Wednesday, December 31, 2008

EDUCATIONAL INVESTMENT IN DEVELOPING COUNTRIES

In the context of economic development, the educational product as a whole not only includes components of consumption (enjoyment of the fuller life permitted by education) and direct investment (increased earnings to the educated person, i.e. “internal” gains of education), but also “external” gains which accrue to other members of the community, i.e. the economic and social system at large.

The most important characteristic of educational investment is externality. This aspect of external benefits of education lies in the change in the social and cultural climate, incident to the widening of horizons, which education entails. At the same time, this benefit result is not an automatic consequence of general education, but only of the proper type, quality and quantity of education. Supply of professional people who cannot be absorbed into appropriate positions may readily become an external diseconomy and source of instability.

Apart from the factor of externality, educational investment has certain other characteristics:
The product of education outlays carries the joint features of consumption and investment. For this reason, the share of resources allocated to education cannot be considered wholly an investment outlay. The consumption component of education may be divided into current consumption (the delights of attending school) and the future consumption (the ability to appreciate life more fully later on). Future consumption being the major element, the consumption component is largely in the nature of a durable consumer good and hence investment. Thus the essential distinction is not between consumption and investment aspects of education, but between education investment which generates imputed income (fuller life later on) and education investment which generates increased factor earnings to the labour supplied by the educated person.

The imputed-income component of education tends to be of particularly great importance at the early stages of development. Extension of secondary education becomes the primary goal of education policy in countries with a low level of education capital stock with extension of elementary education and technical training at the next level of capital stick and expansion of higher education at a more advanced stage.

Secondly, investment in education is characterized by a gestation period which is substantively longer than that of many other types of capital formation. Periods of ten to twenty years may be involved, depending on how far the education process is carried, and even longer spans may be involved if teacher training is taken into consideration. Even though certain skills may be acquired fairly rapidly, especially if a previous foundation is laid, the educational capital stock cannot be changed quickly, particularly for the more advanced type of education. This is a constraint in investment planning requiring public policy guidance and planning.

A further feature of investment in education is the relatively long useful life of the educational asset as compared to other competing investments. Obviously, there may well arise a difference between the government’s and the private investor’s allocation of share for education in investment outlays. The relatively long, useful life makes it necessary that the type of education be chosen in order to meet future demands in particular skills. This applies more to specialized and technical education. Thus, educational planning in the context of a longer-term development view is essential.

Finally, the resource cost of education not only includes teachers’ salaries, buildings and equipment, but also the opportunity cost of lost income on the part of the student. Where there is a general surplus of labour supply, the opportunity cost of foregone earnings will be small or non-existent. Other components of education cost (school teachers’ salaries in particular) tend to be relatively high in developing countries. So, even though the income stream from a given factor input into education will be large, the rate of return on educational investments is therefore not as high.

Sensible education targets must be developed by considering the needs of the particular economy and the demands posed by its specific plans in order to absorb additional supplies of educated manpower. The matter of educational priorities is of vital importance. Unless the right kind of education is provided, setting overall targets has little meaning. Educated persons who are unable to find suitable jobs, fail to add to the national product and also become a source of political instability. Since the cost of various types of education differs greatly, the very setting of overall targets has to be based on the composition of education supply.

Whether undertaken privately or in the public sector, the necessity for investment planning cannot be denied. Left to household decisions, neither market knowledge, nor foresight nor financial requirements are present which are needed to secure adequate supplies. This is especially the case in developing countries where the whole attitude towards education has to overcome conventional barriers and become reoriented to the development process.

Tuesday, December 2, 2008

AGEING OF POPULATION

Ageing is an inescapable reality of human existence and a vital factor in the global demographic transition. According to projections by the UN Population Division, there will be two elderly persons for every child in the world by 2050. This implies that the aged 60 and above, which currently constitute less than 20 per cent of the world population, will account for 32 per cent of the population by 2050.

Moreover, according to the UN agency, future fertility levels in most developing countries is expected to fall below 2.1 children per woman, which is the level needed to ensure the long-term replacement of the population at some point in the 21st century. Thus, with higher life expectancy and lower fertility levels, there will be more of elderly and less of young people in the age structure. This changing balance between the age groups would create multidimensional socio-economic problems both in developed countries (acute manpower shortage, for instance) and developing countries.

In India the age structure (urban) according to 2006 estimates was: 30.8 percent in the 0-14 age group, 64.3 percent in the 15-64 age group and 4.9 percent in the age group 65 years and above.

The average age of Indians is 26 years. Hence, talking of an old-age crisis in a country where nearly two-thirds of the population are below the age of 30 appears ludicrous, but there is no denying the problem. For countries like India and Thailand , it will take only 25 years for their aged population to get doubled. The population of senior citizens, aged sixty and above, in India has increased from 42.5 million in 1981 to 55 million in 1991 and then to 70.6 million in the 2001 census. They comprise about 6.9 per cent of the total population. It is estimated that the number of older persons will grow to 137 million by 2021 in our country.

In India, provisions have been made under legislations such as the Code of Criminal Procedure,1973 and the Hindu Adoption and Maintenance Act,1956 to enable aged parents with insufficient resources to meet their needs. However, the process under these legislations is cumbersome and time consuming. The Government of India adopted the National Policy for Older Persons in 1999. Recognizing that financial security is one of their needs, the Government of India commissioned a National Project titled 'Old Age Social and Income Security' (OASIS) in 1999 with an aim to draw up a comprehensive plan for the financial security of workers on retirement and old age in sectors where no formal arrangements for post retirement have been made. The Government covers around 32 million workers and their families under schemes for provident funds and health and insurance facilities. However, there is a need to reach out to many more who do not have access to such schemes and would be rendered vulnerable on attaining retirement and old age. The Older Persons (Maintenance, Care and Protection) Bill, 2005 which subsequently became an Act will hopefully meet this need.

