ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

EFFECT OF THE INDEX ON EMPLOYMENT IN COUNTRIES WITH VERY HIGH HDI AND HIGH HDI (CASE STUDY AND )

MAHMUD TAAJOBI*

*Department of Education, University of Bu Ali Sina, Hamedan, Iran.

ABSTRACT

The first Human Development Report introduced a new way of measuring development by combining indicators of , educational attainment and income into a composite . The breakthrough for the HDI was the creation of a single statistic which was to serve as a frame of reference for both social and . The Human Development Index (HDI) is a summary composite index that measures a country's average achievements in three basic aspects of human development: , knowledge, and income. Human Development Index is published annually by the United Nations. This index is the most important indicators for developing countries that assessment criteria will be considered. Three indicators of human resource development, education, life and health are expected. Education Index as one of the indicators has impact on development in many variables. On the other hand, one of the important variables for any government is employment. High level of education can lead to increased labor productivity and thus increase the national production. In developed industrial countries, higher education is an important factor in increasing national production and low in underdeveloped countries, this indicator also shows a lower national income. In addition, high levels of education are effective in reducing high unemployment rates in the country's economy. In this paper we will consider impact of education on employment in countries with very high HDI and high HDI. We selected Norway as country with very high HDI and Iran as country with high HDI.

Also we will consider trend of the education Index during the 1980-2010 and its effect on employment in Norway and Iran separately. In addition, we will comparison results for both countries to each other.

KEYWORDS: Human Development Index (HDI), Education, Employment. ______

INTRODUCTION Education plays a pivotal role in the human resources formation for any country. A country with high education can reach to growth and development. Education is considered as core components of growth and development and also is regarded as inputs to the aggregate production function. Education plays important role in absorbing the modern technology. Moreover, education improves the productive capacity. It is obvious from the above discussion www.zenithresearch.org.in that an increase of educational opportunities at all levels has resulted a rise in economic growth

1

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780 by creating more educated and skilled man-power or by providing employment opportunities at large scale. The aim of the paper is comparison of the educational impact on employment in country with very high HDI and high HDI. The research based on source of data, collected from united nation organization sites mostly. The study has concluded that education at all the levels is positively and significantly related with employment. The results of paper suggest that any country should provide education facilities to all the people for performing the labor force to obtain best GNP. The paper provides the brief review of literature about the different related studies in next section.

LITERATURE REVIEW

Several studies regarding education and their impact on employment at national and international level is reviewed in this section. Schultz T. W (1960) has studied the contribution of education to national income for the for the period 1900-1956. He has found that the total resources invested during this period rise about 3.5 times relative to consumer income in dollars and gross physical capital formation. The income elasticity of demand for education was about 3.5 over the period. Education could be considered as an investment which is 3.5 times more attractive than investment in Physical Capital. Schultz has also tried to measure the total stock of educational capital for the United States at different points in time. The results of this research indicate that the ratio of the stock of educational capital to stock of physical capital rises from 22 percent in 1900 to 42 percent in 1957. Panchamuki P. R (1965) has made educational capital estimates for . His estimates of educational capital reveals that the total cost of formal education in India rises from Rs. 34100000 in 1950-51 to Rs. 76900000 in 1959- 60. Killingsworth (1983) has provided the analysis of labor force participation and supply of labor. He has maintained that labor force participation analysis hypothesize that workers demand for leisure (non participating in the labor force) and consumption of market commodities depends on 60 European Journal of Economics, Finance and Administrative Sciences - Issue 18 (2010) workers’ wages, income of the workers without the participating in the labor force and other variables incorporating health status and education. Also Kozal and Alderman (1990) analyzed the factors determining work participation and labor supply decision in ’s urban areas for men and women.

DATA AND METHODOLOGY

The data used in the present study is collected through Human Development Resources sites, also united nation organization sites, center of Iranian statistic and some related sites to Human Development Index and education Index. The data are collected from 1980 to 2008 for all educational index or variables in this study. Different education Indices, employment and related variables are also considered in the study. The study is based on an empirical analysis. We have made this analysis at two levels. First; explanation of the situation of the education and employment in selected countries, Norway and Iran. Also comprehensive statistically analysis of the educational indices is made. Second; graphical analysis of employment and education Indices are modeled in the research paper.

www.zenithresearch.org.in

2

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

IMPORTANT DEFINITIONS

UNEMPLOYMENT RATE: Percentage of the labor force (the employed and unemployed ) ages 15 years and older who are not in paid employment nor self-employed but who are available for work and have taken specific steps to seek paid employment or self- employment.

