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The Education-Employment Channel: The Proper Way Out

Our very own expert, Alaa A. Rahman talks about a much needed investment. The investment in education.
Alaa A. Rahman | 18.04.2016
A lot of focus has recently been geared towards sectors such as energy, real estate and financial markets as main powerhouses to driving the global, regional and local economies forward.

They are important cogs in the overall economic system of any country given the positive spillovers that ensue such as an inflow of currency, a stronger economic structure and a massive job creation bubble accompanied by a – supposed – surge in education. Sounds like a fairy tale, yes? Well, not really.

The thing is investments and business creation are very integral to the economic system of any given country – be it developed or emerging/under development. And since we’ve mentioned the job creation bubble that accompanies investment surges, we must mention one of the biggest dilemmas that investors deal with, which is the lack of educated skills and proper educative quality that will help cement their investments and ensure a proper profit generation cycle. This problem is more prominent in emerging/under development countries that struggle with establishing a proper education system.

Now let's focus on Egypt.

Here we have to shine the light on one of Egypt’s major impasses to its growth: education. A quick image of the situation:

- In 2007, 32 percent (68 percent) of Egypt’s population was illiterate (literate), down (up) to 26 percent (76 percent) in 2013 according to national statistics, which is still higher (lower) than the average worldwide illiteracy (literacy) rate of 16 percent (84 percent) in 2012.

- Most recently, Egypt ranks last in quality of education in the primary cycle with its Human Development Index settling among the lower 40 percent of all developing countries in 2014.

- Unemployment rate lies between 18-21 percent of the 25-54 age group with an unemployment rate reaching as far as 13 percent in the last two years on average.

- Out of 22 million workers, 42 percent are either illiterate or semi-literate (i.e. unable to read or write with ease and fluency), in addition to Egyptian workers being dubbed “unemployable” domestically and internationally due to their lack of skills and inability to cope with the newest techs in various industrial and service based fields.

However bad the situation may be, there is still hope things could turn around IF the proper policies are put in place. According to a study by Abdel-Rahman and Fuller (2014), a simple 20 percent increase in quality of education is enough to almost double GDP growth! Quality of education in this situation refers to the quality of the curriculum taught, the way generations upon generations of Egyptians learn in terms of thinking, applying, searching, analyzing and gaining skills that would help them reach the furthest of levels in their fields of study, and the important concept that education is about building human capital worthy of being called productive, not just a machine that takes in information and blurts it out on a piece of paper titled “exam”.

How does education fit in the whole channel of employment and investments then? The answer is simple:

- Investments (both private and public) should target not just increasing the number of classrooms and school buildings but aimed at improving the quality of school facilities such as laboratories, playgrounds and curriculum settings. With better minds, skills and capital, better employees are produced, ones that understand what everything is all about and will apply the skills needed to establish a successful investment.

- Improving technical and vocational education and training is a must if you are to produce able, skilled and efficient workers. A focus should be aimed at improving the status of technical and vocational schools. If properly reformed and maintained, on a short and long run basis, employability i.e. the fabric of workers needed to implement a successful investment, will improve dramatically by having better skilled and trained employees.

- The schooling process in Egypt is one that depends on how much the students are able to memorize to get the highest grades in their exams so they could go to the elite schools in the country such as medicine and engineering. This process should be taken down and reformed in a way to help youth develop their analytical abilities and skills, make them think and relate what they are studying to real life. They have to develop their skills to match the needed ones in the labor market.

I could go on and on about how important education is and how we should shape this sector into becoming one with greater efficiency but it would take me more than just one article to talk about it. Bottom line is, improving a country’s education system means improving the country’s human capital, which translates directly into higher investment efficiency, lower unemployment rates and a betterment of the overall economic structure of the country. Any government, not just the Egyptian one, should focus on enlightening their students: exams are not important at all against the needs of the labor market because these said needs are what matter not the grades.

Therefore, red tape procedures - as much as they are an impediment to establishing businesses and investments - are nothing compared to lack of skills and training. It is in the investors’ best interest that whenever setting up an investment or business, they pressure governments to up their education quality if they want their investments to work out. Quality before quantity!

image via Shutterstock/Matej Kastelic