Robertas Zubrickas is a Senior Research Associate at the University of Zurich.
Over the past decade, there has been an almost exponential rise in international remittances. We know from recent research that remittances are critical for the well-being of individual households in developing countries – helping them to emerge from poverty, send their children to school, and invest in small enterprises, health, education and housing. Yet not much is known about determinants of remittance flows within transnational households (those with one or more members working abroad), an increasingly important topic for policy makers with the sums involved.
Given that the geographical separation might not allow the wife to be fully aware of her migrant husband’s earnings abroad, and given that a discrepancy in information matters for economic outcomes, the question arises: Does awareness matter for remittances? In particular, will the husband remit less if his wife cannot observe his earnings? Our study “Asymmetric Information about Migrant Earnings and Remittance Flows” (done jointly with Ganesh Seshan), which focuses on Qatar and India, shows that the answer is “absolutely”, with higher earners benefiting more from the lack of awareness than lower earners.
From Qatar to Kerala
Migration into Qatar and other oil-producing countries of the Arabian Gulf took off in the 1970s with rising oil prices that subsequently fueled a large construction boom. In fact, in 2011 there were an estimated 17 million contract workers in the Arabian Gulf countries alone, mostly from developing countries. For our study, we decided to focus on Qatar, where about 90% of the 1.7 million population age 15 or older are foreign born, rendering it the nation with the highest share of immigrants in the world. And we picked the Indian state of Kerala, which until recently accounted for more than half of the Indian migrants to the Gulf.
To assess differences in information about overseas earnings, we collected migrants’ reports about their earnings and contrasted these reports with the reports about their earnings collected from the remittance recipients. To our knowledge, this is the first study using a matched household dataset that collects such cross-reports on remittance flows. Our key findings are twofold:
Observation 1: More earnings, more discrepancy in information. Wives report on average only about 79% of their husbands' earnings, which signifies a substantial discrepancy in information. Moreover, underreporting is not uniform across households – it is more prevalent in households with higher earning migrants. In particular, we observe the gap between wives’ and husbands’ reports to widen in husbands’ earnings (see figure below).
Observation 2: More discrepancy in information, less remittance. Underreporting is associated with lower remittances. In the sample, a wife who understates her husband’s earnings by the average amount receives 15 percent less in annual remittances than a wife who has perfect information about her husband’s earnings. Hypothetically, closing this information gap about foreign earnings would be associated in India with an increase in annual remittances of $432 – or nearly two months worth of monthly household expenses. Furthermore, data show that husbands remit on average 58 cents from every dollar of below-the-median income, but only 17 cents from every dollar above the median income.
Work Abroad as a Family Investment Project
What explains our observations? First, we are able to rule out the explanation that differences in information arise from subjective biases in reporting behavior. A more probable and natural explanation for differences in information – as also suggested by the evidence on remittance behavior of Tongan migrants to New Zealand – is that husbands tend to hide overseas earnings from their wives to reduce pressure to remit. But harder questions are why husbands are more truthful about their income when it is low and why they remit a larger share of a lower income. To answer these questions, we approach migration as a family investment project. A family sends its member abroad for work and expects the migrant to remit a share of earnings, which, however, are observable by the family only if it tries to verify the report (for example, by making inquiries in a migrant network).
When verification costs are not trivial, the most efficient “expectation” for remittances that the family can impose on the migrant takes the form of a simple remittance threshold – which is what occurs in the most efficient loan contract if a costly audit is involved. Namely, if the migrant remits less than the remittance threshold on his account of low income, then the family can take the effort to verify his reported account of income (and punish him if he is found lying). On the other hand, no verification is undertaken if the migrant remits at least the threshold. Thus, it implies that the migrant, once capable of meeting the minimum expectation for remittances, may choose to be silent about any additional income earned and send no additional remittance thereof. As this implication is strongly supported by our empirical observations, it suggests that the same economic arguments that apply to investment contracting also apply to forming expectations for remittances and actual remittance behavior.
Our work signifies the role of information for remittance flows by demonstrating a direct connection between how much families receive in remittances and how much they know about foreign earnings. As more awareness benefits remittance recipients and, accordingly, their countries, a desirable policy is to improve it. Particular measures at the disposal of policy makers in remittance-receiving countries would be improving financial literacy and means of communication.