HUMAN DEVELOPMENT INDEX (HDI): A composite index measuring average achievement in three basic dimensions of human development— a long and healthy life, knowledge and a decent standard of living.

EXPENDITURE ON EDUCATION (% of GDP): Total public expenditure (current and capital) on education expressed as a percentage of GDP.

INTERNET USERS (PER100 PEOPLE): Internet users are people with access to the worldwide network.

MEAN YEARS OF SCHOOLING (OF ADULTS) (YEARS): Average number of years of education received by people ages 25 and older in their lifetime based on education attainment levels of the population converted into years of schooling based on theoretical durations of each level of education attended

IMPORTANT SUB EDUCATION INDICES

In this section we will consider trend of the changes in education index in Iran and Norway and any of the education sub indices will evaluate. The most important sub education indices which are applied in the paper as below;

Expenditure on education (% of GDP),

Internet users (per100 people),

Mean years of schooling (of adults) (years).

Each of these sub indices will be explained and also by figures will indicate. Eventually the education index will obtain from combining of the all following indicators. Education index is one of three of the Human Developments Indices (HDI) which shows disciplinary development for any country. Then trend of the education index in Iran during the period will review the evaluation to its relationship with unemployment. Table 1 indicates values for each of the indicators of education and unemployment for Iran from 2008 to 1980 and table 2 shows values for sub indices of education, unemployment and others during the same period for Norway.

www.zenithresearch.org.in

3

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

TABLE 1, EDUCATIONAL INDICES AND HDI IN IRAN (1980 -2008)

2008 2007 2006 2005 2000 1990 1980

32 18.3 15.7 17.8 1 0 0 Internet users (per100 people)

6.8 6.6 6.4 6.1 5.1 3.7 2.1 Mean years of schooling (of adults) (years)

4.8 5.5 5.1 4.7 4.4 4.1 7.7 Expenditure on education (% of GDP)

14 14 13.7 13 12.2 9.7 0 Expected Years of schooling

(of children) (years)

82.3 82.3 82.3 82.4 77.0 65.5 36.5 Adult rate (both sexes) (% aged 15 and above)

10.4 10.5 11.3 11.5 13.1 9.6 8.6 Unemployment rate (% of labor force)

73.2 73.2 73.2 73.2 69.7 66.4 47.6 Combined gross enrolment ratio in education

0.691 0.684 0.674 0.66 0.619 0.536 0 HDI value

2008 2007 2006 2005 2000 1990 1980

82.5 77.7 71.6 80.1 26.7 0.7 0 Internet users (per100

people)

12.7 12.7 12.7 12.7 11.5 10.8 9 Mean years of schooling (of adults) (years)

6.8 6.7 6.5 7 6.6 7 6.3 Expenditure on education (% of GDP)

17.3 17.5 17.5 17.4 17.5 14 13.1 Expected Years of schooling

(of children) (years) www.zenithresearch.org.in

4

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

------Adult literacy rate ------

2.6 2.5 3.3 4.6 3.4 5.3 1.6 Unemployment rate

98.6 98.6 98.6 98.4 97.7 81.9 76.4 Combined gross enrolment ratio in education

0.937 0.937 0.934 0.932 0.906 0.838 0.788 HDI value

TABLE 2, EDUCATIONAL INDICES AND HDI IN NORWAY (1980 -2008)

INTERNET USERS

Internet users index is one of the sub indices that have more effect on the education index. Situation in Iran during the review process has been different. Until the year 2000 Internet users in Iran are shown less than one of the 100 person and from 2000 to 2005 this index increase by 17.8 persons. While in same period this indicator for Norway from 26.7 increased by 80.1, in fact, the growth of Internet users with the status of the dull pace until 2008 to 32 and there is extra capacity to increase it. Although this indicator has reached the maximum for Norway and has not existed potential to increase and in some years has been associated with reducing. Figure 1 and 2 draw the trend of growth of the Internet users for Iran and Norway.

