5 December, 2020

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Human Capital Inequality In Sri Lanka – A Reflection

By Sharmila Gamlath

Sharmila Gamlath

Sharmila Gamlath

Between 1980 and 2013, Sri Lanka’s Human Development Index (HDI) value improved from 0.569 to 0.75, and with a life expectancy at birth of 74.3, mean and expected years of schooling standing at 10.8 and 13.6 respectively, and a gross national income of $3279.89 in Current US dollars or $9250 after adjusting for Purchasing Power Parity, we are currently categorized by the UNDP in the High Human Development group. Furthermore, the income Gini coefficient is 36.4%, which, in comparison to much more developed countries like the USA (40.68), Chile (52.1%) and Argentina (44.5%) is not very high. These are impressive achievements, even in spite of the fact that international agencies like the UNDP make use of data provided to them by national data collecting bodies; and it is common knowledge that both the Central Bank of Sri Lanka and the Department of Census and Statistics, the two main organizations in charge of collecting socio-economic data, window-dresses and manipulates statistics to project the country in a positive light.

Income and wealth inequality is a hot topic in the Presidential election campaign, and to an extent, the dominance of this issue has precluded the discussion from moving on to coherently exploring the other types of inequality prevailing in Sri Lanka. Inequality is multi-faceted concept. While many economists are preoccupied with income inequality, growth and development economists also pay considerable attention to other types of inequality such as wealth inequality, which has recently enjoyed a massive surge of interest recently due to the French economist Thomas Piketty’s ground-breaking book, Capital in the 21st Century; human capital inequality, with famous names in this line of research including Nobel Laureate Gary Becker, Gerhard Glomm, B Ravikumar and Oded Galor; land inequality, which has received relatively less attention within the mainstream literature, but was studied by Lenin as far back as the late 19th century; and gender inequality, which has received a lot of attention not only in economics but also in sociology, management and politics.

While there have been erudite discussions on income and wealth inequality in Sri Lanka in the print and electronic media (for a good take on this see the article by Mr W.A. Wijewardena, a former Deputy Governor of the Central Bank of Sri Lanka), the focus of this discussion is on human capital inequality. As opposed to focusing on short run inequalities, it is important to look at how and why persistence of human capital inequality exists in the long run.

Much empirical research that has been conducted in many countries in relation to the persistent nature of human capital has shown a clear positive association between the human capital of parents and their children. Hence, children of educated parents tend to obtain a good education themselves, while children of uneducated are less likely to obtain a good education. This is because innate ability is only one determinant of a child’s academic success, while the quality of education and parental expenditure on education also act as important contributory factors. Such inequalities in human capital lead to inequalities in income too, as estimates suggest that people with a university degree can earn at least 70% more income during their lifetime than non-graduates. If one considers health as a form of human capital, the same persistence mechanism could be present in the context of health too, as genetics can only partially contribute towards keeping a person in good health, with the rest being dependent upon factors such as nutrition levels and quality of healthcare.

Public provision of education and health is often considered to be a means of reducing the extent of human capital inequality. This is because it improves access to and availability of these services to society as a whole, thereby contributing towards the improvement of the health and education levels of the disadvantaged members of society. Yet, such benign outcomes can only be achieved in the presence of good healthcare and education. Services provided free of charge to the final user by

the government may not necessarily be of a high quality, and it is apparent in the case of Sri Lanka. With much being made of the free education system in Sri Lanka, the 10.8 mean years of schooling and the 13.6 years of expected years of schooling is, to say the least, inadequate. So essentially, the mean level of education of the present population is 10.8 years, suggesting that on average a Sri Lankan would have studied up to GCE O/L. There is a relatively more optimistic outlook for a child born today, who is expected to study 13.6 years. Another aspect which requires attention is that only 14% of tertiary age students are enrolled in a tertiary course of study, suggesting that despite the presence of an education system which provides free education from the primary to the tertiary level, only a small proportion of students actually manage to enjoy the complete benefits of this system. This state of affairs needs improving through better funding, improved efficiency and a reorganization of the public education system.