Kelsey Jack is an Assistant Professor of Economics at Tufts University.
When one part of the local economy fails, it spills over into other parts of the economy. Maybe this isn't so surprising. However, recent research in Zambia highlights a less obvious link: farmers who can't get access to credit during the hungry season (January to March) increase their off-farm labor supply, drive down wages, and maybe even undermine their own agricultural yields. This matters greatly given that small-scale farming remains the primary source of income for the vast majority of the rural population in Zambia, with typically low levels of productivity and farming income. Fortunately, there is new evidence that providing consumption loans can help farmers invest in their own fields, and — we hope — boost their productivity.
Experimental harvest of provitamin A-enriched orange maize, Zambia, 2010.
Photo credit: Flickr @CIMMYT
Coping with not enough credit for food
A few years ago, two colleagues (Günther Fink of the Harvard School of Public Health and Felix Masiye of the University of Zambia) and I began working in rural Zambia on projects ranging from health and the environment to agriculture. As we spoke to rural smallholder farmers around the country, we kept hearing the same story. Farmers described how they ran out of food in the "hungry season" (the months leading up to harvest time) (see figure), which forced them to cope by resorting to working ganyu, a term for casual day labor typically done on nearby farms. But this meant neglecting their own fields, which hurt their own harvests. Thus, farmers were essentially borrowing against their future harvest, lending out their most available asset — their own labor.
Seasonal patterns in rural Zambia
Source: Midline survey data, Chipata Food Loan Project.
We wondered if other ways of accessing food were available — such as through a loan with reasonable interest — would farmers prefer to take that option. To try to answer this question, we used a randomized control trial that offered short-run food loans to farmers in randomly selected villages in Chipata District in the eastern part of Zambia. We offered farmers in selected villages up to three bags of maize flour during the hungry season (enough to cover the consumption needs of an average household over a three-month period) and asked them to repay in maize after the harvest.
The outcome was extremely positive. First, farmers wanted the loans: 95 percent of those offered the loan took it up. Second, farmers were able and willing to repay: among those who took out a loan, over 95 percent repaid in full. But most important, there were positive effects on consumption, the labor supply, and wages. Specifically, when compared to a randomly assigned control group, the farmers with loans missed almost 50 percent fewer meals and were forced to look for ganyu 25 percent less often. Most remarkably, local wages increased substantially. (See our paper, "Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia" for more details on the study and a summary of related literature).
Our findings contribute to a growing literature, mostly coming out of anthropology, that documents the consumption-smoothing role that ganyu plays for small farmers in Southern Africa. This, in turn, relates to the larger economic literature that documents how households cope with periods of shortage or urgent need when they don't have access to credit. While other studies have shown that labor supply does adjust to help families cope, its role in helping to address seasonal shortages has only been addressed through one previous study on seasonal migration in Bangladesh (Bryan, Chowdhury and Mobarak 2013). The bottom line is that together these studies point to poorly functioning credit markets that distort the off-farm labor supply decisions of poor farmers and hurt other laborers by lowering wages.
Weighing loans to finance consumption
So what can be done to help poor farmers gain access to credit? Traditionally, loans to finance consumption, especially for the poor, haven’t been seen as viable, largely because the spillover from the credit market to the labor market in rural developing countries hasn't been well understood. But if we can document effects on agricultural yields from higher consumption and less off-farm labor, that may change. Indeed, if higher yields in one year translate into less ganyu in the next year, then a loan intervention may help farmers escape from a regular cycle of low yields, hunger, and off-farm labor. To test this assertion, we are in the middle of scaling up the project to learn more about the effects on agricultural yields. More findings to come!
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 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.
Hartmut Lehmann is a Professor of Economic Policy at University of Bologna As transition and emerging economies continue to restructure their enterprises, worker displacement — that is, involuntary layoffs — is inevitable. But is the process random as to which types of workers suffer most? And how large are the costs to individual workers and the overall economy? These are questions that Hartmut Lehmann — Professor of Economic Policy at Bologna University and Program Director of the IZA research area Labor Markets in Emerging and Transition Countries — recently explored. He focused on the former communist transition countries of Central and Eastern Europe and the Commonwealth of Independent States, along with China.
