Education and Productivity, Case Study Example

The link between successful economies and the concept of productivity is continually emphasized in the academic literature. (Aydin, Slide 9) Accordingly, the growth of economy may be approached from the perspective of productivity. Increasing productivity namely becomes a crucial strategy by which countries improve their economic standing. At the same time, however, productivity is a diverse concept. Whereas productivity in its basic form entails “quantity of goods and services produced from each unit of labor output” (Aydin, Slide 9), what determines successful productivity may be ultimately understood in terms of the investment made into the labor force, as opposed to the goods and services being produced. In other words, key determinants of productivity include physical capacity per worker, human capital per worker, natural resources per worker and technological knowledge. (Aydin, Slide 9) To the extent that the determinants of productivity may be defined in this manner, it becomes clear that dedicating policy to the improved skills of workers, that is to say, the people that produce, is the most effective way to realize the aim of increased productivity and, by extension, overall economic growth. This, accordingly, underscores the importance of stressing education within the context of Saudi Arabia, in so far as economic growth is spurred by the investment in the population which produces.

It has been argued in the academic literature that the most successful way to realize this aim is increased education. This argument is based on empirical and quantitative analysis. For example, in the United Kingdom, which is an advanced economy with a high GDP, 98% of citizens who are of age to attend high school pursue their education. (Aydin, Slide, 6) In contrast, in Mexico, which is classified as a middle economy, 71% of those who are of the appropriate age to attend high school are enrolled in school. Furthermore, in Mali, which is classified according to GDP as a poor country, only 31 percent of high school aged potential students are in school. The connection between economy, productivity and economic growth, according to the data, appears explicit.

Because of these lucid statistical numbers, poignant arguments have been made to consider education as also a crucial economic objective. From the perspective of economics, therefore, education is viewed as the growth in human capital, which may be defined as “knowledge and skills that workers attain through education, training and experience.” (Aydin, Slide 11). In the specific case of Saudi Arabia, decisive connections can be made between a policy that promotes education of its populace not only in terms of human growth on the socio-cultural level, but also on the economic level.

When examining statistical data concerning the status of education in Saudi Arabia, there are somewhat discouraging numbers when considered from the global perspective. Unsurprisingly, in conjunction with the above, within the Saudi Arabian context there are also clear improvements that need to be made with regards to labor productivity.

Beginning with the latter, a 2012 report issued by the International Monetary Fund identified numerous issues in the Saudi Arabian economy that need to be rectified so as to improve economic growth. Perhaps most significantly in the case of Saudi Arabia, the IMF identified the key issue that in the Saudi economy, there is a “greater concentration of labor in sectors with relatively low productivity.” (IMF, 17) In other words, the majority of Saudi workers are involved in sectors of the economy that are not producing enough so as to significantly improve the overall situation in the Saudi economy. In other words, what is required, in so far as the IMF report’s findings are correct, is that the labor force must be grown precisely in those sectors where productivity is high.

This presents a two-pronged problem for economic policy makers in Saudi Arabia. On the one hand, it becomes necessary to identify precisely which sectors of the economy are those which have high productivity, so as to eliminate the number of workers who produce in the low productivity sectors. On the other hand, it is necessary to improve the human capital of Saudi workers, so that they are capable to participate in high productivity economic sectors as opposed to those of low productivity.

The first problem can be identified by looking at sectors of the Saudi Arabian economy which feature high productivity. In the Saudi context, this is above all defined by the oil industry. However, there are economic problems which exist when an economy is not diversified, as the literature states. Namely, one cannot expect an economy to be entirely reliant on one industry. The United Arab Emirates represent a successful case of an economy which relies on a particular product, but does not let this product define the economy itself, to the extent that this creates various problems, such as over-dependence on a particular resource for economic growth.

In this regard, perhaps the best policy is not to clearly define beforehand which sectors of the economy have the highest quantitative data regarding production, in so far as this before the fact eliminates potential growing sectors of the economy which have not yet been identified or which may not even exist at this moment. In other words, the recommended policy decision would be to focus on the second aspect of this problem and allow the potential of the Saudi people to shine through with an emphasis on human capital.

This recommended policy decision becomes all the more decisive when looking at statistical information regarding the Saudi education system. Many disturbing numbers emerge through the data, which mainly address the Arab world as a whole. For example, adult literacy rates in the Arab world are below the world average (84.1% of the world, 76.9% in Arab States.) (Aydin, Slide 42) The Arab world also falls under the world average on the knowledge wealth index. (Arab states – 76.9%, World, 84.1%) (Aydin, Slide 43) More specifically in the Saudi context, Saudi Arabia had 171 patents from the period of 1980-2000, whereas South Korea had 16,328. (Aydin, Slide 47) In the bigger picture, OIC countries had 1.5% of the world total of patents. (Aydin, Slide 47)

Nevertheless, there are also signs of potential growth. For example, in terms of the KI index (Education, Innovation, ICT index) and the KEI index (KI, Economic and Institution Regime Index), Saudi Arabia received marks of 5.96 and 6.05, above the world average of 5.12 and 5.01 respectively. Nevertheless, this is significantly below, for example, North America, which has a KEI score of 8.8 and KI score of 8.7.

To the extent that the above connection between productivity and education holds, it becomes clear that Saudi Arabia, for future economic growth, should invest heavily in the education of its citizens. Furthermore, in so far as above “knowledge economy” scores become more important, this indicates the transition of the global economy to a knowledge economy: those countries which will be influential and successful on the global scale possess high knowledge economy scores. Education improvement becomes imperative.

Certainly, it may be argued that the thesis education improvement is imperative is entirely different from actually improving education. However, from the perspective of policy, it appears that a commitment to education is of the utmost importance, in so far as 1) Saudi Arabia and the Arab world in general, because of it being blessed with natural resources, is able to embark upon such programmes, and 2) the tradition of the Islamic world is one that stresses education and higher learning. For Aydin (Slide 41), “starting 15^th century- knowledge creation in the Muslim world stagnated”, whereas Abu Sulayman stated that “the Muslim mind lost ‘its ability to give birth to new ideas, to update its institutions, and to produce the planning, means and policies essential to further progress at the civilization level.” (Aydin, 40) Read from another perspective, the “ability to give birth to knew ideas”, as historically demonstrated, is inherent to Muslim culture itself. In this sense, realizing the policy of a greater commitment to education is not a fantasy, but rather this potential lies in the very heart of Islam.

Works Cited

Aydin, Necati. Macroeconomics: Chapter 12: Production and Growth. Powerpoint Presentation.

International Monetary Fund. Saudi Arabia: Selected Issues. Washington, DC: IMF, 2012.