Digressing from the averages, the gross inequalities that exist in the public education system are quite alarming. Access to the elite public schools is often reserved to the children of rich professionals, businessmen and those affiliated to powerful politicians. The poorer children who do manage to gain admission through the area rule are often grossly marginalized by teachers to the extent that the thick-skinned survive while the others drop out of school at an early age, and their vacancies are filled by children whose parents can give fat donations to the school and delight the principal and the admissions board with handsome bribes. Another inevitable requirement associated with educating a child is private tuition. While there are no reliable statistics available on expenditure on private tuition, it does place considerable strain on the purses of middle and low income parents. As the more educated, richer parents can often afford better supplementary tuition to their children, private tutoring only worsens inequalities in the accumulation of human capital.

A similar story can be told in relation to health. In a country which takes great pride in the free healthcare system, it is concerning to observe that out of pocket health expenditure accounts for 45.9% of total health spending. Such a high share of out-of-pocket expenditure is a cause for worry, especially in a country where according to the UNDP only 17.1 of the population of statutory pension age actually receive a pension, 70% of deaths occur due to cardiovascular diseases, cancer, diabetes and chronic respiratory diseases according to the WHO, and 42,191 people are internally displaced as estimated by the UNHCR.

While progress has been made with regard to health and education, reducing inequalities and inequities in these areas should be a goal that should be actively pursued at the central and local government levels. The obsession with physical capital development of the present regime has come at the expense of human capital development. However, there is a need to appreciate that physical capital cannot be a substitute for human capital. Rather, there is a need for a more balanced approach to development, with physical and human capital development occurring hand in hand. Increased government spending on healthcare and education, can help reduce the need for high private spending on health and education, which would in turn help reduced inequalities in availability and access. For this, in addition to national-level policies, strategies at the regional level are needed to ensure that good education and healthcare facilities are not limited to those living in urban areas. Furthermore, special programmes need to be put in place to get children and adults belonging to ethnic minorities to gain access to public education and healthcare.

A government which is genuinely interested in uplifting the lives of citizens, especially those living in economic deprivation, should appreciate that strengthening human capital is the best means of helping everyone reap the fruits of growth and development, rather than restricting the benefits to a privileged cross section of society. There are two possible explanations. The first is that the present leadership has not realized the need for engaging in human capital development, which is very unlikely, given the large number of economic advisors hovering around President Mahinda Rajapaksa. The second, and more viable explanation is that the present regime simply turns a blind eye to this need due to their selfish desire to only engage in development of the which can provide those in power with the opportunity to engage in unimaginable corruption and misappropriation of tax-financed and borrowed funds; and also appease the elitist urban dwellers who often feel greatly excited at the emergence of new highways, well-paved roads, new ports and airports in obscure locations.

Although it is hard to believe that a complete upheaval of the current system would be possible within a short period of time, and the joint opposition should be realistic about their goals, at this stage, an honest endeavour to bring about a change needs to be supported. Ultimately, altering the perilous course our country is being steered along lies in the hands of the citizens of Sri Lanka, who must vote pragmatically on the 8th in order to exercise their say in determining the future direction of development in Sri Lanka.

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Latest comments

  • 1
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    There are two possible explanations. The first is that the present leadership has not realized the need for engaging in human capital development, which is very unlikely, given the large number of economic advisors hovering around President Mahinda Rajapaksa. The second, and more viable explanation is that the present regime simply turns a blind eye to this need due to their selfish desire to only engage in development of the which can provide those in power with the opportunity to engage in unimaginable corruption and misappropriation of tax-financed and borrowed funds; and also appease the elitist urban dwellers who often feel greatly excited at the emergence of new highways, well-paved roads, new ports and airports in obscure locations.

    So, the final conclusion is Mahinda Rajapske did not develop the human capital at all. they provided jobs to graduate but those graduate did not do anything while being employed.

    Every thing goes in one direction, that what every Mahinda Rajapakse did, did those in his favour or in his family’s favour. Even the mega projects were handed over without the tender procedure and every time the price doubled or tribled because they got humongous commis out of those.

  • 1
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    A very good article by a very thoughtful author..
    Will the author give an update 15months into the new governmant please?

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