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Education Expenditure

15 Januari 2020   18:45 Diperbarui: 15 Januari 2020   18:50 746
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Introduction

Education is an integral part of human capital development, as one of its purposes is to ensure potential labor forces are equipped with adequate skills that suit employers' needs, so that they can make an economic contribution. Governments have provided public education to ensure every citizen has a level playing field in order to reduce reducing skills inequality. Countries generally allocate a significant sum of their budget towards education (11% of Government Budget on average).

Indonesia is no exception here. According to OECD, there is a positive trend on Indonesia's public expenditure on education in terms of percentage of its nominal Gross Domestic Product thanks to its law to spend a minimum of 20% of its budget on education. This shows how much emphasis the country place on improving education. Recently, Indonesia has published the 2020 government budget and Ministry of Education receives Rp 508.1 Trillion. The allocation, however, is rather misguided as Indonesia still focuses on reducing inequality at the expense of the quality of its future workforce, as it was seen on the latest PISA results that showed Indonesia was in the bottom six among the OECD countries. The result shows that quality is something that Indonesia always fails to achieve although it has always been their goal.

Education Expenditure and Inefficiency

Kemenkeu
Kemenkeu

In the 2020 Government Budget 2020, the Ministry of Education is allocated Rp 508.1 Trillion to improve Indonesia's quality of education and future workforce. Out of that budget, 14.6% is allotted to basic education, followed by benefits for civil-servant teachers (12.5%). The purpose is to increase the number of children admitted to schools and in the long-run, expand the workforce. It also aims to tackle the problem of underpaid teachers so that they will be more motivated to teach students along with creating improvement on the current syllabus. Despite the increased effort, the problem remains unsolved as the number of out-of-school children at adolescents does not dwindle. According to UNESCO, the number of out-of-school children still increases even after all the expenditure by the government, with the highest number of out-of-school children in 2014 (1,919,777 in total) and 2018 for number of out-of-school adolescents (2,299,116).

Unesco
Unesco

To strengthen the previous argument, this approach was similarly done by Malaysia in 2012 as well. However, Pereira and Assadullah (2019) found out that Malaysia's effort in increasing public spending to set up additional schools to increase overall student enrolment remained futile as their PISA scores in 2012 were lower compared to South Korea and Singapore as their comparisons. It is understandable to see the reason to increase school enrolment which is to reduce the inequality among the income levels in terms of education opportunity, however this should be coincided with the improvement of the quality as well. If the quality remains stagnant, 

Secondly, increasing teachers' salary does not guarantee higher students' performance in their studies too, as de Ree et al (2017) showed by studying the effects of unconditional increase in teachers' pay in Indonesia.  They found that teachers in schools that received higher pay tend to be more satisfied with the salary, theoretically inducing higher motivation to teach their respective students. However, they did not find a correlation with students' performance in their standardised tests. Their studies concluded that higher teacher salary has "...no effect on teacher effort toward upgrading their own skills, no consistent evidence of changes in self-reported teacher attendance, and no effect on the ultimate outcome of student learning."

The two government's motivations and their respective studies show that although higher government expenditure is imperative, it is the use of these funds that are the important determinants of student learning outcomes (French, French & Li, 2015).

Lacking Quality and Poverty, Health, and Labor Productivity

Those two problems ultimately lead to a lack of quality of the future labours when they enter the labour force once they graduate. Even so, there is no allocation towards improvement of national curriculum as they are currently depending on Kurikulum 2013. Former Minister of Education, Anies Baswedan, decided to overhaul the then-ongoing curriculum (Kurikulum Tingkat Satuan Pendidikan 2006) because certain skills such as complex analytical skills, people management among others were important for the workforce to have to suit recruiters' demands, especially with an increase of automation and technological advancement. However, the latest reform did not solve the above mentioned recurring issue. Purnagunawan (2018) emphasises that Indonesia is the only country which formal education cannot even produce labours with even basic skills, such as literacy and numeracy based on his findings from OECD (2016), Di Gropello (2013), and Suryadarma (2011). This triggers a ripple of effects on its future workforce.

First, it increases the number of unemployed non-tertiary graduates, expanding the number of them living in poverty. Since most of them come from the less fortunate families that cannot afford tertiary education, they have to depend on formal education system as their only source to learn before entering the workforce. However, due to the poor public education system (shown based on the PISA performance indicators), they could not obtain adequate skills necessary to compete in the workforce. As such, they receive less opportunity to have a job compared to their tertiary counterparts (even less compared to those getting education overseas). Thus, they have a lower chance to get a formal employment due to preference toward tertiary graduates and therefore living in poverty. Purnagunawan (2018) found that although the overall unemployment rate decreases from 2010-2015, youth unemployment remains at all time high, especially among the senior high and senior vocational graduates. His findings confirm that students cannot rely on secondary education in order to enter the workforce as they are not adequate enough to guarantee them a formal job.

