Overall, human capital is a key factor for the growth and productivity of SMEs. Studies in Cen-tral America estimate that an increase of 1 percent in the average number of years of schooling would increase productivity by about 0.33 percent.14 Furthermore, education/human capital has been identified as one of the main constraints to growth in Central American countries (see Stein
11. De Ferranti et al. (2003).
12. Jaramillo and Lederman (2006).
13. Human capital can be defined as the mix of innate skills and abilities of people, as well as the skills and learning that they acquire through education and training (OECD 2007).
14. Loening (2005).
2008 and Table 4 above). Despite some advances, the conclusion is that the educational systems in Central America have not been able to meet the challenges posed by the knowledge-based global economy.
Indeed, Central American countries perform poorly in the area of education. Even though the average number of years of schooling has increased in recent years, Central America is still more than 2 years below the world average and the quality is wanting. As shown in Figure 7, Central America’s average years of schooling is also significantly below that of other Latin American coun-tries. This is particularly striking in the cases of Guatemala, Nicaragua, and Honduras. Available information also indicates that the average number of years of schooling in Central America lags significantly behind the average of East Asian countries.15
At the level of primary education, net enrollment rates are high, but with the exception of Costa Rica, the quality of primary education remains very low. As shown in Table 9, most countries get a score below 3 in an indicator that goes from 1 to 7, where a higher value denotes a higher quality of primary education. Guatemala and Nicaragua get the lowest scores among the Central American countries. These two countries also show the lowest completion rates of primary education.
In spite of the high enrollment rates in primary school education, the low quality of education at this level is a big impediment for children to continue on to higher grade levels. Indeed, as shown in Figure 8, secondary enrollment rates in Central American countries are dismal. Three Central American countries16 (El Salvador, Guatemala, and Nicaragua) have among the lowest net second-ary enrollment ratios (a typical measure of human capital) in the Latin American region, and even Costa Rica, which by regional standards has a high per capita income level, sits in the lower range of the ranking.
But even the worrisome secondary enrollment rates do not reflect the seriousness of the situa-tion. Attrition rates from secondary schooling are atrocious, ranging in most of the countries from
Figure 7: Average Years of Schooling for Population Ages 25–65 (2005/2007)
Source: WDI and SEDLAC.
GDP per capita (PPP $ 2005)
Average years of education
30 to 70 percent. A large number of students in Central America do not find enough motivation to finish secondary school given the low quality of education they receive and the high rates of unem-ployment they will likely face. Failure to complete secondary school is, later, a limitation for these students because it makes them less likely to obtain a university or other higher education degree, further limiting their opportunities in the job market.
Moreover, in Central American countries the supply of secondary and university graduates with skills in science, engineering, and technology is limited. This makes it difficult for all types of firms, but particularly for SMEs, to find workers with the skills necessary to adapt knowledge and new technologies and undertake innovative projects.
As expected, the impact of these deficiencies in schooling is significant. Youth in Central Ameri-can countries appear to have more access to drugs and other diversions than to opportunities that will allow them to advance their careers, like a good education. This contributes to increased crime, social exclusion, and emigration, as well as to other social and economic problems. Moreover, a
Table 9: Assessment of Primary Education Net Enrollment Ratesa
(% of relevant age group) Qualityb Completion Ratec (% of relevant age group)
Costa Rica 100.00 4.70 92.87
El Salvador 94.00 2.70 89.73
Guatemala 95.10 2.20 80.01
Honduras 96.60 2.60 89.35
Nicaragua 91.80 2.40 74.54
Source: Unesco (2009), WEF Opinion Survey (2010–2011), WDI (2010).
a. Ratio of children of official school age (as defined by the national education system) who are enrolled in school to the population of the corresponding official school age.
b. Based on responses to the question: “How would you assess the quality of primary schools in your country?” The scores go from 1 to 7; 1 = poor and 7 = excellent
c. Percentage of students completing the last year of primary school. It is calculated by taking the total number of students in the last grade of primary school, minus the number of repeaters in that grade, divided by the total number of children of official graduation age.
Figure 8: Secondary Enrollment Rates in Latin America
Source: WDI—World Bank 2010.
90 80 70 60 50 40 30 20 10
0 GTM NIC SLV DOM PRY ECU CRI PAN URY VEN BOL COL MEX PER JAM ARG BRA CHL
recent report by the World Bank (2010) and the United Nations (2009–10) shows that secondary school completion is one of the most important preventive investments a country can make for young populations exposed to violent environments like those that exist in Central America. This is because young people who attend and remain enrolled in secondary school acquire skills they can use later in life to improve potential wages; it also gives them options for acquiring income that is not related to illegal activities. Moreover, a good secondary education helps keep young people off the streets by giving them responsibilities. It also connects them to a social process that, if well conducted, can instill values, cooperation, and productivity.
In sum, the three core problems in the area of education in Central American countries are:
low quality at all levels, low enrollment rates (mostly at the secondary and tertiary levels), and high attrition rates. All of these problems are also compounded with concerns about the relevance and content of school curricula.