Group Title: Teaching our Caribbean teachers: setting and maintaining educational standards for the allied health disciplines
Title: Developing Caribbean human capital : an examination of public spending on education
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Title: Developing Caribbean human capital : an examination of public spending on education
Physical Description: Book
Language: English
Creator: Palmer, Ransford W.
Affiliation: Howard University -- Economics
Publisher: Caribbean Studies Association
Publication Date: 1984
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Subject: Caribbean   ( lcsh )
Spatial Coverage: Caribbean
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Bibliographic ID: CA00400042
Volume ID: VID00001
Source Institution: Caribbean Studies Association
Holding Location: Caribbean Studies Association
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---PRELIMINARY DRAFT---


DEVELOPING CARIBBEAN HUMAN CAPITAL: AN EXAMINATION OF
PUBLIC SPENDING ON EDUCATION




by

Ransford W. Palmer
Professor of Economics
Howard University
Washington, DC 20059


Prepared f .. presentation at the Ninth Annual Caribbean
Studies Ai" Dciation Conference, St. Kitts, May 30 to
June 2, 1' 4











Ransford W. Palmer
Department of Economics
Howard University
Washington, DC 20059











DEVELOPING CARIBBEAN HUMAN CAPITAL: AN EXAMINATION OF PUBLIC
SPENDING ON EDUCATION


I. Introduction


In 1890 the famous German political economist

Adolph Wagner hypothesized that real per capital output of

the public sector will grow faster than the real per

capital output of the economy during a period of industriali-

zation. Much of this growth in real per capital public

sector output is attributed to investment in the infra-

structure that industrial development requires. As blic

sector output outpaces the growth of national income, its

composition is influenced by changes in the structure of

the population.

Our primary focus here is the educational output

of the public sector, and we take the view that a change in

the age structure of the population will affect the compo-

sition of the public educational output. From this pers-

pective, wise educational policy is one that not merely









responds to population change but one that anticipates the

demand for education that such a change will bring. ihe

-aim of this paper is to assess the extent to wk-ch budget

policy in Jamaica during the 1970s met this challenge. But

before we focus on Jamaica, it is useful to place the Ja-

maican educational effort within the context of the larger

Commonwealth Caribbean.


II. Comparative Caribbean Educational Effort


During the 1970s the share of national resources

allocated to education by the more-developed Caribbean

countries grew significantly, with the exception of Trini-

dad and Tobago. As Table I shows, public expenditure on

education by Trinidad and Tobago as a percentage of gross

national product was the lowest of the four countries,

3.4 percent in 1977, compared to 8 percent for Barbados and

7.5 percent for Guyana. The greatest growth in educational

effort occurred in Jamaica and Guyana, where the GNP shares

rose from 3.6 percent in 1970 for Jamaica to 7.1 percent in

1976, and for Guyana from 4.7 percent in 1970 to 9.8 percent

in 1978.

Not on1y did the share of the GNP allocated to edu-

cation increase for the more-developed Caribbean countries,

but there was also a noticeable shift in the distribution of

their educational spending toward higher education (Table II).

This shift was most dramatic in Jamaica, where the share of

educational spending on tertiary education grew from 8.8 per-










TABLE I

PUBLIC EXPENDITURE ON EDUCATION AS A PERCENT OF GNP FOR
SELECTED YEARS


Country 1970 1975 1976 1977 1978 1979


Barbados 6.6 6.3 8.0

Jamaica 3.6 5.9 7.1

Trinidad
& Tobago 3.9 2.8 3.4 4.2

Guyana 4.7 4.9 7.5 8.2 9.8



Source: UNESCO, STATISTICAL YEARBOOK 1982.



cent in 1970 to 21.1 percent in 1976. In general, the share

of spending on primary education for all countries declired:

while the share for secondary education remained stable.

Despite the -cability of the share of public spending nn

secondary education, thi s.a-e of the secondary Fch>oJ age

population enrolled in school roAe between 1970 and 1979

(Table III), with the most significant increases occurring

in Barbados and Jamaica, where the shares yzew froi 71 per-

cent to 85 percent and from 46 percent to 57 percent, res-

pectively.


