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La Educación
Número: (116) III
Año: 1993

Adjustment Policies and the Educational System

It is widely recognized that human resource development is integral to the overall development process. As part of their national development programs successive governments in the Caribbean have placed particular emphasis on the development of the education sector. For example, the basic philosophy underlying the development of the educational system in Barbados is that “every child should have educational opportunities of the kind which would allow him (her) to make the most of his (her) abilities and to contribute to the social and economic growth of the country” (Ministry of Education and Culture 1990, 28). The educational system is therefore expected to provide for the preparation and training of skilled human resources to manage the economy, to facilitate by means of trained personnel, the generation and advancement of knowledge in pure and applied fields, and to perform a consciousness-raising function of the social, cultural, political, and physical environment.

Economists have long recognized the role which education plays in the economic development process. Recent research on the relationship between education (i.e., human capital investment) and development has found a strong link between the level of educational achievement in different countries and productivity growth. Countries with a high level of educational achievement tend to absorb new technology more quickly and hence grow more rapidly. The quality of a country’s education is also important in determining the pace of innovation (see Economist, January 11, 1992 and September 12, 1992). The newly industrialized countries in Southeast Asia—Hong Kong, Taiwan, Singapore, and Korea—have pursued aggressive educational expansions which have been consistent with their “high-tech” or information technology development.

The drive to provide universal primary education to meet the rising demand for skilled manpower and the importance of the political capital to be gained from meeting the social demand for education has made educational spending a high priority in the budgets of Caribbean governments. In 1989, Caribbean governments spent between 10.5 percent and 20.5 percent of their total budget in the education sector (see Table 4). Public expenditure on education accounts for between 2.5 percent and 8.8 percent of the GNP of Caribbean countries. As a recent report on Caribbean education points out, “most indicators of education place the majority of Caribbean countries well above the average for all countries at similar levels of economic development. Primary schooling is nearly universal, enrollment ratios for preschool and secondary education generally are above the average for middle income countries and overall literacy rates are high” (World Bank 1991, iii).


The provision of resources for the education sector comes via the state and/or the private sector. In the Caribbean the state has been the main provider of financing for education since the 1960s. Government intervention in the education sector can be justified on the following grounds: the existence of substantial “neighborhood effects” or externalities; institutional failures in adjacent markets (e.g., the capital market); the paternalistic concern for children and the technological characteristics of education. Given the limited resources available to Caribbean governments, they have had to borrow funds from international financial institutions in order to expand the educational system. In Barbados, for example, a major source of funds for educational projects has been the World Bank. Barbados has received two “project” loans from the WB to assist with the construction and furnishing of primary and secondary schools, the training of teachers, the promotion of skill training, and general human resource development. Trinidad & Tobago has also received WB loans to support its 15-year Education Development Plan 1968-1983. The emphasis was placed on expanding and strengthening the primary and secondary school system. The IDB has also assisted with educational development in Jamaica, Barbados, and Trinidad & Tobago.

The adverse macroeconomic environment and the attendant policies adopted to overcome the economic problems facing the countries have put pressure on the ability of the taxpayer to foot the bill for education and other social services. Educational budgets have been unable to keep pace with rising educational costs and student numbers. There is, therefore, a need to rationalize the public resources devoted to education.

The structural adjustment policies adopted by Caribbean governments have both a direct and an indirect effect on the educational system. The effects of the policies also raise issues of efficiency, equity, and flexibility in the provision of education. Adjustment policy measures affect the education sector via changes in the macroeconomy (e.g., via reduction in government expenditure, cost recovery systems) and also through changes in the microeconomy (i.e., increased prices and taxes and reduced disposable incomes). As Noss (1991) notes, the effects of structural adjustment policies depends on the initial conditions of the education sector, the nature and implementation of the adjustment program and the extent to which the adverse effects of short-run stabilization policies can be reversed.

In a review of the impact of structural adjustment policies on the educational system across countries, Noss reached the following conclusions:

(i) public education expenditures and gross primary enrollment rates are negatively associated with WB adjustment lending;

(ii) using the female to male primary enrollment rate as an indicator of equity, adjustment policies did not affect equity. Female enrollment rates continued to approach male rates during the adjustment period;

(iii) reliable evidence on the effects of adjustment policies (vis-à-vis external shocks, poor policies, etc.) on the educational system is limited;

(iv) there is a causal link between adjustment and education, but the nature of the link varies and in most cases is poorly understood. There is a greater need to understand the dynamics of the process rather than the comparative statistics.

