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Adriana Kugler is a Full Professor at the McCourt School of Public Policy, Georgetown University. 


"My Medicaid Matters" rally on Capitol Hill, September 21, 2011. Photo credit: Flickr @SEIU

As the dust settles from the U.S. "Great Recession" and the ensuing global recession, many theories circulate about both the nature of the recessions and the success or failure of government economic policies to reinvigorate economies. A welcome perspective to this debate is Adriana Kugler, a Full Professor in Georgetown University’s McCourt School of Public Policy and the Chief Economist at the U.S. Department of Labor in 2011-2012.

On the U.S. policy side, she tells us that the package of policies aimed at boosting aggregate demand (including stimulus money, the Recovery Act, Work Opportunity Tax Credits, and even Medicaid) were effective in lowering unemployment. That said, a lesson learned is that some of these outlays at the state level could have been better targeted — for example, spent on education or income-support programs. As for the longer-term policies (including unemployment benefits, skills assessments, and job search and entrepreneurial training) they, too, worked well. But Kugler cautions that the long-term unemployment rate is still too high and the United States is "not out of the woods" (see figure below).

U.S. long-term unemployment still too high
 
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(See Part 1 for insights on the nature of the recession and the resulting high unemployment.)​

Adriana Kugler is a Full Professor at the McCourt School of Public Policy, Georgetown University.

 
A "sign of the times?", Arizona, November 19, 2009. Photo credit: Flickr @Nick Bastian


As the dust settles from the U.S. "Great Recession" and the ensuing global recession, many theories circulate about both the nature of the recessions and the success or failure of government economic policies to reinvigorate economies. A welcome perspective to this debate is Adriana Kugler, a Full Professor in Georgetown University's McCourt School of Public Policy and the Chief Economist at the U.S. Department of Labor in 2011-2012.

She tells us that the "Great Recession" (Dec. 2007 — June 2009) — compared to past U.S. recessions (dating back to the 1960s) — stands out in two key ways: (i) the depth of the crisis (a much bigger drop in aggregate demand) and (ii) the fact that government jobs didn't contribute to the jobs recovery (see figure below). As for the 5.5 percentage-point rise in the unemployment rate — a higher increase than even the 4.8-point-rise in the 1980s — Kugler estimates that two-thirds of this was cyclical (associated with business cycles) and one-third was structural (associated with issues like a skills or geographical mismatch). However, she plays down worries about a growing skills mismatch, citing recent employer surveys that show that this is a lesser problem than in the past. And she insists that it hasn't been a "jobless" recovery.

Government jobs not pulling their weight in U.S. recovery
 
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(Part 2 will examine policy issues and labor mobility.)

Maciej Lis is Senior Economist at the Institute for Structural Research (IBS), Warsaw.
 

Over the past 25 years, Poland has made tremendous progress on the economic front — closing by half the GDP per capita gap with developed countries. However, it now needs new engines of growth to keep the pace, lower the high youth unemployment rate — at 24 percent — and make better use of the available labor. One way to achieve this would be improving human capital, which is also essential for further structural change — such as reducing the agricultural sector's role, modernizing industry, and enhancing productivity in services.

Laying cobblestone
Laying cobblestones in Krakow. Photo credit: Flickr @Let Ideas Compete

That is why it's encouraging to see better international educational test scores in recent years in Poland for 15-years old (PISA) and the working population (PIAAC), on top of higher enrollment rates in tertiary education over the past 15 years. Yet, some concerns must still be raised about the overall quality of education and skills preparation for a workforce in an increasingly high-tech, dynamic, globalized world. Keep in mind that although educational systems strongly influence the formation of skills, it might take 10 to 20 years for a higher quality education to be felt in the labor market. Thus, an accurate diagnosis of current educational output is crucial for not only assessing the impact of educational changes but also the anticipated future shape of the labor force — and thus the country's future growth potential.