Secondly, poor education system may lead to a decrease of overall labour productivity in the economy. Labour productivity is one yet essential determinant in driving long and sustainable economic growth. However, Budiman (2014) reckons that Indonesia is losing its competitive edge against other ASEAN countries because of inadequate skills from the workforce itself which reduces firms' efficiency in producing the output for the economy. This stems from the fact that Indonesia's education system hinders the workforce's actual growth. Although firms have the ability to retrain their workers to fulfill the necessary skills, it translates into a higher production cost which eventually persuades them to choose to recruit those with already-equipped skills instead. Since only so little of them qualified for their prerequisites, this harms the overall labor productivity.

Data from Vandenberg and Trinh (2016) CEIC suggests that Indonesia is the only ASEAN country (out of the five) where the correlation between the educational attainment of the workforce and enterprise productivity is small and statistically insignificant. Eventually, poor education system not only increases structural unemployment, poverty, and health, it also affects the overall output production which sacrifices the firms' and also Indonesia's welfare as well due to fluctuation labor productivity.

Conclusion

In conclusion, Indonesia's current education system is still harming the quality of its future labour force even after carrying out nine reforms, one more than Singapore the leading performers of PISA scores among ASEAN countries. This poor education system sacrifices not only students' current and future welfare, it also sacrifices the country and also the firms that have been the main force of economic growth which affects the sustainable economic growth. Recently, the newly-elected Minister of Education and Culture Nadiem Makarim proposed to reform the education system again, with erasing the current National Examination is the  most notable feature and replace with an assessment of the students' three essential skills; reading, Mathematics and Science. Hopefully, his reformation of the curriculum will also reform the quality of the future workforce and promote sustainable growth in the long run.

By Christian Anugrah Leonardo | Staff Divisi Kajian Kanopi FEB UI | Ilmu Ekonomi 2018

 

Bibliography

de Ree, J., Muralidharan, K., Pradhan, M., & Rogers, H. (2017). Double for Nothing? Experimental Evidence on an Unconditional Teacher Salary Increase in Indonesia*. The Quarterly Journal Of Economics, 133(2), 993-1039. doi: 10.1093/qje/qjx040

French, J., French, A., & Li, W. (2015). The relationship among cultural dimensions, education expenditure, and PISA performance. International Journal Of Educational Development, 42, 25-34. doi: 10.1016/j.ijedudev.2015.02.010

Perera, L., & Asadullah, M. (2019). Mind the gap: What explains Malaysia's underperformance in Pisa? International Journal Of Educational Development, 65, 254-263. doi: 10.1016/j.ijedudev.2018.08.010

Revina, S. (2019). Skor siswa Indonesia dalam penilaian global PISA melorot, kualitas guru dan disparitas mutu penyebab utama. Retrieved 23 December 2019, from http://theconversation.com/skor-siswa-indonesia-dalam-penilaian-global-pisa-melorot-kualitas-guru-dan-disparitas-mutu-penyebab-utama-128310?utm_source=twitter

Purnagunawan, R. (2018). GENDER, EDUCATION AND LABOUR MARKET IN INDONESIA: SOME ISSUES AND CHALLENGES. Presentation, Universitas Padjajaran.

Sembiring, L. (2019). Wamenkeu Ungkap Borok BPJS Kesehatan Hingga Defisit Rp 32 T. Retrieved 23 December 2019, from https://www.cnbcindonesia.com/news/20191007153718-4-104993/wamenkeu-ungkap-borok-bpjs-kesehatan-hingga-defisit-rp-32-t

Fleming, S. (2018). These countries spend the most on education. Retrieved 6 January 2020, from https://www.weforum.org/agenda/2018/10/these-countries-spend-the-most-on-education/

Budiman, A. (2014). More bang for your buck: Improving productivity in Indonesia. Retrieved 23 December 2019, from https://www.mckinsey.com/~/media/McKinsey/Locations/Asia/Indonesia/Our%20Insights/More%20bang%20for%20your%20buck%20Improving%20productivity%20in%20Indonesia/Op-Ed%20on%20Lean%20Productivity%20ENGLISH_Final.ashx

Vandenberg, P., and L.Q. Trinh. 2016. Small Firms, Human Capital, and Productivity in Asia. ADBI Working Paper 582. Tokyo: Asian Development Bank Institute. Available: http://www.adb.org/publications/small-firms-human-capital-and-productivity-asia/

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