University education in Pakistan may be adding less value to society than we think

It is axiomatic among policymakers that one of the most valuable investments that a state can make is to develop its human capital. This can be done through schooling and university education, skills and vocational training, investment in healthcare, and inculcation of social skills such as punctuality and good citizenship. The economist Gary Becker’s human capital theory of education popularized the idea that, “Education and training are the most important investments in human capital… The earnings of more educated people are almost always well above average although the gains are generally larger in less developed countries.” 

Subsequently, numerous studies have reinforced the perception among educationalists and policymakers that attaining higher levels of qualification, especially university degrees, has a very positive economic payoff. Individuals with a bachelor’s and master’s degree earn significantly more than those with a high school certificate, and they in turn earn more than those that have had little schooling. This has provided the impetus for expanding access to university education as the foundation for creating a prosperous modern society and fighting economic inequality. 

Few have been willing to challenge such conventional wisdom, but Bryan Caplan, a professor of economics at George Mason University, enthusiastically rejects the belief in his book “The Case Against Education.” Drawing on Michael Spence’s theory of job market signaling, he argues that most of the benefit of education comes from marking. He shows with the help of a raft of supporting statistics that the majority of qualifications or degrees do not substantially add to the individual’s innate skills or knowledge, but only serve to ‘signal’ to employers they have the desirable characteristics for employability, such as intelligence, conscientiousness and conformity. 
Since employers value these traits, they pay more for employees who have successfully completed a degree than for those who have not. More contentiously, he adds that universities are imparting irrelevant knowledge to uninterested students, and the years of university education serves only to identify to employers’ individual workers' innate productivity levels rather than actually enhance them. 

The crux of Caplan’s argument is that time and money are being wasted by individuals and society in pursuing qualifications that are in reality far less beneficial than prevalent research would suggest. Rather than creating value by developing skills relevant to the modern job market, university education may be exacerbating the mismatch between educational requirements and job opportunities provided by employers, since they choose to select employees within peer groups by demanding increasingly extraneous credentials to more easily identify suitable candidates.

Until recently, there has been limited appreciation of the paltry levels of investment in both the structure and capacity of the Technical and Vocational Education and Training (TVET) sector.

Javed Hassan

Dr. Ayesha Razzaque, an education expert, notes that ‘degree inflation’ in Pakistan results in employment postings requiring higher minimum formal qualifications than may be actually relevant for the job function. For example, occupations that may only need a secondary school certificate for the candidate to perform effectively but now demand a Bachelor’s or even Master’s degree. 

While Caplan’s view that “government should stop using tax dollars to fund education of any kind” may sound extreme, especially in the context of Pakistan, where there is already underinvestment in building human capabilities, it is important for policymakers to systematically analyze the linkage between different levels and types of education and skills training with their intrinsic impact on productivity, earnings capacity, reduction of poverty, and enhancing equality, amongst other things.   

There is a need for comprehensive studies to estimate the rate of returns on the various tiers of education and skills training, that is, the value of lifetime earnings for an average individual against the cost of their education or training. Moreover, the economic criteria for state intervention-- in particular, sectors of education and/or skills training-- should not only be based on return rates being positive and higher than alternative forms of investment, but must also measurably demonstrate that they impart up to date market relevant knowledge, expertise and/or skill, and not merely be signaling tools for the job market. 
The public discourse about education in Pakistan has been dominated by obtuse debates about the Single National Curriculum (SNC) and the medium of instruction, but there appears to be little interest in discussing the intrinsic value of allocating public resources into university education of questionable quality vis a vis limited sums being spent on vocational and skills training that may be essential for increasing productivity levels. 

There is little conversation around the fact that university education takes long, is expensive, and may not be relevant to the jobs available in the market. Also, until recently, there has been limited appreciation of the paltry levels of investment in both the structure and capacity of the Technical and Vocational Education and Training (TVET) sector. Given the resource constraint the country faces, it is imperative to evaluate investments into different sectors of human capital development, and allocate funds to those areas which provide society the greatest dividends.

– Javed Hassan has worked in senior executive positions both in the profit and non-profit sector in Pakistan and internationally. He’s an investment banker by training.

Twitter: @javedhassan