High Marks for Progress in Most Areas

Let's start with the good news. In the latest round of PISA (Programme for International Student Assessment) testing, Polish 15-year-olds were counted among the best in the OECD in terms of achievement in math, reading, and science tests (see Figure 1). These achievements occurred after a period of little progress in scores between 2003 and 2009. That said, Polish teenagers were already in the forefront of the European Union (EU) as early as 2003. Polish high school students outperform not only their peers from Western and Eastern Europe but also their older colleagues. This means that today's 15 -year-olds would outperform the gymnasium (junior high school) graduates from 3, 6, or 9 years ago, if travelling in time were possible. Moreover, the most recent improvements in skills extends to top, medium, and weak students — in other words, a reduction in the percentage of students who cannot cope with even the simplest problems was accompanied by an increase in the percentage of those being able to solve complex problems. In earlier PISA testing rounds, it was mainly the weaker students who improved.

Figure 1: Major educational advances except in problem-solving
(PISA scores in Poland, Finland, U.S., and whole OECD: 2000-2012)


Source: OECD

The improvement in skills of Polish students is affirmed by the results of the PIAAC (Programme for the International Assessment of Adult Competencies) study, which investigates the skills of the population aged 16-65 (see Figure 2). The gap between Poland and the OECD average disappears for the youngest cohort (16-19) in all three dimensions studied — problem solving, numeracy, and literacy. Still, Poland has a ways to go to catch up with Finland.

Figure 2: The younger the better
PIAAC 2012 results by age group


Source: OECD

Problem Solving Poses a Major Problem

The not-so-good news is that solving creative problems is much more difficult for Polish students, according to an additional PISA module (see Figure 1). They are clearly below the OECD average, with the top gap in the OECD between results from other tests and creative problems solving. In other words, math and reading test results would imply that good as well as weak students would score much better when solving creative problems. Moreover, Poland is behind the United States in this module, although it is ahead in the other modules. Even the PIAAC score in problem-solving puts Poland below the OECD average except for the youngest cohort (see Figure 2). Complicating factors might be Poland's lower level of urbanization and lower level of technological saturation compared with not only top scorers like Korea and Japan but also regional neighbors like Estonia and the Czech Republic.

One other educational measure — Poland's specific gymnasium final exam — raises additional worries (see Figure 3). The raw scores of the exam cannot be easily compared among cohorts, owing to fluctuations in the level of difficulty of tests in subsequent years. However, this problem could be dealt with by using appropriate statistical techniques that would yield comparable results over time. The conclusions are not very optimistic: the results in math and science have worsened since 2008, although those for the humanities have remained stable

Figure 3: A mixed report card at the gymnasium level
(Standardized gymnasium test score in Poland)


Source: pwe.ibe.edu.pl

Origins and Outlook

What might be driving the improvements in some areas? First, the education system has benefitted from greater demographic changes in recent years, resulting in fewer schools (especially primary schools in rural areas), smaller class sizes, and the typical merging of gymnasiums with secondary schools (rather than with primary schools) in one building. Second, although commuting to schools in larger agglomerations is more cumbersome and costly, it enables children from vulnerable backgrounds to catch up more quickly. Third, the core syllabus for gymnasiums has been sharpened and made more cohesive between successive levels of education. Fourth, there might be a delayed benefit of the rising tertiary education enrollment in the 1990s and the sharp rise in the percentage of university graduates aged 25-29 — up from 8 percent in 1995 to 42 percent in 2012 — given the vital role of family in skills formation.

Certainly the overall better report card for Polish teenagers bodes well for their and Poland's future. However, it is far too early to declare the educational system a great success, given the disappointing results on problem-solving skills — an essential tool for succeeding in the labor market — and employer complaints about ill-equipped youth (a reflection also of problems with vocational schools and even universities). But improvement on the skills front will be much tougher than adjusting the educational syllabus to international standards, a situation that many countries have to contend with.

Brij Kothari is Professor of Communication at the Indian Institute of Management, Ahmedabad, and the Founder of PlanetRead.
 

In India, the formal sector accounts for only 6% of the total labor force of nearly 500 million. This means that the bulk of labor participation is in the informal sector, trapped in a vicious cycle of low skills, low wages, and low productivity. If these individuals are to have a fair chance at not only upping their job skills, perhaps through vocational training, but also leveraging these gains on social and emerging technological fronts to escape their cycle of poverty, they must have basic functional literacy (not just nominal "literacy"). However, the vast majority of these individuals do not. The encouraging news is that there are numerous efforts under way to dramatically turn this situation around — including a successful program of using subtitles for Bollywood movies (see "Better Late than Never" in Education and Skills 2.0: New Targets and Innovative Approaches, 2014).


