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EDUCATION: BACK to BASICS: Is Education Fit for the Future

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EDUCATION: BACK to BASICS: Is Education Fit for the Future EDUCATION: BACK TO BASICS Is Education Fit For The Future? Citi GPS: Global Perspectives & Solutions July 2017 Citi is one of the world’s largest fi nancial institutions, operating in all major established and emerging markets. Across these world markets, our employees conduct an ongoing multi-disciplinary global conversation – accessing information, analyzing data, developing insights, and formulating advice for our clients. As our premier thought-leadership product, Citi GPS is designed to help our clients navigate the global economy’s most demanding challenges, identify future themes and trends, and help our clients profi t in a fast-changing and interconnected world. Citi GPS accesses the best elements of our global conversation and harvests the thought leadership of a wide range of senior professionals across our fi rm. This is not a research report and does not constitute advice on investments or a solicitation to buy or sell any fi nancial instrument. For more information on Citi GPS, please visit our website at www.citi.com/citigps. Citi GPS: Global Perspectives & Solutions July 2017 Authors Thomas A Singlehurst, CFA Nithin Pejaver, CFA Head of European Media Team Global Education Research Coordinator +44-20-7986-4051 | [email protected] +44-20-7986-2812 | [email protected] Elizabeth Curmi, Ph.D. Benjamin Nabarro Global Thematic Research Analyst Global Thematic Research Associate +44-20-7986-6818 | [email protected] +44-20-7986-2056 | [email protected] Robert Garlick Head of Research, EMEA +44-20-7986-3547 | [email protected] Citi Global Education Research Team Lucio Aldworth Jason B Bazinet Latin America North America +55-11-4009-2058 | [email protected] +1-212-816-6395 | [email protected] Mark Li, CFA Nithin Pejaver, CFA China Global +852-2501-2783 | [email protected] +44-20-7986-2812 | [email protected] Taher Safieddine, CFA Thomas A Singlehurst, CFA Middle East Europe +971-4-509-9668 | [email protected] +44-20-7986-4051 | [email protected] July 2017 Citi GPS: Global Perspectives & Solutions 3 EDUCATION: BACK TO BASICS Is Education Fit For The Future In some parts of the world, students are going to school every day. It’s their normal life. But in other parts of the world, we are starving for education… it’s like a precious gift. It’s like a diamond’ Malala Yousafzai, Education Activist and Nobel Laureate1 There is no shortage of inspiring quotations about the impact education can have on an individual but Malala Yousafzai’s comment from 2013 has a special resonance in our view. This is because it not only highlights the importance of education but also the profound asymmetry of access worldwide. If education truly is the ‘oxygen of opportunity’, we have to acknowledge that not everyone enjoys this privilege and even those that do may still face challenges as the tectonic plates of demography and automation shift beneath them. In this report we look more carefully at the role education plays both for individuals and society. We also consider the asymmetries of access that exist both across and within markets. We look at the value of education but also the challenges faced in continuing to provide access as governments grapple with the headwinds posed by changing demographics and disruption in the workplace, in particular from automation. Finally we consider potential solutions to these challenges both in terms of securing access for more people worldwide but also improving productivity and driving better outcomes. The thread running through all of this is a fundamental question – are the benefits from education diminishing and what role will governments, corporates, investors, and individuals play in making sure that how education is provided is fit for the future? The conclusions are at once encouraging but sobering. On the positive side, it is clear that education has had and is still having a very positive impact on society both economically and in terms of social well-being. This said, supply and demand imbalances as well as disruption from automation represent a significant challenge for governments and society more broadly. It is also hard to avoid the conclusion that the benefits of education are unevenly distributed both across and within markets and even between people of different social backgrounds, ethnicities, and genders. This needs urgent attention. Although the precise prescriptions differ between developed and developing markets and from primary to secondary to tertiary education, we think the answer to these challenges lies in broadening the sources of financing for education, in embracing the role of technology and the impact it can have on increasing productivity, and in trying to change attitudes to learning and education, encouraging individuals to think about it as a lifelong process. The especially encouraging thing is that if this works, there is not only a better chance that more people can get more access to education driving benefits for