Technical Education in the Middle Income Trap: Building Coalitions for Skill Formation

Abstract

This article analyses variations in the provision (breadth and depth) of skill formation through technical and vocational education (TVE) in secondary education in middle-income countries. A growing consensus blames productivity stagnation for the middle-income trap and advocates more human capital to boost productivity. Building on the extensive political economy literature of skill formation in developed economies, the article emphasises the importance of a more demand-side analysis of skill formation. Fragmentation of social groups in middle-income countries discourages the sorts of coalitions that pushed strong public investment in TVE in earlier developers. Brief analyses of exceptional TVE expansion in Chile, Turkey, and Malaysia suggest the importance of a more top-down dynamic led by strong parties and stable governments that compensated for weaker coalitions.

Acknowledgement

We are grateful to Martin Liby Troein, Elvin Ong, Guillermo Toral, and Anna Weissman for research assistance, and to Nahee Kang, Juan Pablo Luna, Antoine Maillet, Eva Paus, Thomas Remington, Merve Sançak, Ken Shadlen, and participants at SASE 2017 for comments on previous versions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Rothman blog interview. http://ncee.org/2017/09/after-the-shock-the-german-education-system-in-2017/, accessed 24/6/18.

2. http://www.elmercurio.com/blogs/2014/07/20/23672/Eyzaguirre-devela-el-misterio.aspx, accessed 4 June 2015.

3. From the European experience, these collective solutions do not emerge out of some spontaneous process of inter-firm cooperation but rather result from economic institutions, such as business associations, public-private consultative councils, and company-union councils, capable of promoting collective action through effective consultation, monitoring, and credibility in rewarding and sanctioning members (Busemeyer & Trampusch, 2012; Crouch, Finegold, & Sako, 1999).

4. For example, ‘political leaders can build effective proreform alliances of business leaders and civil society through communications campaigns that paint a compelling picture of the current failures of the education system and the importance of better education for economic competitiveness.’ (Bruns & Luque, 2015, p. 48).

5. Our emphasis here is on the role of business. For more on labour, see Doner and Schneider (2016).

6. Sevilla (2017) provides different calculations for Latin America for the proportion of upper secondary enrolments in 2013 in technical, professional education: Argentina 16 per cent; Brazil 8 per cent; Chile 40 per cent; and Mexico 38 per cent. Although the magnitudes differ, the order of the countries is the same as the World Bank data. We use the World Bank data here and in subsequent figures to facilitate comparisons with other regions.

7. Despite its low levels of technical enrolment, Japan has a highly skilled workforce in manufacturing. This is due to the skilling done by companies in the context, historically, of lifetime employment. Liberal economies like the United States provide little technical training at the secondary level, in part because they rely more on general skills (Estevez-Abe, Iversen, & Soskice, 2001).

8. In Thailand, students from well-to-do families are more likely to undertake vocational education and enjoy higher earnings than is the case for general education (Moenjak & Worswick, 2003).

9. Interview with Santiago de la Barrera, coordinator for the national council for technical education in Argentina, 10 August 2016.

10. Since teacher salaries account for most education spending, the much lower student–teacher ratio in TVE in Brazil implies a much higher spending per pupil than in general education or somewhere well about the 45 degree line in Figure 1.

11. This should not be taken to minimise large versus small firm differences. Culpepper and Thelen (2008) note that in the quintessential CME, Germany, market and technological developments have raised the costs of training, which small and medium-sized firms find increasingly onerous. Indeed, Culpepper (Culpepper, 2007) explores differences among CMEs by highlighting the tendency for larger employers to favour higher skill levels, as reflected in support for ‘tertiary vocational training’ (similar to American community colleges) versus smaller firms' tendency to discourage such tertiary training to protect cheap labour procured through apprenticeships.

12. Doner and Schneider (2016) provide a more extended discussion of these cleavages in middle-income countries and their relative absence in developed countries.

13. In Mexico, in one perverse instance, the entry of MNCs led to a reduction in skills as students left school early to take unskilled jobs (Atkin, 2016).

14. However, the informal-formal distinction is blurred on other issues as workers often shift between formal and informal employment (Baker & Velasco-Guachalla, 2018; Perry, 2007).