III. Public Spending and Educational Progress in Jam.aca


Between 1960 and 1970 the enrollment ratio for

primary education in Jamaica rose from 92 percent to .19 per-

cent, while that for the secondary education rose only slight-










TABLE II

PUBLIC EXPENDITURE BY LEVEL OF EDUCATION FOR SELECTED YEARS


Country/Year Primary Secondary Tertiary


Barbados:

1970

1975

1977

Jamaica:

1970

1975

1976

Trinidad
& Tobago:

1970

1976

1978

Guyana:

1970

1975

1977

1979


34.7

27.3

28.8



44.7

33.5

30.3




52.5

42.8

37.0



46.5

44.8

35.2

33.1


33.9

29.7

31.9


13.0

18.5

15.6


35.6

32.3

35.3


8.8

19.8

21.1


24.0

20.0

27.0


13.9

21.0

9.0


34.4

33.3

32.3

33.1


14.7

15.9

19.5

15.2


Source: UNESCO, STATISTICAL YEARBOOK 1982.



ly, from 45 percent to 46 percent. In the following decade,

as a result of ambitious government programs to increase

access to secondary education, the enrollment ratio for

secondary education grew dramatically, from 46 percent to










TABLE III

SCHOOL ENROLLMENT RATIOS FOR SELECTED YEARS


Country/Level 1970 1975 1977 1978 1979 1980


Barbados:

Primary 108 101 116 122 115 117

Secondary 71 77 81 81 85 85

Jamaica:

Primary 119 98 98 99 99

Secondary 46 57 58 58 57

Guyana:

Primary 99 93 98 98 115

Secondary 56 56 61 60 59

Trinidad
& Tobago:

Primary 107 99 94

Secondary 42 39 --



Source: UNESCO, STATISTICAL YEARBOOK 1982.



57 percent. The behavior of the enrollment ratios is signi-

ficant for it reflects the adequacy of new capital expenditures

to meet the anticipated growth in demand for education as well

as the adequacy of current spending to permit full utilization

of new capital facilities. Current (or operating) expendi-

tures, therefore, measure the actual supply of education by

the government. The demand for education, on the other hand,

is measured by t e number of primary and secondary school age











children to be educated.

A change in the supply of education has two dimen-

sions--a change in quantity and a change in quality. An in-

crease in the seating capacity of schools and an increase in

enrollment are obvious measures of an increase in the quanti-

ty of education. But they say nothing about quality. For a

complete assessment of the quality of education, we need to

look beyond these measureSto such things as the structure

of the curriculum, the competence of the teachers, and the

availability of instructional materials. This, however, is

beyond the scope of this paper. For our purpose, we shall

use real current spending per enrolled pupil as a proxy

measure for the quality of education. This is defined as

nominal current spending per pupil divided by the consumer

price index. The rationale here is that the quality of

education depends on the amount of real resources allocated

to it, and real current spending provides a reasonably ac-

curate measure of real resources. If, as more children are

being educated, real current spending per child remains
quantity
fixed, then the quiaxit of education will have increased

but not its quality. Two considerations arise here. One

is that if the quality of education is high to begin with,

then a fixed real current spending per enrolled child pre-

sents no problem. The other is that greater efficiency in

spending on education could result in declining real cur-

rent spending per enrolled pupil. In this eventuality, a

decline in real current spending would not be in conflict with











an increase in the quality of education.

The relevance of -this latter consideration, how-

ever, depends on whether or not the educational plant is

being operated below its optimum level of production. If

it is, then an increase in enrollment would lead to a re-

duction in the average cost of educating each child. In

Jamaica, the evidence indicates otherwise. Throughout the

1970s, primary and secondary schools have been operating

well above capacity. The number of children enrolled has

exceeded the constructed seating capacity of the schools.

The efficiency consideration, therefore, is not relevant.

Thus we postulate a conflict between falling real current

spending and the quality of education.

The direction of change in real current spending

(RCS) per pupil depends directly on the behavior of ma-i-.al

real current spending (MRCS), which is the absolute 1 .

in real current spending divided by the absolu.e chnLi :

the number of p .-s enrolled. In order to prevent th.

quality of education from declining, the MRCS must t eI.-

be equal to the real current spending per pupil or average

real current spending (ARCS) of the previous period. When

this condition is met, the quality of education per enroll ed

pupil will remain stable. This level of quality may be

totally inadequate, but at least no pupil is made worse off.

A change in current spending is a function of capi-

tal spending of a previous period. If a change in curert

spending is inadequate to maintain previous levels of quality,

we may infer that the level of capital spending was also










inadequate. We can determine the retired level of capital

spending by constructing the following simple model:

ARCS = a RKS (1)

where z\RCS is the change in real current spending,

RKS is real capital spending, and a is the current spending

coefficient. To maintain the quality of education, the

following condition must exist:

ARCS = MRCS (2)

But
MRCS = a RCS (3)
A E
where E is enrollment. Thus

RCS ARCS
E LE (4)

It follows, therefore, that

ARCS a RKS (5)
-E AE
RCS = a RKS (6)
E AE


AF RCS
SR = a RKS (7)
E


(1 ( )PRCS

RKS = N
a

Thus the amount of real capital spending required

to maintain real per pupil current spending is equal to the

rate of change in enrollment times total real current spend-

ing divided by the current spending coefficient.