FIGURE 1, TREND OF THE INTERNET USERS IN IRAN DURING 1980-2008

www.zenithresearch.org.in

5

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

FIGURE 2, TREND OF THE INTERNET USERS IN NORWAY DURING 1980-2008

Expenditure on education (% of GDP)

One of the following indicators for education is expenditure for education. Table 1 trends shows spending on education over the period 1980-2008. In the 1980s the costs for education has been 7.7 percent of the gross domestic production (GDP), it shows very good share, but from 1990 onward with the sudden drop of 70 percent, decreased to 4.1 percent. This amount up to the

end of the period with a slight fluctuations to 4.8 percent and never seems to be the percentage of the top of the 7.7 percent like 1980s. Table 1 shows situation of the development charges on education. According to this figure growth with gentle slope has been increased. In another side table 2 shows expenditure for education for the country of Norway during the period, although in 1980 the percentage of spending on education has been 6.3 percent of gross domestic production, but this index is less than the cost of education in the 1980s for Iran. This growth up to the end of the period with the volatility is very Down to 6.8 percent. With regard to the comparison figure number 3 for Iran and figure number 4 Related to Norway can be concluded that both countries had a similar trend for expenditure on education with the difference that Norway has have a

higher level cost on education during the period against Iran. www.zenithresearch.org.in

6

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

FIGURE 3, TREND OF THE EXPENDITURE ON EDUCATION IN IRAN DURING 1980-2008

FIGURE 4, TREND OF THE EXPENDITURE ON EDUCATION IN NORWAY DURING

1980-2008

www.zenithresearch.org.in Mean years of schooling (of adults) (years)

7

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

Other important indicators play an important role in the education index for countries is Mean years of schooling (of adults) (years). This sub index for the two countries Iran and Norway is shown in table 1 and 2. According to the table number 1 for Iran this sub index in the 1980s has been only 2.1. This trend is continued very slowly to 2000 by 5.1, but from year 2000 to 2008 with the growth of better has reached up to 6.8. This sub index during the 28 years for Iran in Iran has come More than three times, but this indicator for Norway has been different situation, so that in the 1980s this sub index has been 9 years and this index increases up to 12.7 in 2005. Since 2005-end of the period shows a trend without any change and growth. This sub index for Iran with an excellent growth during the period increased more than 200 percent, but for Norway this sub index has increased only 30 percent. The reason can be using of the blank capacities in Iran and lack of capacity in Norway. Figure number 5 and figure number 6 show trend of the Mean years of schooling (of adults) For Iran and Norway during the period 1980-2008.

FIGURE 5, MEAN YEARS OF SCHOOLING (OF ADULTS) FOR IRAN DURING

1980-2008

www.zenithresearch.org.in

8

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

FIGURE 6, MEAN YEARS OF SCHOOLING (OF ADULTS) FOR NORWAY DURING 1980-2008

UNEMPLOYMENT

Unemployment as one of the macroeconomic variables matters a lot. Hence the politicians always try to use economic policies to reduce rate of the unemployment. The politicians believe to unemployment as important political and economic variable. The main objective of this research reviews the impact of education on employment. So we selected Iran as a country with high level of Human Development Index (HDI) and Norway as a country with very high level of Human Development Index (HDI). Therefore, we analysis effects of the unemployment on the education index, consideration statistical data in the table 1 and 2 related to Iran and Norway.Table1shows unemployment statistical data for the period 1980-2008 in Iran. Since 1980 to 2000 the rate of employment in Iran has been less than 10 percent, but since 2000s

attention to the composition of the population suddenly it reached to a high rate of about 13 percent. This trend continues with declining and the end of the period reaches to10.4 percent. One of the reasons for the growth of unemployment in 1990 in Iran has been increasing the population rate and also as a result of incentive policies created by the Government.

www.zenithresearch.org.in

9

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

FIGURE 7, TREND OF THE UNEMPLOYMENT IN IRAN DURING 1980-2008

In other side unemployment for Norway in the 1980s shows a rate of about 1.6 percent and this rate increased with a quick growth op to 5.3 percent until end of the decade 1990. From 2000s, the rate of unemployment has downward and declined so that in the end of period reached to 2.6. The trend of the unemployment in Norway during the period has a similar situation same Iran, but with a deferent level of unemployment, for Iran a rate upper than 10 percent and for Norway with a rate less than 5 percent. Rate of the unemployment in Iran shows a rate less than 9 percent at the beginning of period but this rate increased upper than 13 percent until end of the decade 1990. From 2000s this rate has downward and decreased and continued until end of the period. This process also was same situation for Norway but with deferent rate of the unemployment. The rate of unemployment mostly of the period shows a rate about natural unemployment rate. Figure 7 and figure 8 shows trend of the unemployment in Iran and Norway.