Private company employees produce Vitamin C, Moldova.
Photo credit: Flickr @World Bank Photo Collection
Lehmann tells the JKP that studies show that displacement imposes large costs on the individual workers affected as well as on the economies at large, although better data on the topic is essential. For the individuals, he says, the costs typically take the form of foregone earnings stemming from long spells of non-employment, heightened job insecurity, reduced health for themselves and their children, and psychological costs (like depression). Those hardest hit are the less educated and less skilled. What can policy makers do? He says the key is to pinpoint which types of workers are being displaced and what are the constraints they face in trying to find new jobs. Then governments can devise the right equity — and efficiency-enhancing policies — such as income support, job search counseling, and retraining.
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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., 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.
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Solomon Polachek is a Distinguished Professor at Binghamton University (SUNY) Despite equal pay legislation dating back 50 years, American women still earn 22 percent less than their male counterparts, although this figure is down from 40 percent in the 1960s-1970s. In the United Kingdom, the gap is still 21 percent, and in France and Australia, it is around 17 percent. What can be done to further narrow the gap in industrial countries? To learn more, the JKP recently spoke with Solomon Polachek, a Distinguished Professor at Binghamton University (SUNY) and an expert on the topic.
Gatwick airport sign, 2010, United Kingdom.
Photo credit: Flickr @Kathy Dempsey
Polachek explains that an effective solution rests on a better understanding of the source of earnings differences. He takes issue with the commonly held belief that the culprit is corporate discrimination per se. Rather, he says, the differences stem from demographic differences. In particular, the gender wage gap is small for singles and young people, but higher for older people and married people — especially for those with children. Thus effective policies to speed up wage convergence should involve government actions to stimulate a further rise in women's lifetime work, such as eradicating taxes that decrease wives' incentives to work. Repealing marriage taxes would increase women's incentives to invest in education and training, and better enable women to climb the corporate job ladder. Promoting high-quality day care would do the same.
Louise Fox is a Visiting Professor at the University of California at Berkeley, and Deon Filmer is a Lead Economist in the World Bank's Research Group.
As the world's youngest and poorest region, Sub-Saharan Africa faces a major jobs challenge. Half of the population is under 25, and every year 11 million people enter the labor force — mostly youth looking for work. After more than a decade of rapid growth and expansion of educational opportunities, youth have high aspirations and expectations, and African policy makers are concerned about how to meet them. Jobs and opportunity are at the top of the development agenda.
Youth empowerment in Liberia. Photo credit: Flickr @CAFOD
Most African governments are unprepared to meet this challenge, both because they don't have good data and analysis showing what the challenge actually is in their country and because they tend to focus on the complaints of urban, well-educated young males, who may be the most vocal but are actually a very small minority. The overwhelming majority of Africa's young people live in rural areas and towns. Rather than developing expensive enclave youth projects in capital cities, countries need national strategies focusing on all youth and all employment segments — family farming, household enterprises in rural and urban areas, and wage jobs created in labor-intensive private sector firms. Strategies need to focus on raising productivity in each of these segments and helping youth find and grab the opportunities that exist.
To help governments and stakeholders create customized national strategies, we worked with a team from across the World Bank to assemble evidence on how and where countries are creating jobs and how policy makers can help youth to find sustainable economic opportunities (see "Youth Employment in Sub-Saharan Africa"). We found a lot of innovation and some success, but we also uncovered a number of myths that hold countries back from effectively addressing the youth employment challenge. Until the discussion moves beyond these myths and faces up to reality, effective strategies will be illusive.
Six Myths About Youth Employment in Africa
Myth 1: Urban unemployment is the central problem. Unemployment in low- and lower-middle-income countries in Africa is actually very low because people can't afford to be unemployed. African youth work, often in the same activities as their parents — in household farms and firms. But they may be underemployed, meaning that they can't find enough hours of remunerative activity. In rural areas, they can't find off-season work, and in urban areas, they may spend too much time waiting for customers or for someone to hire them for the day or week. The challenge is to address this underemployment — to enable these working young people to be more productive so their earnings will increase (and they can therefore be more independent and, in time, support a family).
