income inequality (ibid: 30) as jobs for secondary educated students have expanded in
number.
Knight and Sabot question some of the methodological assumptions that lie behind
conventional rate of return analysis and suggest that some results may be misleading.
They draw attention to the dynamics of labour markets fed by expanding numbers of
school graduates as others have done. In particular false conclusions are likely to be
drawn if the starting wages of new school leavers stand in a changing relationship to
average wages for previous cohorts who entered the labour market when wage
differentials were different. In the case of Kenya they suggest that this leads to an
exaggeration of rates of return for primary school leavers sufficient to bring these
below the level for secondary leavers when calculated on a marginal rather than
average basis. This can be taken to suggest that greater emphasis on primary investment
would have an efficiency penalty from a purely economic point of view. It should be
noted that the data used in this very comprehensive study dates from 1980 since when
labour market conditions will have changed. Like other studies of its type it appears to
give little attention to unpacking educational quality variables - e.g. taking account of
the school attended (since many employers are known to value the school attended in
making recruitment decisions) and separating years of schooling from information on
qualifications and grades achieved (qualification levels and grades are likely to be used
by bureaucratic employing organisations for recruitment and promotion).
The impact of education on productivity is also a matter of concern in the urban
informal sector. Here the problems of measurement are even more challenging than in
relation to agriculture and modern sector employment, and the evidence is equally
mixed. Hallak and Caillods (1981) were unable to establish a clear relationship when
reviewing studies by the World Bank on entrepreneurship, by PREALC on the informal
sector in Paraguay, Ecuador, the Dominican Republic, by Nihan on Mauritania and
Togo, by Aryee on Ghana, and by Van Dijk on Senegal. The Aryee study did suggest
that gross output and earnings of heads of enterprise did increase with educational level,
but only up to middle school level. In the PREALC studies the level of education that
made a difference to income varied by employment activity being least in basic services
and greater for repair and maintenance work. King's review of studies of training for the
informal sector (King 1991 98-113) lists a large number of initiatives that have been
taken to explore the interfaces between education, training systems and informal
employment. As might be expected from the wide diversity of situations that they
investigate these do not appear to lead to any singular conclusions. The impact of
education on productivity within the areas reviewed is therefore variable and likely to
appear at many different levels of significance. The conclusions that can be drawn have
to be surrounded with caveats. There are likely to be circumstances where education
has a strong effect on productivity and cases where this seems improbable. Which are
which has to be the subject of specific research projects.