Photo credit: Still from Jodhaa Akbar with Same Language Subtitling, Copyright Disney UTV.
Note: Subtitle in image reads "In the folds of these moments."

How Literate is Literate?

Although independent India's literacy rate rose from 18% in the first national census (1951) to 74% in the most recent round (2011), an astonishing 50-60% of the so-called "literates" cannot read the day's newspaper headline, or a Grade 2 level text, in their own language. That is not to say that they are fully illiterate either, because most of them can identify at least a few letters and are, therefore, best thought of as, "early-literate" but functionally illiterate. How high is functional illiteracy? Based on my research (with Tathagata Bandyopadhyay; see Can India's 'literates' read?, 2011) and ASER's findings year after year about the poor state of reading achievement in Grade 5, I estimate that around 400 million "literate" Indians are actually functionally illiterate. This is in addition to the 273 million who are officially illiterate.

India's "ability to read a newspaper headline rate," if there were such a measure, would hover in the 30-37% range. No government would like its galloping literacy rate to be punctured with a statement like this. But if a government does not acknowledge the reality of its nation's literacy quality, it is unlikely to do much about it. A big problem is that the literacy rate in many countries, like India, is simply measured by asking individuals to self-report for all household members if they are "literate" or "illiterate." Even a slight variation on the question, like "Can you read a newspaper?" would give an accurate measure of functional literacy. We have found that people's response to this question is highly correlated to tests that measure an ability to read any simple text functionally. People report accurately because the question is specific and, in their perception, easily subject to verification. One could even replace "newspaper" with "bus board" or "letter" as proxies for functional literacy.

While governments do focus on the challenge of getting illiterates off the starting block, they are swift to label this achievement as "literacy" because all the incentives revolve around getting the literacy rate up. From the government's perspective, the functional literacy rate is best left unmeasured lest the problem surface officially. The state, therefore, gets off the hook of having to also plan for the more arduous and longer transition of early-literates to functional literacy.

Improving Literacy, Bollywood-style

How does one transition 400 million early-literates in India to functional literacy? The essence of a solution lies in creating conditions that allow for at least a few minutes of easy reading engagement, every day and throughout life. This is possible if reading itself becomes an integral part of something people do every day, like, watching television. In India, 750 million people watch, on average, two hours of TV every day. Bollywood-style films and film-based content is a dominant genre in a large number of Indian languages. What if we subtitled the lyrics of all existing film songs on TV — in the same language? Word for word, what you hear is what you read. This was a question we first posed in 1996, calling our approach "Same Language Subtitling" (SLS). It causes automatic and inescapable reading engagement among early-readers (and readers alike) whenever they happen to watch film songs with SLS. Anyone with some letter familiarity cannot but try to read along, as confirmed by a body of eye-tracking research. Viewers like to read along to songs for its Karaoke-like experience and to know the song lyrics.

Since 2006, SLS has been implemented on 10 weekly half-hour song-based TV programs, in as many languages, currently delivering reading practice to 200 million weak-reading TV viewers in India. As we have slowly scaled up, we have done rigorous testing to ensure that SLS is working, and we now have strong evidence that it is a proven solution on the scale that is required. The Indian Institute of Management, Ahmedabad (IIM-A) and the Nielsen-ORG Center for Social Research studied the effects of SLS in 3,179 households during 2002-2007, demonstrating that exposure to 30 minutes of SLS per week increased the functional literacy rate from 25% to 56% among students with at least five years of schooling (see PlanetRead for the latest studies). Plus, the cost is minuscule. For example, with a viewership of 20 million, one U.S. dollar can give 30 minutes of daily reading practice for about 1,000 people per year.