FIGURE 8, TREND OF THE UNEMPLOYMENT RATE IN NORWAY DURING

1980-2008

www.zenithresearch.org.in

10

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

ANALYZING THE OF SUB INDICES AND UNEMPLOYMENT

The top three sub-indices of the important parts of education according to the statistical data related to Iran and Norway were reviewed and Growth under each of the three major indices was studied separately. In addition, the unemployment rate was also evaluated for both countries. The three sub-indices for Iran during the 2008-1980 periods show a different growth. Although expenditure on education sometimes has increased and sometimes has decreased but two other sub indices have increased mild. The results show that over the years, trend of the education index has increased but the unemployment has not declining and have sometimes been associated with an increase in the unemployment rate. Therefore, no significant relationship between education sub indices with the unemployment rate is found.

Another reason shows that the unemployment rate at the end of period has been much more than beginning of the period. While growth of the sub education indices have increased with a couple of times. For the Norway, growth of the education indicators during the period has been different. Internet users’ index with high growth at the end of period is reached by 82.5 and expenditure on education shows about a constant trend until end of the period. Other sub index shows a mild growth. The findings do not show a significant relationship between sub indices of education and unemployment rate in Norway, so that in some years, the unemployment rate is rising while the education indicators also have been rising. Thus, contrary to the expectation that the relationship between education and unemployment should be inverse is not true for Norway, of course in most of the years.

CONCLUSION

In this paper, the impact of education as one of the three indices of Human Development Index on unemployment rate for Iran and Norway were reviewed. According the Results both countries with different level and situation of education and unemployment there is no a significant relationship between these variables. Generally we believe that increasing growth of the education Index as one of the three Human Development Indices implies to reduce the unemployment. But this may be true sometimes but this rule did not imply the two countries, Iran and Norway. Thereby reducing the unemployment rate should be thinking of other variables. Perhaps sometime the growing the education Index would lead to increased unemployment. Therefore Unemployment is more affected by macroeconomic variables. If the growth of education index increases the skill and expertise can help to increase the unemployment rate. In this field we should be created to provide employment to unemployment is not a problem.

www.zenithresearch.org.in

11

ZENITH International Journal of Multidisciplinary Research Vol.2 Issue 1, January 2012, ISSN 2231 5780

REFERENCES

An article or chapter of a book

1) Todaro Michael P. and Stephen C. Smith (2005), ―Economic Development‖, longman, London, P. 385. 375.

JOURNAL ARTICLE

2) Arif, G. M., and K. H. Sheikh (2000), ―Woman Employment Concerns and Working Conditions in Pakistan‖, Paper presented at Manpower overseas Pakistan.

3) Mete Cem and T. Paul Schultz (2002),‖ Health and Labour force participation of the elderly in Taiwan‖. Center discussion Paper no. 864, Economic growth center Yale University.

4) Romer Paul. M (1986),‖ Increasing returns and long run growth. Journal of Political Economy‖. 94: 1002-1073.

GOVERNMENT PUBLICATION

5) Harbison F. H (1962) ―Human Resource in Development Planning in Modernizing Economics‖. International Labour Review.

6) Daugstad, Gunnlaug (2006) ―Marriage patterns among immigrants in Norway. Who do immigrants in Norway marry?‖ Statistical Magazine. Statistics Norway.

7) Daugstad, Gunnlaug & Sandnes, Torild (2008): ‖Kvinner og menn i innvandrerbefolkningen. Noe er likt – mye ulikt‖ Samfunnspeilet 2/2008, Statistics Norway.

AN ONLINE JOURNAL ARTICLE http://www.ssb.no/vis/english/magazine/art-2006-10-13-02-en.html

www.worldbank.ir World Bank site www.undp.org, Human Development Index Reports. www.cbi.ir. Central Bank of Iran www.data.UN.org, United Nations

www.amar.org.ir, Statistic Center of Iran www.zenithresearch.org.in

12