Korea’s Experience in Human Capital Policies

Ju-Ho LeeKDI School of Public Policy and Management

Human Capital Policies (I):

Korea’s Education Expansion

and bubble

I. The World’s Fastest Educational Expansion

II. Quality Problems of Colleges and Schools

III. Formation of Education Bubbles

IV. Labor Market Consequences of Education Bubbles

Outline

Korea’s Rapid Educational Expansion

① Educational Attainment: • Average Years of Schooling

② Educational Achievement: • International Achievement Tests

③ R&D Manpower• Number of Researchers

Average Years of Schooling (15-64 old) in Korea, Japan, USA, and China

Source: Barro, R. & Lee, J. (2010). A New Data Set of Educational Attainment in the World, 1950-2010, NBER WP 15902http://www.barrolee.com/ (2013.4. 12 retrieved)

0.0

3.0

6.0

9.0

12.0

15.0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

K 15-64 J 15-64

USA 15-64 China 15-64

Source: Barro, R. & Lee, J. (2010). A New Data Set of Educational Attainment in the World, 1950-2010,NBER WP 15902 http://www.barrolee.com/ (2013.4. 12 retrieved)

Average years of schooling (15-34 old) in Korea, Japan, USA, and China

0.0

3.0

6.0

9.0

12.0

15.0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Korea 15‐34 Japan  15‐34

USA 15‐34 China 15‐34

Average Scores of Reading, Math and Science in PISA

Number of Researchers (FTE) per Million Inhabitants

0

1000

2000

3000

4000

5000

6000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Korea Japan USA UK Germany France China

Source: UNESCO

Quality Problems in Korea’s Education

① Low Academic Ranking of Research Universities

② Strong Vertical Differentiation of Universities with respect to KSAT Scores of Entering Students

- Weak Horizontal Differentiation of Universities

③ Focus on Test Scores in Schools at the expense of Creativity and Character Skills

Academic Ranking of World Universities (2013)

Alumni: Alumni of an institution winning Nobel Prizes and Fields Medals (10%)Award: Staff of an institution winning Nobel Prizes and Fields Medals (20%)HiCi: Highly cited researchers in 21 broad subject categories (20%)N&S: Papers published in Nature and Science* (20%)PUB: Papers indexed in SCIE and SSCI (20%)PCP: Per capita academic performance of an institution (10%)

0

50

100Alumni

Award

HiCi

N&S

PUB

PCP

Harvard University(1)

The University of Tokyo(21)

SNU(101-150)

Peking University(151-200)

Share of Papers and Citations by Countries

Source: Web of scienceNote: In full counting method

Vertical Differentiation among Universities : Education and Research Indicators (2013)

• According to PISA, Korean students study Math for 9.32 hours per week, much longer than OECD average(6.83), Finland(5.02)

– Korean students study Math at after school programs including private tutoring for 2.28 hours per week, much longer than OECD average(1.07), Finland(0.37)

– Korean students study Math autonomously including homework for 2.31 hours per week, much longer than Finland(1.20 hours)

Education Bubble

• We call education bubble as a phenomenon of steady increases in spending on educational investment that may not result in the effective increase in human capital

• Such phenomenon may involve

- Mushrooming of private tutoring to enter prestigious universities

- Rapid increase in students among low-quality universities

Private spending on education keeps increasing despite low rate of

return due to:

• Social psychological factors that put high values on the academic degrees

• Strong vertical differentiation in education

Institutional changes in education to enhance its quality and diversity occur

much slowly than the quantitative expansion

• Educational institutions fail to respond flexibly to the rapid increases in the demand for education

• Political economic factors that make education reforms much more difficult

than economic reforms

• Over-education

- Quantity of Education

- Labor Market Mismatches

• Education Bubbles

- Quality of Education

- Vertical Differentiation in Education

- Continuous Increase in Education Expenditure

• Financial Bubbles: - Prices in a financial bubble can fluctuate erratically and are vulnerable to a sudden burst

• Education Bubbles- Increases in education expenditure are more persistent for a longer period

- More long-run adverse consequences on inequality and economic growth

Share of new graduates from high schools who enter universities had surged from 33.3% in 1990 to 83.9% in 2008

Share of new graduates from vocational high schools who get jobs had plummeted from 80.1% in 1991 to 16.8% in 2009

Sluggish quality improvement and strengthened vertical differentiation in universities

Employees of private tutoring institution increased from 69,000 to 317,000 which is equivalent to 77% of total number of school teachers

11

22

33

44

0.0

20.0

40.0

60.0

80.0

100.0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

generalallvocational

Percentage of New High School Graduates who Enter Colleges (Advancement Rates)

Note: those enlisted were excluded from graduates. . Source: Statistical Yearbook of Education. 

0.0

20.0

40.0

60.0

80.0

100.0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

vocationalallgeneral

Percentage of New High Schools Graduates Employed

Note: those enlisted were excluded from graduates. . Source: Statistical Yearbook of Education. 