IIM-A and PlanetRead are now on course to deliver regular reading practice to all the 750 million TV viewers in India at present, and growing rapidly. More than half the viewers are also weak-readers. The goal is to implement SLS on all songs on TV in India, in all languages, through national policy. The strategy is to scale up in India first and let that speak as a model for expansion to other countries, especially in South Asia and Sub-Saharan Africa, on popularly watched song-based programming, in the local language. The latest update in this narrative is that the Broadcasting Corporation of India (Prasar Bharati), the national TV network (Doordarshan), and the Planning Commission have supported, in principle, the scaling up of SLS nationally.

In India and many other countries, the problem of low quality of literacy is real, if under-researched, and seldom acknowledged officially. Yet we feel strongly that the SLS solution is proven and cost-effective. So what is holding back broadcast policy in India and other low literacy nations from considering SLS seriously? What is holding back private networks with a genuine interest in doing "well" (ratings do go up) by doing "good?" These questions are not easily answered. But at its core, policy-making generally lacks the risk-taking ability required to advance social innovation in a time-bound manner. On the other hand, private networks may need to do much more to bring — what might sometimes be a peripheral interest in doing good — to a place where doing well and doing good are inseparable.

Robert Willis is a Professor of Economics at the University of Michigan and Research Professor at the Population Studies Center

Rapid population aging in many parts of the world means that policy makers and business communities will need to create conditions that enable aging workers to maximize productivity and adapt to changing technologies. We recently spoke with Robert Willis — Professor of Economics at the University of Michigan and Research Professor at the Population Studies Center — who has been conducting path-breaking research on the relationship between declining cognitive ability and work and retirement decisions. He says that new data from the U.S. Health and Retirement Study shows that a decline in cognitive abilities has a very modest effect on people's ability to work at older ages, unlike education levels, which have a major effect. Does this pattern hold in rapidly aging Asian societies like China and Korea, where older workers are much less educated and social interaction with the more educated younger generation may play a key role in maintaining cognitive function at older ages? Studies under way, like CHARLS (China Health and Retirement Longitudinal Study) and the Chinese Family Panel Study, will allow us to answer this type of question.

Exercise Plays Vital Role Maintaining Brain Health
Exercise plays a vital role in maintaining brain health.
Photo credit: Flickr @A Health Blog


Willis also points out that that a big question for the future and for workers in developing countries is whether technological changes substitute for the tasks that people are doing (which would encourage retirement) or enhance their productivity (like a waiter using an iPad) (see his recent study on computerization and labor demands). Another recent paper by Willis, "Mental Retirement" illustrates that in the United States and European countries with pension schemes that reduce work incentives, there is a faster drop in labor force participation after age 60 and a significantly larger decline in people's cognitive function based on simple memory tests.

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(For more on the topic, see "Conference on Challenges of Population Aging in Asia" held this past April by the HKUST Institute for Emerging Market Studies.)
Robert Lerman is a Professor of Economics at American University and an Institute Fellow at the Urban Institute.

Countries like Germany, Switzerland, and Austria tend to have low youth unemployment rates. They also are known for high-quality training programs — known as apprenticeships — that are run by many of their companies. So why aren't more companies pursuing this path to secure more jobs for youth and develop their human capital? That's a question that Robert Lerman — Professor of Economics at American University and an Institute Fellow at the Urban Institute — recently studied.

Kesslers International Ltd
Kesslers International Ltd., finalist in the U.K.'s Medium Employer of the Year Award category
at the 2009 Apprenticeship Awards. Photo credit: Flickr @National Apprenticeship Service


Lerman tells the JKP that typically firms worry that they won't be able to recoup all or most of their costs within the apprenticeship period, and after that, their apprentices might move to another firm. But his study shows that most firms gain from the apprentice's contributions to production, reduced turnover and training costs, and greater certainty that all workers have the same high levels of expertise. Moreover, although firms in Germany, for example, don't fully recoup their costs during the apprenticeship periods, they recoup them soon after because a fairly high percentage of those workers stay with the firm. At this stage, the OECD and the European Union are calling for major expansions of apprenticeship programs — with success no doubt hinging on how well these programs are structured, something the Swiss do extremely well as they manage to combine training with extensive use of apprentices in production.

(For more on the topic, see Lerman’s policy note “Do firms benefit from apprenticeship investments?” For IZA’s World of Labor.)
 

