Education and Employment: An Essay on the Relationship Between Education Demand and Employment Supply

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Education and Employment: An Essay on the Relationship Between Education Demand and Employment Supply

Most of the public discussion and literature about economic development and education generally, most especially employment and education, is based on two major economic processes. First, is the interaction between the politically responsive supplies and the demands that are economically motivated in determining the number of schools provided, who can access these places, and the kind of instruction given. Second, is the important difference between private and social costs and benefits of the different educational levels as well as the consequences of these differentials for the investment of education strategy.

The schooling an individual receives, though affected by countless nonmarket factors, is said to be mainly determined by the demand and supply, just like other services or commodities. However, due to the fact that in the less developed countries, most education is usually publicly provided, the demand determinants end up becoming more significant than the supply determinants.

Considering the demand side, the two major factors influencing the amount of desired schooling are: 1) the greater prospects of an educated student earning more through the modern-sector employment in the future (the private advantages of education for the family); 2) the costs of education, both indirect and direct, that must be born by a student or his or her family. Education demand is therefore in reality, a sort of derived demand for employment opportunities with high wages in the modern sector. Why this is so is because accessing these jobs is majorly based on the education of an individual. Most people (majorly the poor) in the less developed countries dont demand education just for its noneconomic benefits, rather they do this because it is one sure way of securing employment in the modern sector. These derived benefits have to be weighed against reduction costs.

Considering the supply side, the number of school places at the different levels of education (primary, secondary, and tertiary), is largely determined by political processes, which are usually not related to the economic criteria. Due to the political pressure mounted all through the third world for school places having greater numbers, we can, therefore, for convenience say that the supply of these school places is largely dependent on the level of the educational expenditures of the government. In turn, these are influenced by the level of private demand for education

The demand to get educated is enough to qualify anyone to get a modern sector job, which seems to be determined by or related to the combined effect of the four variables below:

The income or wage differential. This has to do with the wage differential between modern sector jobs as well as those outside it (urban and rural self-employment, family farming, etc.), which we can simply refer to as the traditional sector. Gaining entrance into the modern-sector jobs initially has to do with the level of completed schooling, whereas the opportunities that earn income in the traditional sector dont have fixed educational requirements. The larger this income differential between the traditional and modern sectors, the higher the education demand.
The probability of being successful while finding modern-sector employment. Any individual that successfully gets the required schooling to gain entrance into the labor market (modern-sector) has a very high chance of securing a well-paid job compared to someone that does not. It is clear that, if the rates of urban unemployment among the educated are increasing or if the number of secondary school graduates surpasses the available job openings which qualify a secondary graduate, then the need arises to make some adjustments to the actual wage differential, and rather speak about the expected income differential once again. Since the probability of being successful is inversely proportional to the rate of unemployment, we can then say that the education demand via the secondary level is inversely proportional to the current rates of unemployment among graduates of secondary school.
Educations direct private costs. This is referring to the present out-of-pocket expenses while financing the education of a child. These expenses include books, school fees, clothing, and other related costs. Here, we should expect that the education demand would be inversely proportional to the direct costs, i.e. the more the school fees as well as associated costs, the lesser the demand for education. For those that are poor, the direct costs of primary schooling usually represent a serious financial constraint and burden. For example, in most parts of Africa, the average cost required to send a child to the primary school (excluding opportunity costs) is typically about 20% of the per capita income.
The opportunity or indirect costs of education. Investing in the education of a child goes beyond the out-of-pocket costs to get that education, most especially when that child gets to the age where he can start making some positive contributions to the income of the family. When this happens, for every passing year the child schools, he tends to forgo the money income that he or she could earn or the output produced in the family farm. It is important to include the educations opportunity cost as a variable thats affecting its demand. Normally, we expect this relationship between demand and opportunity costs to be inverse, i.e. the higher the opportunity cost is, the lower the education demand.

Although, there are other important variables, where most are noneconomic (i.e. social status, family size, cultural traditions, and education of parents), will definitely have an effect on the education demand, focusing on the four variables earlier discussed will give some great insights into what relates employment opportunities supply and the education demand.

