56702 Skills, Not Just Diplomas: The Path for Education Reforms in ECA Mamta Murthi and Lars Sondergaard1 recession among all developing regions. In the post economic-crisis world, financial resources are more limited Key Messages and more expensive and export growth is restrained by potentially slower growth in the destination countries. In the post economic-crisis world, restoring and Restoring and sustaining growth in this context require sustaining growth in ECA countries require reforms to boost competitiveness and increase labor reforms to boost competitiveness and increase productivity. This is all the more important given the labor productivity. shrinking of the working age population in many countries Firms in the region report a "shortage of skills" of the region. Earlier boom years in ECA exposed as being a significant bottleneck (second only to significant bottlenecks to growth, particularly with respect tax regimes) to growth. to skills of the labor force (World Bank, 2009). Paradoxically, for a region with relatively high educational A large number of students complete upper attainment, the shortage of skills emerged as one of the two secondary and tertiary education in ECA most important constraints to firm expansion (the other countries but too many of them graduate being the tax regime). This makes it important, as countries without the right skills needed by industry; the plan for recovery, to undertake reforms to reduce the skills quality of education is, for the most part, poor. shortages that the earlier growth episode exposed. Apart from a few countries in the EU, there are few opportunities for adults to retrain, upgrade their skills or acquire new skills. The system of The Skills Challenge in ECA life-long learning to build new skills in later years is underdeveloped in the region. ECA had a well-regarded education system prior to the end of central planning. While the intervening years have taken Reducing the shortage of skills requires a some of the shine off this reputation, the countries continue fundamental change of approach in the to have some strong achievements in the field of education. education systems so that they aim for, and Notably, enrollments are high at all levels of education. The deliver, higher quality education for the vast socialist legacy is particularly visible in the low income majority of students. countries in the region which show the highest secondary Countries need to focus more on measuring and enrollments in the world for their income level. Tertiary using information on learning outcomes. They enrollments have grown rapidly in the past two decades and also need to use incentives provided by are also high relative to income with a few exceptions to financing, institutional autonomy, and this general pattern in the low income CIS countries accountability mechanisms to steer their systems (Azerbaijan and Uzbekistan). towards producing better education outcomes. Despite high enrollment and high attainment on average, skills shortages have become an important constraint on Introduction growth in the region. The EBRD-World Bank Business Environment and Enterprise Performance Surveys (BEEPS) ECA countries are currently emerging from the deepest provide successive snap-shots of the self-reported 1 This brief is based on a flagship report prepared by a team led by Lars Sondergaard, including Mamta Murthi, Dina Abu-Ghaida, Christian Bodewig, and Jan Rutkowski. ECA Knowledge Brief constraints to expansion by firms in ECA.2 The surveys Despite high levels of enrollment, education systems in show a dramatic change in firm perceptions of the skills the region do not produce enough graduates with the constraints starting around 2005. By 2008 skilled labor right skills. Students often graduate with diplomas, but not shortages had moved up to being the second most with necessary skills. The systems are still making the commonly reported constraint to growth across all countries transition from teaching the basics (factual content often via in the region, second only to tax regimes. The distribution rote-learning) to inculcating higher order skills such as of countries according to the frequency with which firms critical-thinking and problem solving. As a result, too many reported "major" to "severe" constraints in the supply of students graduate without the skills that are increasingly in skills is reported in Figure 1. On average, 30 percent of demand in modern manufacturing and service industry. The firms considered education and skills to be a major or need for such skills is not confined to a few high-tech severe constraint in 2008. The highest proportion of firms sectors or upper middle income countries alone (surveys of reporting constraints were found among the middle-income employers in countries like Kazakhstan and Macedonia CIS with upwards of 40 percent of firms dissatisfied with point in the same direction). the availability of skilled workers. A smaller proportion of firms in the Western Balkans reported to be constrained International assessment tests such as PISA measure certain while there was significant variability in proportion of dimensions related to critical thinking and problem solving. affected firms in the EU10+ 1 and Turkey (World Bank With the exception of a handful of EU countries, students in 2009a). ECA score