Percentage Change in Enrollment from 2000 by Decile Groups of Colleges

Source: National Business Survey by Statistics Korea, and Educational Yearly StatisticsNote: Teachers in elementary and secondary schools

Number of institutions and Employees in Private Tutoring Business

-

50

100

150

200

250

300

350

400

450

-

10

20

30

40

50

60

70

80

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

no. o

f emplo

yees or teach

ers

(x1000)

no. of

inst

ituio

ns

(x1000)

No. of institutions in private tutoring No. of employees in private tutoring No. of Teachers in Schools

Korean Labor Market Analysis

Despite the massive increases in the graduates of higher education

institutions:

1•Wage growth has slowed down since mid 1990s (the rapid expansion period)

2•Overall wage inequality has risen

3•College Premium increased but heterogeneously among the college graduates

4•Within-college inequality was the main driver of the increasing inequality

Compositional Change of the Workforce Toward Higher Education0

.2.4

.6

1980 1985 1990 1995 2000 2005 2010Year

MS HS 2Y-C 4Y-C

Growth and Inequality of Korean Wage

1997 2008

.25

.3.35

.4

Gini

1313

.514

14.5

Log W

age

1980 1985 1990 1995 2000 2005 2010Year

Mean Gini

4-Year College Premium by Wage Decile Groups-.5

0.5

11.5

2

Rate of R

etur

n to C

ollege

Edu

catio

n

1980 1985 1990 1995 2000 2005 2010Year

1st Dec. 2nd Dec. 5th Dec. 10th Dec. Top 5% Top 1%

Share of Wage-deficient Young 4-year College Workers

0.0

5.1

.15

.2.2

5

1980 1985 1990 1995 2000 2005 2010Year

mean median

Among College Workers (Age<=34)

0.0

2.0

4.0

6.0

8.1

1990 1995 2000 2005 2010Year

mean median

Among Workforce (Age<=34)

• Human capital is an engine of economic growth, and human capital policy is major tool to combat inequality

• However quantitative expansion of education alone might not necessarily lead to the human capital accumulation

• Policy makers around the world should focus on education reforms to enhance the quality of education to cope with the negative consequences of education bubble such as mushrooming of private tutoring to enter prestigious universities and rapid increase in students among low-quality universities

Human Capital Policies (II):

Korea’s Reforms to

Diversify Education

I. Education diversification as a goal

II. Specific reform agendas for implementing diversification

III. Reform strategies for implementing diversification

Outline

Educational Diversification as a Goal

Distribution of Schools and Colleges before and after Education Diversification

Distribution of Schools and Colleges before and after Education Equalization

Education Diversification versus Education Equalization

Misguidance of the International Comparisons on Education Reforms

Reform Agendas

Reinforce Vocational Education

Meister high schools initiatives

Strengthen career guidance(employ new 4,500 career counseling teachers)

Introduce “Job-first, Diploma-Later” career pathfor vocational high school graduates

Encourage changes in 350 specialized vocational high Schools

Teaching and Assessment for Creativity & Character Skills

Introduce Admission Officer Systems for universities

Introduce Admission System for Self-directed Learning forspecial-purpose high schools

Revitalize character education to combat school violence(school sports clubs, student orchestra, social and emotionallearning)

Introduce smart education (digitalize textbooks)

Support Universities that Focus on Teaching and Cooperation with Industry

Introduce supporting system for universities that teach well- University Educational Capacity Enhancement Program (UECEP)- Advancement for College Education (ACE)

Introduce supporting system to link universities and companies- Leaders in Industry-University Cooperation (LINC)- 2,000 I-U Partnership Professors- Contract Majors- World Class Colleges (WCC))

Strengthen the Autonomy of Schools

High School Diversification 300 Initiatives - autonomous private high schools- boarding high schools- autonomous public high schools

Introduce a system to recruit principals through open competition

Strengthen the Accountability of Schools

Nation-wide information disclosure on schools

Pulling students out of underachievement based on nation-wide assessment of all students

Evaluate teachers by students, parents, and colleagues

3. Enhance the Quality of Research Universities

Governance reforms for national universities- corporatize SNU- abolish direct election system of presidents of national universities

World Class University (WCU)- invite 340 foreign scholars to 30 domestic universities

Double government support for research of university professors - from 16% (2008) to 32% (2013)

Establish International Science Business Belt- Institute of Basic Science (IBS)- on-campus research centers at KAIST, GIST, DGIST, and POSTECH- Heavy-ion Accelerator

Restructuring Universities

Establish data-based framework for restructuring universities

Set up University Restructuring Committee (URC)

Announce annual list of universities that are subject to limited financial support, limited subsidies for student loans,even to be closed down

Reduce the Burden of Private Tutoring

Expand After-School Class

Encourage local communities and industries foractive educational donation

Education Broadcasting System (EBS) providesquality CSAT courses

Regulate through price ceiling and limited hours of late-night private instruction

“Half Burden of Tuition” Initiatives

Launch National Scholarship Program through Korea Student Aid Foundation (KOSAF)

Introduce Income Contingent Loan

Incentivize universities to reduce student’s burdenof tuition

Reform Strategies

Crisis-Management Strategies

Building on earlier failed reform efforts Obtaining an electoral mandate for education reforms Pursuing evidence-based reforms with information disclosure

and solid research Engaging teachers by mediating conflicting interests among

teachers Transforming small crises into significant reform opportunities

Opening-Up Strategies

Open to industry

Open to parents

Open to new players

Open to countries abroad

Open to other ministries through “whole-of-government” approach

• Balanced consideration of cognitive and non-cognitive skills is crucial in setting the goal of education diversification reform

• Reform agenda for education diversification include diverse policies designed to reinforce horizontal differentiation

• Major strategies to overcome for education diversification reform are opening-up strategies and crisis management strategies

• Hopefully, goals, agendas, and strategies of education diversification reform discussed during the seminar will contribute to the formation of a more balanced and wide-ranged consensus on education reform

Thank you for your participation