Take, for instance, theres a situation in one of the least developed countries, where these conditions are happening:

For secondary school graduates compared to the primary school ones, the urban-rural or modern-traditional age gap is about 100%.
The rate at which the employment opportunities of the modern sector for primary school dropouts is increasing is less compared to the rate at which these individuals are coming into the labor force. This may also be true at the secondary and tertiary levels in nations like Egypt, Nigeria, Ghana, Pakistan, Mexico, India, and Kenya.
Employers that are facing the problem of excess applicants, usually choose by the educational level. Candidates having a secondary education will be chosen above those with a primary education even if the job performance may not require something more than primary education.
Governments that are backed by the educateds political pressure, seems to bind the wage to the educational attainment level of jobholders instead of the jobs minimum educational requirement.
Most times, the school fees required for the early stages of the primary level are nominal and, in some cases, nonexistent. They usually rise very sharp at the late secondary and primary level, and then falls again at the tertiary level as a larger portion of the costs of the college student is born by the state.

Considering these conditions, which closely agrees to the education and employment situation realities in most developing countries, we would believe that the need for education will be substantial. This is due to the fact that the expected private advantages of schooling more would be larger compared to little or no schooling. The indirect or direct private educational costs, on the other hand, are relatively low, and over time, this demand will spiral upward.

As the job opportunities for those that are uneducated keep diminishing, it is important that individuals acquire a fully-completed primary education to protect their position. This may be adequate for some time; however, the inner dynamics of the demand-supply process of employment could end up in a situation where job prospects of those having just primary education will start declining. In turn, this will create an increasing demand to attain secondary education. However, the demand to get a primary education has to rise simultaneously, as those who were initially contented having no education have now been cut off from the labor market. The irony of the matter is that the more an unprofitable level of education turns into a terminal point, there will be a higher increase in demand as a precondition or intermediate stage to the next phase or level of education. This will put more pressure on the government to do all it can to expand the facilities required for education at all levels so as to meet the increasing demand. If a response is not done quickly, the people may decide to handle things themselves. An example of this is Kenyas self-help movement (Harambee School), where secondary schools that were sponsored by the community were built all through the nation having it in mind that the government will take responsibility for the maintenance later.

The conclusion of the whole matter is the serious tendency for developing countries to widen their educational facilities at a very quick rate which is very difficult to justify financially or socially regarding the most favorable resource allocation.

Educations social benefits (the payoff to the society), falls well below the private benefits. As the employment situation worsens, then theres a need to call for higher demand as well as supply of more education. Initially, it is the uneducated that were majorly found included among the unemployed. But, over time, theres an unstoppable tendency that the unemployeds average educational level will rise as the number of school graduates continues to surpass the demand for both high and middle-level workers. Those that are well-educated must take on jobs that require a lower educational level after waiting unemployed and their aspirations begin a drop. The degree and diploma, therefore, becomes very important employment requirements. Private employers, as well as the government in most less-developed nations, seems to strengthen the trend by upgrading the formal education of entry students continuously for jobs that were initially filled by workers having less education.

Educational qualifications that are excess becomes formalized and could end up resisting downward adjustment. Due to the displacement phenomenon and educational certification, students that couldnt continue their education due to one reason or the other (i.e. poverty), will end up as school dropouts and unemployed in the process. Similarly, those that are more affluent will keep qualifying themselves by educating themselves for more years. In cases that are extreme, a situation will evolve just similar to that of contemporary Pakistan, Bangladesh, and India, where we can say their higher education system is like a last resort absorber for most of the educated people that are unemployed. This sort of unemployment compensation is a very expensive one. However, due to the fact that people cannot continue being students until they reach the retirement age, these masses will have to appear from behind the academia walls into a highly competitive labor market. This leads to more obvious unemployment among people that are both very vocal as well as very educated. For instance, a Bangladesh study revealed that the rate of unemployment among university graduates in the year 1980 was about 47%.

To conclude, we must note that most individuals seem to refuse things that look like a downgrade of their job qualifications. As a result, even though employers that demand labor will try to replace those that are more educated with the less educated ones for a particular job, concerning supply there will be lots of people searching for jobs and whose expectations will surpass the labor markets emerging realities. They might even prefer staying without a job for a while rather than accepting a job that they feel is below their standards. This means that, due to the lags and frictional effects of these adjustments on supply, there will be unemployment at virtually all educational levels even though it will only be concentrated at the lower levels and generally, it is inversely proportional to the educational attainment.

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