significantly below the OECD mean. A 40 point difference on the PISA scale approximates to the Figure 1: Skills Constraint on Firm Expansion by 2008 competency increase from one additional year of schooling. (% of firms that consider workers' skills a major or very severe constraint) Figure 2 suggests that 15 year-old students in the region are 9 MI CIS "behind" the OECD average for reading competency by up 8 7 TJK LI CIS Western Balkans to 1 year for Croatia and Latvia, 1-2 years for Russia and 6 UZB EU10+1 and Turkey Turkey, 2-3 years for Bulgaria, Romania, Serbia and AZE CZE 5 ARM GEO EST Montenegro, and more than 3 years for Azerbaijan and the Kyrgyz Republic. Similar "deficits" are observed with BIH 4 KGZ HRV UKR KOS 3 MKD ALB LVA MDA respect to competencies in mathematics and science. It is no 2 1 MNE SRB BGR POL LTU KAZ surprise then that many firms find it difficult to find workers 0 HUN SVN TUR SVK ROM RUS BLR with the right skills. x < 10% 10% x < 20% 30% x < 40% 40% x < 50% 60% x <70% 70% x < 80% 20% x < 30% 50% x < 60% 80% x <90% The legacy of central planning inhibits school systems in Source: Turmoil at Twenty, World Bank 2009a other ways. The key actors tasked with delivering learning (school principals, local education authorities, etc.) operate in a stifling managerial environment in most ECA countries, Why Education is Failing to Produce Skills for All providing schools and local authorities with little or no autonomy to make decisions that might improve learning The emergence of skills shortages in the face of high and outcomes. The Ministries of Education often impose rising enrollments suggests that the problems lies not so detailed norms that determine levels of staffing and other much with access as with quality of education: inputs. Resources are inefficiently used and mostly tied up in (poorly maintained) buildings and (underpaid) staff. The Few education systems in the region recognize that they neglect of teachers, the most crucial input into improved are failing a large number of students. School systems student learning, has resulted in a profession which is over- still focus on sorting and streaming students, breeding aged, under-trained, part-time and poorly paid. excellence for a few at the top while worrying less why many fail. Few school systems in the region measure Apart from a few countries in the EU there are few success in terms of increasing the proportion of students opportunities for adults to retrain, upgrade their skills who meet key competencies by the end of basic or or acquire new skills. The system of life-long learning to secondary education. When students fail, their failure is build skills in later years is underdeveloped in the region. seen as the failure of the individual student and not of the Opportunities for learning later in life are extremely system. The needs of market economies point toward an important for those who may have finished or left school approach that focuses on increasing the skills of the vast with only the most basic of proficiencies or those who were majority of their students. educated under the regime of the planned economy and now 2 find themselves without the skills needed to sustain The EBRD-World Bank Business Environment and Enterprise Performance Surveys (BEEPS) have been conducted in virtually all ECA countries in 1999, employability (such as computer skills or language skills). 2002, 2005 and 2008. The samples are constructed by random sampling from the national registry of firms (or equivalent) and cover industry and services. ECA Knowledge Brief Figure 2: Not Reading Well Enough to Learn? Share of Students Scoring "Level 1 or Below" (indicating very poor quality) on PISA 2006 (Reading, %) 100 % students scoring "level 1 or below" on PISA 90 80 70 60 sreading test 50 40 30 20 10 0 Slovenia Montenegro Azerbaijan Denmark Greece Macao-China Netherlands Uruguay Brazil Estonia Latvia Serbia Finland Australia Iceland Luxembourg Slovak Republic Belgium France Spain Israel Russian Federation Indonesia Czech Republic Japan Qatar United States Canada Chinese Taipei ECA OECD, non-ECA Other Source: OECD 2007 database in the early stages of development (Figure 3). Developing The Path Ahead student learning assessment systems that measure learning competencies at key points in the learning cycle should be a Reducing the shortage of skills requires a fundamental priority, as should using the assessment data to improve change of approach in the education systems in the region teaching and learning both at the institutional and policy so that they aim for, and deliver, higher quality education making levels. In many countries, assessment centers are for the vast majority of students. "niche" departments with no influence on policy making. Figure 3: Scope for Improving National Assessment Using Incentives: Policy makers need to rely more on Systems to Measure Learning Outcomes in School providing incentives to the various actors in their education systems ­ the kind of incentives that will "steer" the systems towards better outcomes. This implies two things for central governments: that they have a vision which can be translated into measurable goals, and that the vision carefully balances three interrelated instruments which are at the disposal of governments to influence the behavior of local managers (Figure 4): Financing