Myth 2: Past growth has been jobless, creating the youth employment problem. Not only was Africa's economic growth high over the past 15 years — averaging 5 percent per annum for the region as a whole — it also created lots of new jobs, with many in the higher productivity industrial and service sectors. Private sector wage employment expanded two to three times faster than the growth of the labor force. But the labor force has been growing so rapidly — over 3 percent per annum — that there was no way for a sector that started the decade employing less than 5 percent of the labor force to expand rapidly enough to absorb a substantial share of the new entrants. The biggest job creator in the past was the household enterprise sector (which includes very small businesses run by one person or their family, out of their home, on the streets, or in a simple marketplace), followed by agriculture (see Figure 1).
Figure 1: Where Africa works
Source: "Africa's Got Work to Do: Employment Prospects in the New Century," IMF, WP/13/201.
(Estimated structure of employment in Africa by country type, 2010)
Note: HE stands for household enterprises. 183 m stands for 183 million people.
Myth 3: Effective industrial policy will solve the youth employment challenge. One way East Asian tiger economies created new, more productive jobs was through expanding the manufacturing sectors. African countries haven't been able to duplicate this success, leading some to call for new industrial policies. As important as it is for African countries to transform their economies, even under the most optimistic policy scenarios, only about 25 percent of African youth can expect to get any kind of wage job in the near future — casual or formal — and most of these won't be in manufacturing (see Figure 2). The other 75 percent will have to make their own jobs in agriculture and household enterprises. These youth are the ones needing the most support to find a sustainable and rewarding livelihood. This is a particular challenge in the poorest countries, for youth growing up in the poorest families, and for young women.
Figure 2: Where the new jobs will be
Source: "Africa's Got Work to Do: Employment Prospects in the New Century," IMF, WP/13/201.
|Number of new jobs by sector
|Distribution of new entrants by sector |
Myth 4: The problem is a lack of vocational training. Despite being the most educated generation of Africans ever, young people emerge from school lacking basic cognitive skills. In rural areas, 60 percent of African youth are entering the labor force without even completing primary education, and 50 percent of all females aged 15-24 don't complete primary education. Moreover, alarming proportions of those who complete primary school don't get beyond the most basic levels of numeracy and literacy (see Figure 3). Even the most effective vocational training program can't make up for missing cognitive skills, and African public vocational training programs don't have a track record of being highly effective. Public resources and attention need to focus on ensuring that basic education provides a solid foundation for skills development.
Figure 3: A low report card in math
Source: SACMEQ, 2007
(Percent of test-takers who do no better than "basic numeracy" on a math test)
Myth 5: Agriculture offers no hope for youth. Despite current low levels of productivity and earnings, Africa's family farm sector offers opportunities for young people. Africa still imports a lot of food, and prices are high. With the right policies and programs, Africa's agriculture sector can meet regional and global demand, as well as provide the inputs to a growing agribusiness sector. Youth can be part of this agriculture renaissance, but they need access to land, to inputs and know-how, to markets, and to finance. Customary land tenure systems tend to exclude youth, and this has to change for youth to be interested in farming.
Myth 6: The household enterprise sector is a dead-end; policies should focus on small- and medium-sized enterprises. In most low- and lower-middle-income countries outside of Africa, governments and society recognize that household enterprises supply affordable goods and services for low- and middle-class households and are an important source of income. These informal vendors, hairdressers, tailors, brickmakers, and small-scale manufacturers of custom items almost always stay small and informal, but they are often the best livelihood choice for many people without the education or skills to either run a larger business or get a wage job. Youth's entry into this sector by creating new independent businesses should be supported by national and local governments. But in Africa, governments too often do the opposite — they undermine household enterprises, by not providing the infrastructure, support, and security that would allow them to operate productively.
Africa's Got Work to Do: Employment Prospects in the New Century (IMF Working Paper)
Household Enterprises in Sub-Saharan Africa (Policy Research Working Paper)
Click here to read the English version.
