                                                              Colombia




                                                                                                                                            3.1
                                                    Brazil                                                                                                                                      Brazil
      3




                               Nicaragua Peru                                                                                                                                                Peru
                                Ecuador                                                                                                                                         Nicaragua




                                                                                                                                         3.05
                  Dominican Republic
                                                                                                                                                                            Ecuador
                                     El Salvador                                                                                                              Dominican Republic
2.9




                                                                                                           Mexico                                                                                                Mexico
                                   Guatemala                                                                                                                                         El Salvador
                                       Paraguay




                                                                                                                                                  3
                                                                                                                                                                               Guatemala
2.8




                                                                                                                                                                                    Paraguay

          400               450                  500       550                                                             600    650                 400                450                 500       550                         600    650
                                                  SERCE SCORE                                                                                                                                 SERCE SCORE
          Includes only individuals with tertiary edu.                                                                                                Includes only individuals with tertiary edu.




      31
Enterprise survey evidence on time to fill skilled
vacancies in LCR reinforces this message…

       Average time to fill vacancy by regions of the world




  32
… as does the evidence on time taken by
innovative firms: a constrained sector?
     Average weeks to fill vacancy by firm’s innovation status




33
     3. Conclusions




34
Reasons to be cheerful
    LCR’s large education expansion hasn’t eroded quality
    Downturns in skill premia likely reflect easing of
     (relative) shortages (winning Tinbergen’s race) rather
     than erosion of quality (Katz-Murphy analysis)
    Improved outcomes for children from poor
     backgrounds in some countries (EOI)
    Reduced skill premia help reduce Ginis and poverty
    Institutional factors such as minimum wages have
     helped, in most places
    Skill premia still high enough to stimulate demand for
     secondary and tertiary education


    35
    Reasons to worry
   Big quality gap may be constraining path of
    development
        East Asia still has rising premia in spite of higher
         and faster growth of attainment: not the same thing?
        LCR lags OECD by the equivalent of 2 years
         schooling @ age 15 (PISA).
        Quality improving only slightly and due to better
         grade-age matches, not intra grade efficiency.
        Shortage of New Economy skills may constrain
         growth at cutting edge: a second class continent?




    36
Future work
    Improving our understanding of skill – labor
     market linkages
        Getting data with direct observations of skills,
         beyond the “Big Five”.
        High end (New economy skills)
        Low end (social literacy skills)….
        New skills surveys in FY 12 in Bolivia, Colombia, El
         Salvador (MDTF, BNPP)
    Improving regulatory information in TVET
        Benchmarking methodology designed
        Piloting underway in Argentina
        Rollout next year
    37
Thank you




38

								
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