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Laura Alfaro is the Warren Alpert Professor of Business Administration at Harvard Business School

Intel Pentium III 866 Mhz
Intel Pentium III 866 Mhz, Costa Rica.
Photo credit: Flickr @Luigi Rosa (http://www.flickr.com/photos/lrosa/)



Why are some countries better able to attract multinationals than others? To explore possible answers to that question, the JKP recently looked at the case of Costa Rica, which in 1996 made headlines when it attracted Intel to invest and has since attracted enormous foreign investment. We asked Laura Alfaro – who was Costa Rica’s Minister of National Planning and Economic Policy (2010-2012) and is now back in academia as the Warren Alpert Professor of Business Administration at Harvard Business School – about the relative roles of the private and public sectors and what countries can do to attract multinationals.

She says that she welcomes developing countries’ renewed interest in industrial policy, but she insists that this shouldn’t mean a debate on public versus private sectors, given that each sector has a vital role to play. She also stresses Costa Rica’s efforts to create an enabling environment to both attract foreign investment and allow local entrepreneurs to benefit from the investment, rather than just tax incentives and subsidies.

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Mushtaq Khan is a Professor of Economics at University of London


Heavy traffic jam at Chandni Chowk in Old Delhi. Photo: © shigemitsu


As developing countries increasingly experiment with "industrial policies," a big question is how to get the incentives right for these policies to work.
 
The JKP recently spoke with an expert on the topic – Mushtaq Khan, Professor of Economics at the School of Oriental and African Studies, University of London. In Part 2 of this series, he explores two successful examples in the 1980s – launching a garment industry in Bangladesh and producing Indian automobiles. Going forward, however, he cautions that many developing countries will have to make industrial policies work in a setting where the political environments, governance capabilities, and private sector capabilities are much weaker. This will mean starting with small-scale experiments, rather than ambitious endeavors, to avoid doing long-term damage.

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Mushtaq Khan is a Professor of Economics at University of London

Textiles in Bongooo Bazaar
Textiles in Bango Bazaar, Dhaka, Bangladesh. Photo: Dan Nevill

As developing countries increasingly experiment with "industrial policies," a big question is how to get the incentives right for these policies to work. The JKP recently spoke with an expert on the topic — Mushtaq Khan, Professor of Economics at the School of Oriental and African Studies, University of London. In Part 1 of this series, he explores how countries should develop their industrial policies. He says the first step is to identify the type of market failure preventing growth of competitive employment generating industries, which in many developing countries is developing greater organizational capacity (i.e., countries suffer from both insufficient institutional capabilities and a weak ability to develop those capabilities). The second step is to recognize that different policies could address similar market failures, but not all policies are implementable in different political and institutional contexts. Countries have distinct "political settlements" defined by the relative power of organizations affected by particular policies to modify or block their implementation. Policy design has to be informed by an understanding of the relevant political settlement so that likely distortions are minimized.

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​​

Joseph Stiglitz is a University Professor at Columbia University and Co-Chair of Columbia University's Committee on Global Thought 

IMG_9835 post
Maize researcher, Ukulima Farm, Limpopo, South Africa
Photo by: Joseph King

With job creation at center stage and new approaches avidly sought, Joseph Stiglitz's ground-breaking research on creating a learning society is already being much debated. The JKP recently sat down with him and asked how industrial policy and job creation fit into the picture. Stiglitz, who is University Professor Co-Chair of Colombia University’s Committee on Global Thought, stressed that it was tough for policymakers to decide ex-ante which sectors were most likely to have the greatest capabilities for learning and the greatest learning spillovers. But in the case of Africa, where much of the economy will still be in agriculture for a long time, it is important to ask: How can you make a more learning-oriented agriculture and how can you better educate farmers so that they can learn about new technologies, new seeds, and new markets? He also emphasized that one aspect of learning is being motivated by the possibility of a job. That means industrial policies and macro policies have to be linked together.

Stiglitz explored the learning society concept when he was the keynote speaker at the recent first World Bank Competitive Industries conference on "Making Growth Happen." He won the 2001 Nobel Prize in Economics for his analyses of markets with asymmetric information. Previously, he served as World Bank Senior Vice President and Chief Economist (1997- 2000) and Chairman of the Council of Economic Advisers (1995-97).

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