In order to analyze the process through which adjustment affects the education sector, data are needed before and after the adjustment process. In the context of the Caribbean, Jamaica offers the best case study for examining the effects of adjustment policies on the educational system. Miller (1989) in his assessment of the impact of structural adjustment policies indicates that the impact has been negative. He sees the decade of IMF-WB assistance in Jamaica (1978-1988) as one of “retrenchment and reversals”:

(i) teacher education suffered the greatest reversals with teacher training either discontinued or scaled down, thus reducing the supply of teachers;

(ii) fees which were abolished in 1973 were reintroduced for high schools. Since user fees for social services (health and education) are regarded as “regressive,” poor parents were unable to send their children to schools. As a result enrollment rates declined, which affects the long-term human capital of the country;

(iii) the policy of free university and college education was reversed with the introduction of a cess in 1986;

(iv) a number of rural primary schools were closed in 1986, but re-opened in 1987;

(v) the teacher-pupil ratio was increased so that by 1984 it stood at 1:55 in primary schools;

(vi) education’s share of government recurrent expenditure had fallen from 20 percent in the late 1970s to 12 percent in 1988. An education tax was introduced in 1983 and raised in 1989;

(vii) many schools fell into a state of disrepair due to the lack of maintenance. Furniture, supplies, and equipment were lacking;

(viii) teacher’s salaries declined dramatically in real terms due to the rapid rate of inflation between 1973 and 1985.

After many years of building up the educational system in Jamaica, the structural adjustment policies taken to redress economic imbalances adversely affected the educational system thus undermining one of the pillars needed for economic recovery. Anderson (1991) further emphasizes the decline of the educational system in Jamaica by pointing to the decline in real expenditure on education (see Tables 5 and 6).


Although it is too early to quantitatively determine the effects of tight fiscal and monetary policies on the educational system in Barbados, one can still gauge the likely impact of the expenditure cuts. An examination of the 1991/92 and 1992/93 estimates of expenditure indicates that the budget allocation for education has been cut significantly for central administration (35%) and pre-primary and primary education (25%). The budgetary allocations for tertiary and technical and vocational education have been increased slightly (see Table 7). It should be noted, however, that these cuts and increases are based on current price estimates and do not reflect the real value of the expenditure change.


Since the bulk of the expenditure on education consists of wages and salaries due to its labor intensive nature, the cutback in public spending, occasioned by a salary cut of 8 percent and the laying off of temporary teachers, would affect the number of teachers available for the school system. It is expected that the teacher-pupil ratio would increase from its level of 21:1 at the primary level and 17:1 at the secondary level. The reduction in the provision for teaching training can also result in the shortage of teachers in the medium term. The Textbook Loan Scheme designed for students at government secondary schools, assisted private schools, and the Barbados Community College (students under 19 years) to rent required textbooks, has had its budget allocation cut from Bds $1.37m in 1991/92 to Bds $0.1m in 1992/93. The Schools Meals Department, which provides meals for primary school students, has had its budget allocation remain almost intact. The government has, however, reintroduced a small charge for the provision of these meals.

With the reduction in the budget allocation to certain sections of the education sector, it is expected that there will be a slight decline in the quantity and quality of the education service: higher teacher-pupil ratios especially at the primary school level; reduced availability of materials and equipment; and some decline in teachers’ morale. The increases in bus fares, user charges for the Textbook Loan Scheme and school meals, coupled with the high level of lay-offs, can result in a decline in school attendance as low income and unemployed parents would be unable to meet the cost of sending their children to school. In the medium and long term the quality of the output of the school system can decline. The inability of some parents to meet basic school costs can also put pressure on the already hardpressed welfare services of the government. The lack of funds for maintenance and the purchase of furniture and equipment can result in the deterioration of the school plant. Many schools have been faced with a shortage of furniture and equipment for a number of years, so that the cutback in financial resources for education can only aggravate the situation in some schools. The nature and extent of the impact of structural adjustment depends on the stock of education capital and the length of the austerity program. The education system has developed a stock of “capital” over the years (i.e., physical plant, work experience, organization systems) which can withstand the short-run budget reductions. If the austerity program is prolonged, then the educational system can be adversely affected and thus impair long-term human resource development.

The experience of Trinidad & Tobago and Guyana with stabilization and structural adjustment programs also points to the adverse effects of reduced government expenditure, devaluation, increased taxation, and user fees on the educational system. The effects have been the deterioration of physical plant; shortage of staff and supplies; the high incidence of untrained teachers; the demotivation of teachers due to the decline in their standard of living and higher teaching loads; ineffective management structures; reduced teacher training, and greater absenteeism.

The experience of the Caribbean countries with structural adjustment policies indicates that they have had a negative impact on the educational system. Reductions in household incomes and increases in user fees have reduced the demand for both public and private education; poor health and low nutritional levels have affected attendance and learning ability; currency devaluation, price liberalization and fiscal/monetary restraint have affected the opportunity cost of school attendance and the supply of educational services.