Transcript Market Reality and Public Perception

Transition from School to Work in Romania
MEETING THE STARK REALITY OF THE
MARKET
Presentation by:
Dr. Catalin Ghinararu, National Labour Research Institute
Institute of Education Sciences,
Mar.9th 2009, Bucharest-RO
Transition from school to work - Market
Reality and Public Perception

Initial conditions at the onset of the Plan to
Market Transition in RO, were clearly against a
spendthrift in education and FOR a quicker
transition from school to work;
 However, Public Perception was firmly pointing
the OTHER WAY AROUND!
 As a result, a prolonged period of public and
private (household) spendthrift in education
ensued with NEGATIVE consequences for
school to work transition;
% growth as of 1990=100
Nominal GDP% (1990=100) and the growth in Education
expenditures (nominal, 1990=100),
selected years 1990-2007
1200
1000
800
Nominal GDP% (1990=100)
600
Growth in Nominal Education
Expenditure(1990=100)
400
200
0
1990
1995
2000
2004
2006
2007
THE SPENDTHRIFT (1) – Inflation and
Depreciation of the Education process

Expenditures for education increased steadily
throughout the 19 years since 1990,
irrespective of economic conditions;
 Spending growth far outpaced gains in
productivity, increase in living standards a
reflected by GDP per capita and the general
pace at which the economy itself expanded;
 The END result: An inflated education system,
with depreciated results;
School enrolment growth rates as % of the growth rates for
labour, productivity, average salary income, GDP p.c. and
Nominal GDP (=100) (1990=100)
Growth of School enrolment rates for tertiary education as ratio of
growth rates in Labour Productivity, Average Salary income,GDP p.c.
and Nominal GDP
350
300
250
School Enr.rate.tertiary % vs
Lab.Prod.%
200
School.Enrate.tertiary % vs.
Av.sal.inc.%
School Enrate.tertiary % vs.GDP.pc %
150
SchoolEnrate.tertiary % vs.Nominal
GDP%
100
50
0
1990
1995
2000
2004
2006
2007
THE SPENDTHRIFT (2) – A Prolonged and
Damaging School to Work Transition

As the number of years in school lengthened so the
activity rates for the young dwindled;
 While higher education enrolment rates spiralled out of
control, the country has been deprived of valuable
labour input!
 The End Result – A growing pressure on the public
sector to generate jobs for an increasing number of
higher education graduates;
 Public sector, EDUCATION especially, now serves as
a SCHOOL TO WORK TRANSITION route, with
damaging effects on the quality of services provided;
 Inflation and Depreciation from EDUCATION thus has
an unwanted SPILLOVER EFFECT!
The Employment rate for the 15-24 population (%) and the total number of
students (mil.)
(RO, 1990-2005)
50
0,7
0,6
40
0,5
35
30
0,4
25
0,3
20
15
0,2
10
0,1
5
0
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Total No.of Students (mil.)
Employment rate for the 15-24 (%)
45
Employment rate 15-24
No.of Students (in mil.)
The Response of the Market (1) –
the Labour Supply

Labour Supply Crowded-IN EDUCATION,
especially higher one;
 Enrolment rates increased, but the structure
depreciated itself, with a higher share of
broad-subjects at the expense of specialized,
technical subjects;
 As a result TRANSITION from School to Work
became a harder problem to nudge for more
and more graduates;
 The Education system itself became the victim
of its won PROFLIGACY!
The Radar of Education Expenditures and their impact on the wider Economy
throuhgout the years of Plan to Market Transition and EU Accession
1990
800
700
600
500
2007
1995
400
300
200
100
Labour productivity GDP/w as of 1990=100
0
School Enr.rate tertiary-grow th (1990=100)
Grow th in the share of Tertiary Empl.(1990=100)
Nominal GDP% (1990=100)
2006
2000
2004
The Response of the Market (2) –
The Labour Demand