Japanese office workers. Photo credit: iStock 02-27-13 © kobbydagan
資料：Corporate Women Directors International Website (www.globewoman.org)
(2) 企業は、「適切な」人材を集め、維持するために、成長ビジョンとストレッチ目標を明確にすべきである。例えば、フォーブス誌の「2013年度世界で最もイノベーティブな企業」100位にランクされたダイキン工業は、年齢や経験にかかわりなくグローバルなレベルで人材を開発・維持するため、i) 年功制から成果による評価への転換、 ii)挑戦する意欲がある個人への機会の提供 iii)結果だけでなく、挑戦を奨励する報酬制度、iv) 「失敗をとがめない制度」を採用。日本IBMでは、社員に、新しい事業戦略を実現するために必要なスキルの獲得を奨励している。中高年人材を維持することと若い女性を昇進させることには、対立・緊張関係が生じることがあるが、採用と昇進に関するルールを見直すことは両者に役立つ。
Yoko Ishikura is a Professor Emeritus at Hitotsubashi University.
Click here to read the Japanese version.
As Japan searches for ways to cope with a shrinking and aging workforce — along with the need for a more innovative workforce to help pull it out of decades of stagnation — it is becoming increasingly clear that business as usual is no longer an option for several reasons.
Japanese office workers. Photo credit: iStock 02-27-13 © kobbydagan
||Japan has the world's highest share of "elderly" people (those 65+) — about 23 percent of the total population — a figure that is expected to rise to 31 percent by 2030. |
||The working age population (15-64) is shrinking fast (expected to drop to 58 percent in 2030 from 63 percent now), with fertility low and longevity quite high. |
||Women are as well educated as men yet they earn, on average, 27 percent less than their male counterparts (still well above the OECD average of 17 percent). |
||Although women represent 42.3 percent of all workers, which is in line with other developed countries, the ratio of women in managerial positions is low, even among other Asian countries (see figure). |
Far too few women managers in Japan
Share of women managers vs. workers (%)
Sources: "Labour Force Survey (Basic Tabulation)" by the Ministry of Internal Affairs and Communications (2012) and "Databook of International Labour Statistics 2012" by Japan Institute for Labour Policy and Training.
1. 2012 data are used for Japan, 2008 data for Australia and 2010 data for other countries.
2. In Japan's "Labour Force Survey", 'Administrative and Managerial Workers' include company officers, company management staff, and management government officials. Definition of 'Administrative and Managerial workers' varies across countries.
3. Japan's "Labour Force Survey" uses the population assumed on the basis of the fixed population according to 2010 census as the base of calculation. Share of women board members (%)
Source: Corporate Women Directors International website (www.globewomen.org)
Japan's best hope lies in simultaneously tackling three challenges: (i) harnessing the talents of older workers; (ii) boosting the participation of women; and (iii) rethinking how its education system and companies approach work and learning. Yet although these ideas are much debated and weighed, little progress occurs. Few companies have adopted plans to reskill older workers, and hardly any educational institutions have begun new initiatives for women or the elderly — keep in mind that what's needed are high-productivity workers trained to keep up with fast-paced change. In effect, while the notion of lifetime jobs still prevails, that of lifetime learning does not.
What is needed to propel real change? From my vantage point as a longtime professor and specialist in competitiveness, innovation, and global business strategy and talent (see bio) — I'd argue that Japan needs a mindset change, spurred on by those not only willing to question the status quo and the "unwritten" rules but also to unlearn old ways and push for new creative ways.
Rethinking the Company—Skills—Education Nexus
The good news is that some of the major stakeholders have at least started to tinker with the status quo, so it's worth taking stock of some of these initiatives, which is what we recently did (supported by Mercer Japan). The results are explored in "Reinvigorating Japan's Economy with More Women and Older Workers," part of a new World Economic Forum book, Education and Skills 2.0: New Targets and Innovative Approaches. Let me mention a few here:
(1) The government should promote clear goal setting for the relevant stakeholders. For gender issues, the Abe administration has set a goal of attaining 30 percent of the leadership positions by women by 2020 as one of the key pillars underlying Japan's growth strategy. For older workers, the mandatory retirement age was recently raised from 60 to 65 — meaning that companies are obliged to keep employees if they want to continue working after they turn 60. And a 2008 government survey shows that more than 90 percent of older workers think that they want to work until more than 65 years old. For lifelong learning, the government's goal is to double the number of those enrolled at universities and specialized schools in five years.
