The Talent Paradox: Funding Education as a Global Public Good 01-07

The Talent Paradox: Funding Education as a Global Public Good

Addressing the massive needs of India’s education system was one small part of the discussion at the most recent World Economic Forum in Delhi. But for a country that is projected to supply approximately 25 percent of the global talent pool by 2030, what could be more important than getting education right? Especially for corporate leaders, as one CEO of a Fortune 500 company puts it “the global talent gap is the issue that keeps me and every other CEO I know up worrying at night.”

And there is much to worry about. Global demographic trends mean that soon a disproportionate share of the world’s human capital will be born in developing countries. Yet these countries, particularly those with high levels of inequality like India, do not have good education systems that can prepare their young people to be the talent that companies want to hire. India alone lacks 400,000 teachers and absenteeism within the existing teaching ranks is currently at a staggering 25 percent.

Last year, close to 60 percent of children in class 5 in rural government schools could not read a class 2 text, a number that has only risen since 2008. This education crisis is mirrored in other emerging economies. In Nigeria  , 58.3 percent of student are not meeting basic learning levels in literacy and numeracy with Ethiopia and South Africa   not far behind at 55.3 and 33.7 percent respectively.

So what can be done about this? Klaus Schwab, the founder of the World Economic Forum, has long advocated for multi-stakeholder solutions to global, regional, and national problems as the best way to achieve sustained economic growth and social progress. And so, the solution to the global education crisis is no different. Clearly governments have a central role to play by investing in the young minds of their nations. And others are also stepping up to the plate. For example, the United Nations Secretary General recently announced a new five-year global initiative, Education First, focused on putting every child in school, making sure they learn well while there, and ensuring their education helps them become good global citizens.

But what about the many global business leaders who are wringing their hands about how the emerging talent gap could undermine their profits? Well, to that we say “it is time for businesses to move their investment in education from the halls of corporate social responsibility programs to the long-term investment and business strategies of their companies”.

Is it realistic or fair that the Indian government, for example, foots the bill for the school fees of a quarter of the world’s workforce, given the fact that a significant proportion of this future talent pool may end up living outside the country and working for non-Indian companies. “Human capital flight” from India is estimated to cost the country $2 billion for 2012 alone, and it’s on the rise.

Education is a global challenge that cannot be solved by improving a single education system in a single country. Nor can it be solved by one company or one industry, no matter of how well-heeled its CSR program is. The solution requires global collective action, specifically establishing a funding mechanism that funds education as a global public good. This type of funding mechanism could recognize and quantify the future economic value of human potential; both an economic and societal “return on investment” on capital that is very much required today. A mechanism with global reach, that would be outcome based rather than dependent on taxing the incomes of those who can least afford it.

So what’s the rationale? To multilateral donors, a funding instrument of this nature would be attractive from a value for money perspective. Indeed, there are successful precedents in other sectors in the world of development; the Global Alliance for Vaccines and Immunizations (GAVI) stands out in particular. GAVI’s innovative “Advance Market Commitment” or AMC addressed the market failure in the development of new vaccines by effectively setting a future floor price to attract private sector investment in R&D. Could the same GAVI principles of an AMC be applied to education? Providing an AMC around the future economic value of talent that would catalyze innovation and co-investment from the private sector, technology companies in particular, who are well placed to provide the hardware and the wiring for a state of the art education infrastructure.

Besides those companies whose core business is directly related, there is also an opportunity to incentivize the broader private sector around long-term investments in education - to create a market mechanism whereby a pooled investment today from a coalition of businesses and donors could give some enhanced access to the talent businesses will require for future growth.

As businesses increasingly look to emerging markets as new sources of growth, it would be naïve to assume that struggling public education systems on their own will be able to provide the talent and skills that employers need. Expecting an infinite choice of highly polished resumes will simply not happen on its own and as with other critical sources of raw material, businesses may need to “backward integrate” up the talent supply chain, far further than they have in the past. Make no mistake. This is not back door privatization of the education system on a global scale. Funding should not be conflated with service delivery. We are advocating an equitable and transparent funding mechanism that has a chance of giving a quality education to all children and youth.

Education is in the so-called pre-competitive space, and businesses, donors and governments alike have a mutual interest in co-investing in the outcomes which will benefit all. But it’s a long-term game, which means investing now to develop the talent base that businesses will need 10+ years from now.

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