incentives to increase the focus on desirable outcomes such as higher graduation rates, greater learning, etc.; Source: Authors' assessment of ECA's progress with using external assessment to Autonomy for educational institutions to allow for improve policy making. greater flexibility in curriculum, teaching methods, Measuring Learning Outcomes: Countries need to focus resource use, institutional mission etc. so as to improve much more on measuring outcomes and using this learning outcomes of students and to move away from information to improve policy. At the level of basic the "inspection-control" regime currently used to education there is greater consensus on what are key skills monitor inputs into learning; and, and competencies, and the standardized tests to measure them.3 Many countries in the region participate in Accountability to stakeholders to ensure that the other international assessments, which should be complemented two instruments are being used in such a way as to with national assessments. Most school systems in the improve student learning. region have national assessment systems although many are These policy dimensions are intrinsically linked and policy makers will have to work on making progress on all three 3 fronts. The balancing act is ultimately about providing While the use of learning assessment tests is not uncontroversial, testing methodologies have improved, making these tests better and more useful for enough freedom to providers to innovate and respond assessing student learning than previously. quickly to new demands versus enforcing enough ECA Knowledge Brief compliance with rules and regulations to ensure that they Significant improvements will be difficult to achieve innovate and respond in a way that produces desired without a serious attempt to address the malaise in the education outcomes in a cost-effective way. Providing local teaching force ­ addressing the serious overstaffing in the managers with more autonomy to make decisions could tip sector and improving pay, professional development, and the scale in the direction of innovation, while strengthening work conditions. accountability measures could risk tipping it toward too much compliance. Similarly, the modalities governing the In higher education, countries need to go further by way local managers receive their financing can also tip the introducing incentives to encourage graduation and scale in one or the other direction, depending on how much performance-based contracts to enhance quality and they restrict the behavior of local managers. relevance. This needs to go hand in hand with greater autonomy over institutional governance and management. Figure 4: There are Three Classes of Instruments to The biggest challenge however is strengthening Provide Incentives for Improving Educational Outcomes accountability for outcomes. This requires a two-pronged approach of both strengthening of national quality assurance systems as well as enhancing transparency and information Financing to encourage migration to quality. Improvement in Adult Learning: Countries need to become serious about developing and implementing a strategy that increases the opportunity for adults to upgrade Autonomy Accountability or acquire new skills. For many countries, participating in OECD's Program of International Assessment of Adult Competencies (PIAAC) would be an important first step in the process of understanding the skills and competencies of their work force. Innovation Compliance Conclusion Whatever measures countries take, it would be important to Source: Authors' analytical framework. continue to build learning assessment systems and monitor and evaluate the impact of the reforms on desired outcomes. This balancing act has important implications for policy This is the only way of telling whether the adopted makers because there is no single recipe for getting the three measures had the intended effect and whether course elements right. Even successful countries constantly have to correction is needed. The education reform agenda ahead of re-assess whether they need to strengthen accountability, the countries in the region is an extremely important one as expand autonomy, or revisit financing mechanisms and such it lies at the heart of their competitiveness. The reform will fine-tuning might involve scaling back some elements of take time, suggesting that there is no time to lose to make a autonomy or re-centralizing some duties; country start. circumstances (which are constantly changing) will have to guide them. However, in general, in the school system this would mean a move away from inflexible line-item budgeting towards a About the Authors greater use of delegated budgets with incentives to maintain Lars Sondergaard, Senior Economist, and Mamta Murthi, enrollment and attendance (per-capita financing), a path on Sector Manager in Education, Human Development Sector which over half of ECA countries have already embarked. Unit, Europe and Central Asia Region, World Bank Schools need to be made more accountable for improving the learning outcomes of the bulk of their students. "ECA Knowledge Brief" is a regular series of notes highlighting recent analyses, good practices and lessons learned from the development work program of the World Bank's Europe and Central Asia Region http://www.worldbank.org/eca