(2) Companies could articulate the growth vision and stretch goal to attract and retain the "right group of people." At Daikin Industries — ranked 100 in Forbes' World's Most Innovative Companies 2013 — a new approach to better develop and retain talent on a global basis, regardless of age or experience, is based on: (i) a shift from a seniority-based system to a merit-based one; (ii) opportunities for individuals willing to take on challenges; (iii) a compensation system to reward employees for both achieving results and challenging themselves; and (iv) a "no blame" policy for failure. Similarly, IBM Japan encourages its workforce to acquire the new capabilities needed to implement its business strategy. Granted, tensions might arise at times between keeping on older established men and making room for promoting younger women, but rethinking the rules around hiring and promotions would benefit both groups.
(3) Companies could seek ways to facilitate diverse career paths and work styles. One way, which would attract both women and older workers, is through job rotations across different fields and flexibility in work style. Another way is to establish an open entry system instead of a single career path and corporate-led assignment system within a narrow field. Orix has done just that by creating an open entry system and free agent system — trying to make explicit both talent and business requirements.
(4) Educational institutions could offer opportunities to bridge education/skills development and employment — for all groups of people, not just youth. One way to do this is by providing company employees, such as middle-level managers, with the wherewithal to train others. For example, the University of Tokyo has initiated a veteran instructor training school to provide experienced manufacturing employees with the tools to teach others.
The efforts under way to tinker with the framework are a start but what is needed to really make a difference are "rule breakers" — in management-speak, those who question the common beliefs and "unwritten rules" of the game to truly change the game and create new business concepts. For example, we need to challenge traditional rules such as a fixed system of promotion, an evaluation system emphasizing "face time" rather than output per time spent, and a belief that seniors aren't able to reskill themselves. We also need to challenge the sequential model of education, skill development, and employment.
These rule breakers — true trailblazers — can be women who opt for the entrepreneurial route. They include Tomoko Namba, founder of DeNA (a major social-networking videogame platform); Fujiyo Ishiguro, President and Chief Executive Officer of Netyear Group (a marketing company focused on Internet services); Yuriko Kato, President and founder of M2 Labo (an agricultural think tank); and Haruno Yoshida, President of BT Japan (a multinational focused on telecommunication services). But these rule breakers can also be older workers who can start a new life by combining their rich experiences with new skills in IT and not become "baggage" requiring extra charges. Together, these rule breakers can make the life of all workers, including the mainstream men, a more balanced and richer one.
Sergio Urzúa is an Assistant Professor in the Department of Economics at University of Maryland
In the 1980s, Chile's educational system underwent a major overhaul that included decentralizing administrative powers and the creation of a nationwide voucher system to promote competition. The result was three types of schools: (i) public (funded by student subsidy, administered by municipality), (ii) private voucher (funded by student subsidy and in some cases with a co-payment, administered by private sector), and (iii) private-fee-paying (funded and administered by private sector). How is this set-up working in an economy that has grown rapidly but continues to have a high level of income equality? A new study by Dante Contreras (University of Chile), Jorge Rodríguez (University of Chicago), and Sergio Urzúa (University of Maryland) – which for the first time links data on individual’s schooling achievement and adult labor market performance — suggests that the three-tiered school system, along with two major educational reforms introduced in 1996 to improve the quality of education, aren't helping to reduce income equality.
Colegio Municipal Marcela Paz, Santiago, Chile. Photo credit: Flickr @UNESCO/Carolina Jerez
Urzúa tells the JKP that over time there's been a sharp shift in the public-private balance. Just 10 years ago, 53 percent of students attended public schools, 39 percent voucher schools, and 8 percent private schools. But now, more students are enrolling in voucher schools than public schools, drawn by the hopes of better educational outcomes and eventually better labor market outcomes. In fact, the study shows that attending a private-voucher school during high school instead of a public one is associated with an increase of 2 to 4 percent in adult earnings, while attending a private-fee-paying high school instead of a public one is associated with a 15 percent increase in earnings. He cautions that these findings underscore the need for beefing up the quality of public schools to reduce inequality, which will entail enabling them to better compete with the voucher schools.
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