15. Other weaknesses include poor policy coordination; unstable funding allocation; lack of clarity on funding criteria; and a lack of accountability owing to poor access to data (Cheong & Lee, 2016; see also Felker, 2017). In Thailand, heightened concerns about competition from lower wage competitors, such as Vietnam, has triggered an extensive number of public–private sector initiatives designed to strengthen the technical workforce (for example Chalassatien, 2016). The results of these efforts are not yet clear.

16. Following Bizzarro et al (2018, p. 286), we understand party strength to be a function of permanent national (or regional) party organisation, permanent local party branches, centralised candidate selection, legislative cohesion, minimal party switching, and programmatic rather than clientelist linkages to key social bases.

17. The Malaysian and Turkish exceptions are, furthermore, consistent with the argument that proportional representation (PR) systems are more effective than majoritarian electoral systems in facilitating the kinds of long-term collective action and negotiation among key interests required for effective TVE (Hall & Soskice, 2001; Iversen & Stephens, 2008).

18. See Raj-Reicher, this volume. A 2013 World Bank analysis warned that even as Malaysia’s continued reliance on foreign workers for low-skill work can help ease labour shortages, in the long-run, it 1) perpetuates ‘a low labour-cost model that impedes production upgrading through technology,’ and 2) ‘ breeds a mentality of reliance on this model and a lack of incentive to drive productivity growth’ (Cheong et al., 2013). Reliance on low-skill migrants was intensified with an acceleration of out-migration by skilled workers during the 1990s, just as the economy began its drive toward upper-middle and high-income status (Felker, 2017). On similar problems in Thailand see Voravid (2013).

19. The above-noted (2017, p. 123) World Bank report pushes the trade openness argument further by stressing the benefits of export diversification. While diversification may be a necessary condition for escaping the trap, the case of Thailand, a country with a highly diversified export basket, runs counter to the idea that diversification is anywhere near a sufficient condition.

20. Turkey and Chile are also exceptions as the first two of the three countries,Indonesia is the third poorer country to participate in 2014 in Piacc (Program for the International Assessment of Adult Competencies). By 2016, Mexico, Hungary, Ecuador, and other poor countries joined. Piacc measures basic literacy, numeracy, and problem-solving skills among the entire adult population. Although Chile and Turkey ranked below richer countries, the fact that they were eager to join the survey demonstrates a government concern with skills. https://oecdskillsandwork.wordpress.com/2016/06/28/the-survey-of-adult-skills-nine-more-countries-added-on/, accessed 18 August 2018.

21. Moreover, 44 per cent of tertiary enrolments are in TVE (Bernesconi and Sevilla, 2017). These authors note massive increases in scholarship funding for TVE in the 2000s despite the ‘negligible’ ‘political clout of the sector’ (p. 144).

22. These numbers use different calculations from those used by the World Bank in Table 1. We use these different estimates here because they capture more over time variation.

23. In the 2010s, however, education politics on many issues shifted to more bottom-up pressures; massive, sustained student protests with strong backing in public opinion surveys helped a new center-left coalition elected in 2013 to push through a whopping tax increase of 3 per cent of GDP and shift these new resources directly into education (Mizala & Schneider, 2017). However, the main policy initiatives after 2014 focused on reforming the voucher system, teacher careers, and financing higher education. TVE was not a central issue.

24. The pre-1990 dictatorship had transferred some technical schools to business associations and had devised a tax scheme that put business in charge of ongoing training. However, the business-run technical schools were a small proportion of all technical enrolments.

25. Also worth mentioning is the support from the private sector owners of schools and as providers of TVE (55% of secondary level and almost 100% at the tertiary level).

26. This discussion of Turkey comes from Sancak (2017) and Sancak & Özel (2016) who also emphasise the support for Turkish TVE that came from the European Union. Also, from personal communication from Merve Sancak (16 January 2018).

27. Coordination over skills also varied regionally within Turkey. Apaydin (2012) finds better coordination in Bursa than Istanbul (and also better than in Córdoba, Argentina).

28. Unless otherwise noted, the following discussion draws on Felker (2017, p. 23–25) and on author interviews, conducted in November, 2017 with Greg Felker, in Penang with managers from Motorola, Intel, Clarion, Symmid, Oram, as well as with officials of the Penang Skills Development Corporation (PSDC) and the Collaborative Research in Engineering, Science and Technology (CREST).

29. Personal communication from CEO of PSDC, 8 January 2018.