society and individuals alike, but there is an active role to be played by – and opportunity to be exploited by – governments, corporates and investors along the way. 1 Yousafzai, Malala. ‘Death Did Not Want to Kill Me’. Interview with Diane Sawyer. ABC News. 7 October 2013. http://abcnews.go.com/WNT/video/diane-sawyer-sits- inspirational-malala-yousafzai-20499735 © 2017 Citigroup Making Education Fit For the Future EDUCATION IS COSTLY BUT WORKS FOR INDIVIDUALS, GOVERNMENT, AND SOCIETY Source: Global Silicon Valley, Citi Research COSTS Global Education Market Total Global Education $4,906 billion $2,800bn $1,500bn $340bn $200bn $50bn $50bn ABC K-12 Post-Secondary Corporate Childcare and Language Lifelong Pre-Primary Learning Learning School (Non-Degree) BENEFITS Individual Government Social In the OECD, people who have In the OECD, the net public In the OECD, a 30-year old a tertiary education earn 55% return for tertiary education is man with a tertiary education more vs. those with upper roughly $96,000 on a purchase is expected to live 8 years secondary education. price parity-adjusted basis. longer than a man with upper secondary education. © 2017 Citigroup CHALLENGES FOR THE EDUCATION MARKET COME FROM DEMAND AND DISRUPTION Source: World Bank Development Report based on Frey & Osbourne (2013) methodology 90 80 70 60 50 40 30 20 Share of Employment at 10 ‘High-Risk’ of computerization of ‘High-Risk’ 0 ca India Malta China Nepal Latvia Serbia Bolivia Cyprus Angola Nigeria Croatia Albania Ukraine Georgia Panama Ethiopia Ecuador Bulgaria Uruguay Thailand Malaysia Romania Tajikstan Mongolia Mauritius Lithuania Paraguay Argentina Cambodia Nicaragua Costa RicaCosta Seychelles Guatemala Macedonia Uzbekistan El Salvador El Bangladesh South Afri Kyrgyz Republic Kyrgyz Dominican Republic West Bank and Gaza 11% 10,000,000,000 Post Secondary Upper Secondary Lower Secondary Primary Incomplete Primary Currently 11% of the global population No Education has no education at all. This is Under 15 1,000,000,000 expected to fall to just 5% by 2050. 1970 2010 2050 Source: Rose and Nagdy, Citi Research THREE SOLUTIONS TO ADDRESS THE CHALLENGES IN EDUCATION Changing attitudes to Broadening sources Embracing the role education - from stage of 1 of financing 2 of technology 3 life to lifelong learning Government $1,060bn $2,690bn 2% 69% Household $197bn $198bn International Finance $16bn $89bn Despite historical heavy reliance on Today just 2% of the $4.9trn global 69% of youth surveyed government financing, international education market is digital but felt Vocational Education finance’s contribution to education digitization will play a key role in Training was most helpful spend is expected to rise. increasing productivity in the future. for getting a job. Source: The Education Commission Source: Citi Source: McKinsey & Co 2015 (Current Spend) 2030 (Financing Plan) 6 Citi GPS: Global Perspectives & Solutions July 2017 Contents Is Education Fit For the Future? 7 What We Think 7 Roadmap to the Report 9 Introduction 10 Education, Education, Education – The Basics 10 1. What is Education Worth? 15 An Individual’s Net Financial Gains of Investing in Education 15 Public Expenditure on Education and Public Net Financial Gains 28 Other Social Benefits 32 Implications: Education Works 33 2. How Will Demand for Education Evolve? 34 Demand for Education in Different Countries 34 Education as a Global Commodity 37 Implications: Supply/Demand Imbalance Creates Pressure Points that Vary by Market 38 3. What Are the Future Challenges for Education? 40 1. Organic Challenges 40 A. The Productivity Challenge: Primary and Secondary Schooling 41 B. The Productivity Challenge: Tertiary Education 44 C. Access to Education: A Growing Challenge 47 D. Finance and Education 52 2. Disruptive Challenges 55 Implications: Obvious Challenges, Not So Simple Solutions 61 4. Making Education Fit for Purpose: Potential Solutions to Future Challenges 62 Demand and Supply Side Interventions 63 Demand Side Interventions 64 Supply Side Interventions 68 Financing of Education Improvement 74 Is There A Student Debt Problem? How Do We Solve It? 81 Education Technology 83 Bespoke Learning 99 Education to Employment 103 Lifelong Learning 105 Competency-Based Education 110 MOOCs 113 Implications: Distinguishing Between First- and Second-Order Solutions 117 5. Conclusions & Implications for Stakeholders 118 For Policy Makers 118 For Investors 119 For Corporates 119 For Us as Individuals 119 Education System in the United States 122 Education System in the United Kingdom 128 Education System in China 133 Education System in India 139 Education System in Brazil 143 References 148 © 2017 Citigroup July 2017 Citi GPS: Global Perspectives & Solutions 7 Is Education Fit For the Future? What We Think How much is education worth? How will this change over time? And if education is truly about the ‘advancement of knowledge and the dissemination of truth’, how can we make sure education systems around the world are ‘fit for purpose’? Four main conclusions: Starting with the general conclusions, we make four points: 1.
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