The nations of the world had gathered at Vienna in 1982 for the First World Assembly on Ageing and brought out the International Plan of Action on Ageing. The Plan of Action was drawn up with clear understanding of the implications that the increase in the ageing population would have on the socio-economic structure of both the developed and developing countries. The basic aim of the Plan of Action

was to ensure that ageing is both a graceful and a productive process. The Second World Assembly on Ageing was at Madrid in 2002, which focussed on ageing agenda with current global developmental issues. Across the globe, steps have been taken by various countries such as the United States, Canada, the United Kingdom, New Zealand and Germany to provide social security systems for the elderly and other disadvantaged groups. Such systems ensure that senior citizens are not deprived of their most basic needs when they lack the resources to fulfil them.

The role of Non-governmental organizations is crucial in promoting the welfare of the aged. The Government of India provides financial assistance to NGOs for certain projects aimed at providing shelter and meeting recreational and medical needs of the elderly. Special privileges like old age pension, tax concessions and various amenities in the transportation and health services, provision of services at the grass root level by NGOs and emerging civil society groups which proactively voice the concerns of the aged are some of the encouraging developments in our country.

In India it is the last stage of life that society accords the highest respect and prestige to an individual. This is why old age home concept, though not alien, is rare in Indian families. However, globalization and its economic effects, is causing a silent and invisible transformation within the social structures. Fragmentation of the traditional family network is leading to an erosion of the available support within the immediate and extended family. Migration of younger generations from rural to urban areas and from one urban centre to another and transnational migration results in the elderly persons being left out to fend for themselves at a time when family support becomes more necessary. This has increased insecurity and loneliness among the geriatric (elderly) population. Poor financial status, physical and mental disorders and guilt of being dependent on others are some of the problems nagging the elderly population in India and other countries around the world. An ageing society will give rise to special problems from health, family and social angles.

Besides shelter, medicare and nutritional problems, the elderly population in India also faces a multi-dimensional socio-psychological pressure. A paper on the mental health of the ageing population by Dr. Vikram Patel and Martin Prince, points out that in the developing world, including India, the aged with psychological problems do not get the required medical attention. In particular, the study found that while dementia is considered a normal process of ageing that a doctor cannot help much, depression is rarely diagnosed or treated. An increasing number of older persons are also falling prey to other geriatric diseases such as rheumatism, arthritis, osteoporosis and cardiac complications. An in-depth study by the New Delhi-based All India Institute of Medial Sciences (AIIMS) found that elderly women are affected more by dementia, depression and psychosomatic disorders than their male counterparts. According to this study, the population structure of the elderly is dominated by poorly educated women, economically dependent on children without any tangible authority or status in the family.

Apart from the serious social crisis, there is an important fiscal angle to the problem of ageing, as large proportion of the resources meant for developmental activities will have to be diverted to take care of the needs of the elderly population. For, as a study done by Gautam Bhardwaj of the Invest India Economic Foundation (IIEF), a think-tank that works on the pensions sector, and ex-UTI chief Surendra Dave estimates, providing a pension cover for just the civilian employees of the central and state governments adds up to 55 per cent of the country's GDP. Less than a sixth of those about to retire in the next decade are covered by some form of pension, and only 2 per cent of those not working in government (where pensions are generous) will be able to fund their retired lives if they cut expenses by half, according to an all-India survey done by the IIEF.

Very little attention has been focused on the pitiable plight of the elderly population in rural areas of the country. Field studies pertaining to the problems of the aged in rural India reveal that deteriorating health and economic insecurity are the most pressing problems facing the elderly population in the villages in the absence of financial support from family and old-age pension schemes of the State governments. Inspite of their poor physical and mental health, the aged males are forced to work to eke out a living.

While the problems of the aged often cut across national boundaries and have almost an equal impact, there are bound to be some differences both in perceptions and actual ground realities from nation to nation. Unfortunately, the concept of a welfare state where many of the needs of the ageing population are taken care of by the state is being criticized by agencies, such as the World Bank, which are keen that governments provide only minimum levels of social security to the elderly population groups.

Ageing is an ongoing process. The population of older persons is increasing every year and the changing social order is not always conducive to their well being. Striking a balance between aspirations of the young and the rights of the aged members of society is a daunting task for any nation, particularly for economies in transition such as India. In this context, it must not be forgotten that the elderly people in their productive spans of life have made significant contributions. Awareness programmes relating to traditions of the country, importance of values, morals, ethics etc.should be organised frequently to educate the younger generation to respect and care for their seniors. Moreover, steps may be taken to promote schemes such as the ‘adoption of senior citizens’ by persons or families having means as a welfare measure. Such a scheme would not only provide financial security to senior citizens, but also create a sense of belonging. Sometime back, the UN Secretary General Kofi Annan, while referring to the ageing population had observed: "Trees grow stronger over the years, river wider and like with the age, human beings gain immeasurable depth and breadth of experience and wisdom. That is why older persons should not only be respected and revered but they should be utilized as the rich resource to society that they are".