Using the procedures set forth above, we can now

assess the extent to which there was any improvement in the

quantity and quality of primary and secondary education in

Jamaica during the 1970s. In doing so, it is important to

bear in mind that even if there is no capital spending on

education in a given year, real current spending in the

subsequent year may still increase, simply because of the

greater utilization of existing capital facilities. In

some instances, capital spending may generate little or

no subsequent current spending when such capital spending

merely replaces old capital stock. The replacement of an

old school building with a new one, for example, may not

require additional teachers.

Table IV shows that between 1974 and 1979, real

per pupil current spending on primary education declined

from J$104 to J$76. This decline was also accr`'-a- e" by

a fall in enrollment. At the secon'-sy l1e:el, the decline

in real per pupil current spending was more dramatic--fro n

J$356 in 1974 to J$184 in 1979. The fact is that -ub!.:

secondary school capacity declined from 101,266 places in

1974 to 96,881 places in 1978, while enrollment grew from

130,660 to 158,039. These figures suggest that thL 9i : j.r

ment's objective of creating greater access to secondary

education was not matched by the amount of real public

spending required to maintain the standard of quality that

prey .iled in the early part of the 1970s. The decline











TABLE IV

JAMAICA:PUBLIC SPENDING ON EDUCATION AT THE PRIMARY AND
SECONDARY LEVELS, 1974-1979 (J$ million)


Year Current Capital Consumer Real
Expen- Expen- Price Current
diture diture Index Expen-
diture


Real
Capital
Expen-
diture


Total
Enroll-
ment


Real Current
Spending
per Pupil


Primary


1974 38.0 4.1 85.1 44.6 4.8 429,516 103.9

1975 44.8 4.8 100.0 44.8 4.8 431,882 103.8

1976 43.3 6.0 109.7 39.4 5.4 425,579 92.6

i978 60.6 2.8 164.5 36.8 1.7 435,938 84.5

1979 68.5 4.1 212.4 32.2 1.9 424,514 75.9


Secondary


9 /4

975

976

-978

iS 79


32.8

44.0

48.5

60.9

61.9


6.6

15.5

13.4

11.8

6.6


85.1

100.0

109.7

164.5

212.4


38.5

44.0

44.2

37.0

30.6


7.7

15.5

12.2

7.1

3.1


108,070

130,660

142,942

158,039

166,022


356.7

336.9

309.3

234.3

184.4


Source: ECONOMIC AND SOCIAL SURVEY.


in real spending per pupil must in large measure be attributed

to the decline of the Jamaican economy in the latter half of

the 1970s. This economic decline eroded the tax base and

weakened the government's ability to finance spending at


- -










levels that would at least maintain the quality of edu-

cation at the 1974 level.

Using the 1974 real per pupil current spending of

J$356.7 as a benchmark, we can calculate the levels of

real cuurent spending that would have been required to

maintain that level. In 1974,secondary school enrollment

was 130,660, thus the total real current spending that year

should have been 130,660 x 356.7 = $46.6 million. This is

$2.6 million greater than the actual real current spending

for that year. For 1979, when the enrollment was 166,022,

real current spending should have been $59.2 instead of the

actual $40.6 million.

Data for the 1974-1980 period indicate that one

dollar of real capital spending generated an average in-

crease of 30 cents in real current spending in subsequent

years. The underlying assumption here is that only net new

capital spending generates subsequent current spen in~- re-

placement capital spending does not. Using equation o, we

can det?>rwr e the required amount of real capital sr :Ling.

In 1974 this was $2.4 million--less than the actual amount

by $5.3 million. We may infer from this that the $5.3 mil-

lion was replacement investment. In 1978 required real

capital spending should have been $6.6 million, $0.5 million

less than the actual amount. This $0.5 million we attribute

to replacement investment.

That required current spending was inadequate to

maintain real per pupil current upendiing must be attributed











to the inadequate new capital spending. Although actual

real capital spending was large, a disproportionate share

of it obviously went toward the replacement of capital

facilities. The result was that enrollment grew much

faster than the expansion of capital facilities.


IV. Conclusions


This paper has looked at education strictly from

the vantage point of real public spending on the grounds

that the quantity and quality of education are determined

by the amount of real resources allocated to it. The

conscious effort on the part of the Jamaican government

during the 1970s to increase the supply of education met

with only limited success. For while it succeeded in

increasing access to secondary education, it did so at

the expense of the quality of education as evidenced by

the dramatic decline in real per pupil current spending.

The likely effect of this is to drastically reduce the

rate of return on investment in education, thereby re-

ducing the significance of education as an instrument of

upward mobility.




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