Thursday, July 21, 2016

Inequality and educational reforms

In the last few years, we have witnessed an intense debate over educational reforms around the world. Latin America has not been the exception and these discussions have been particularly important in Chile. This country is known to be one of the most successful in the region in political and economic terms. Chile was the first Latin-American nation to obtain membership to the Organization for Economic Cooperation and Development (OECD) in 2010, and was classified as a high-income country by the World Bank (WB) in 2013.

Having said this, Chile has one of the highest levels of income inequality in the world. According to data from the WB, Chile is in the top 10% of income inequality around the world measured by the Gini coefficient. Inequality can be measured before and after taxes. Both indices are not much different for Chile. This shows the ineffectiveness of the taxation system and government transfers. Another striking fact is that the top richest one percent gets more than thirty percent of the total income of the country. To get an idea, this level is much worse than the United States, where this figure reaches the twenty percent.

This combination of a growing economy and high inequality over time has created the conditions for the Chilean people to start complaining about the fairness of the economic system. That is how in 2011, university students took to the streets to protest against the high tuition fees and the quality of education in all its levels, but with a focus on higher education. Students demanded free higher education and their main argument was that this would also decrease inequality, hence helping to build a fairer society. However, the economic evidence shows that a much better way to reduce inequality and enhance lifetime income is by investing on preschool education. James Heckman (Nobel Laureate in Economics) and others have found that early childhood education yields the highest economic returns. Chile will spend in 2025 around 2.17 percent of GDP in the educational reform of which 51 percent will go to higher education and less than 7 percent will go to preschool education.

This reform may be popular among the groups that protest more strongly. However, it is not the best reform to solve the issues of income inequality and fairness. A much better solution would be to invest in our poorest children so that they can develop their cognitive skills as early as their richer fellows.

Jorge Rojas-Vallejos

No comments:

Post a Comment