Enterprises CROWDED-OUT of education and
training provision!
A large share of entrepreneurs succumbed to
DIPLOMA CULTURE and …
To the even more dangerous idea that graduates have
to MUSTER IT ALL after exiting from school;
The End Result – A Disincentive for entrepreneurs to
invest in education and training as they witnessed the
more than high willingness of the state and
households to “cover for them”!
Total Population, Occupied Population and Employees participation in
CVT by age group
(participants in CVT in the age group as % share of total age group population; 2005)
Total no.Employees part.in
CVT(%)
ALL AGE GROUPS
55 and over
Occupied population - part. in
CVT (%)
25-54
under 25 years
Total population - part.in
CVT(%)
0
2
4
6
8
10
12
14
The Stark Reality of the MARKET –
The Mismatch





Job generation has been more than subdued when compared
with the numerical output of the education system;
Higher education job generation remains only a fraction when the
same comparison is made!
Job Generation is concentrated (the Capital-city attraction
phenomenon) and skewed towards SERVICES (apparently high
in end-output value added but actually low when looking at the
PROCESS);
The End Result – The public sector remains the largest provider
of jobs for the increasingly large cohorts of higher education
graduates;
Migration continues to remain attractive thereby depriving the
country of valuable HR!
Broad Sectors' contribution to Employment Growth (q.values, previous quarter=100),
RO 2003-2008
2000
1500
1000
500
Agriculture contr.to Inc. in Total Empl.(%)
Industry contr.to Inc. Total Empl (%)
Q2
20
03
Q3
20
03
Q4
20
03
Q1
20
04
Q2
20
04
Q3
20
04
Q4
20
04
Q1
20
05
Q2
20
05
Q3
20
05
Q4
20
05
Q1
20
06
Q2
20
06
Q3
20
06
Q4
20
06
Q1
20
07
Q2
.2
00
7
Q3
.2
00
7
Q4
.2
00
7
Q1
.2
00
8
0
-500
-1000
-1500
Service contr.to Inc. in Total Empl (%)
Increase in SERVICES employment by Development Region
(quarterly values, q1.2005=100, RO - 2005-2008)
120
100
80
60
C
NW.
40
W.
20
SW
0
S.
-20
-40
-60
-80
-100
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Q12007
Q2.2007
Q3.2007
Q4.2007
Q1.2008
SE
NE
Bucharest
The Economic Dynamics of CVT Participation (thou.CVT participants, Labour
productivity, Average salary and Gross Value Added by economic activity)
Industry
300
250
Real estate, renting and business activities
200
Electricity, gas and water supply
150
100
50
Financial intermediation
0
Transport, storage an communications
Constructions
Commerce
Hotels and restaurants
Contr.to GVA-%nat.av
Partofemplin CVT-%nat.av.
Av.sal. as% of nat. average
Lab prod as%of nat.av
The Base Effect and the Shape of the Things
to Come (1) – Business as Usual





High spending for education in recent years will for surely lead to
a plateau in the years to come;
High growth of the enrolment rates in the last years, coupled with
the entry of smaller generations will also result in a plateau for the
years to come;
Low spending by companies during the last years, should be
followed by higher levels in the years to come;
However, higher returns to education during in the years to date
will give way to lower returns in the years to come as market
starts to feel the impact of the INFLATION of GRADUATES!
All in all this should deflate the bubble without too much of a burst
and finally give a spur to School to Work transition policies and
measures, NONETHELESS…
The Base Effect and the Shape of the Things
to Come (2) – In times of CRISIS





Education expenditures will plateau but as
GDP might shrink they will actually shrink too!;
Business would like to bridge, but they might
find it hard to do so!;
Returns to Education will slump!
The burst will hurt;
Spendthrift that encouraged a NO SCHOOL
TO WORK transition policy WILL FINALLY,
though PAINFULLY meet REALITY!
In Lieu of Conclusion





A biased policy, guided by PERCEPTION and NOT by REALITY,
skewed the education incentive system;
As a result no workable SCHOOL TO WORK TRANSITION
actually exists;
Corporate, Public and Individual Social Responsibility are still
abysmal twenty years after the Fall of Communism;
The Stark Reality of the (emergent) MARKET is one of Random
Exogenous Shocks (e.g.: the CRISIS) and not of an uninterrupted
spending binge;
Accordingly, a SCHOOL TO WORK TRANSITION system is an
embedded SOCIETAL HEDGING MECHANISM , showing
SOCIAL RESPONSIBILITY and thus shielding (at least partly)
from SHOCKS when they come!