South Africa, although blessed with an undeniably generous supply of resources, it is still plagued with a high level of unemployment and has many of its citizens living in the low income bracket. Unlike some countries in the Western World such as the United States where primary and secondary education is free for in South Africa, high quality education is still unconsciously deemed as a precious and rare commodity set aside for the elite. This is echoed through the fact that so many people in South Africa do not have access to high quality education and although there are a few exceptions, only the rich can afford the best education. This is a problem. Evidence of this problem is shown in the positively sloped relationship between level and quality of education and employment in the skilled labour market and economic growth and in the long run and the relationship between quality of education and the journey towards decreasing and eventually alleviating poverty
In this blog, I will be discussing the relationship between household income and quality of education, it will use indifference analysis and economic theory to examine and explain why people in the high income bracket are much better off than those in the low income bracket when it comes to accessing better quality and higher levels of education. I will further pursue the importance of having access to high quality education and its implications on the economic growth of the country. I will also analyse the study which was done by Fryer et al about incentivising teachers to encourage them to improve student performance and through the use of the Kahneman-Tvesky Value Function, explain the economic reasoning behind the conclusions that were drawn. I essay aims to show that incentivising teachers at the beginning is a much more economically sound decision than incentivising them at the end of the academic year. I will then examine whether or not such a scheme is feasible and if it would work in a South African context.
In South Africa, the higher the level and quality of education which one has attained, the better the job they will have and as a result the higher the income they will receive. The higher income then translates into a better standard of living. Thus one can say that good education is equated with higher standards of living. This creates a vicious and on-going cycle in that only the wealthy will have access to good education and will use their income to educate their children who will also then do the same. Leaving the less fortunate uneducated and as a result unable to educate their own children.
High quality education also speaks to economic growth. Macroeconomic theory has shown that countries where majority of people have access to high standards of education have much higher levels of GDP and the growth rate of that GDP is significantly higher than those nations with lower quality education (Parkin et all, 2010:480-488). Through having a nation that is highly educated, a country is able to efficiently address and resolve issues of shortages in the skilled labour market and also of economic growth. Research has shown that in the long run, having more people with a good quality education will help in decreasing poverty levels as more people will be able to enter the skilled labour markets which tend to have much higher wages and salaries than the low-skilled labour markets. It is evident that people need to have access to good quality education
The Kahneman-Tvesky function is a value function that explains the concept that people tend to weight events separately and also that they seem to place less value on gains than they do on losses, sometimes the gains are valued so much less that a consumer will choose to not partake in pairs of activities that would actually result in a net effect that would increase their wealth (De Villiers and Frank, 2011:201-2012). Quite different from the usual utility function, the Kahneman-Tvesky value function is defined in changes in total wealth. This function is much steeper in losses than it is in gains, this is evident in the concavity of the function as it is convex in loss and concave in gains. There are two very distinct properties of a Kahneman-Tvesky value function that one needs to familiar with: the first being that people will value losses more than they value gains regardless of the monetary value being exactly the same, the second property is that people will consider individual events separately first and then add them together. Economics tells us that valuing losses more than gains is not irrational, the irrationality only comes in when a person chosen to weigh events separately.
The above link is the Kahneman-Tvesky value function. On the independent axis, there is gains on the right and losses on the left. The dependent axis then shows the values of the gain and the loss respectively. From the graph, one is able to deduce that regardless of the fact that the monetary value of the gain and the loss are equal, people will still value the loss more than the gain.
The study which was done by Fryer at al. had the objective of discovering which method of incentive is more effective in encouraging teachers to improve their student performance, a lump sum incentive given at the beginning of the academic year or one given at the end of the year (Fryer, R, Levitt, S. List, J. and Sadoff, S. 2012). The findings showed that the former proved to be more effective. This can be justified through the Kahneman-Tvesky value function. If teachers are given an incentive at the beginning of the year and then go on to not meet the required target with their students, they would have to pay back some, if not all of the cash incentive that was given to them. This would be a loss. However, if they were given only at the end, after having achieved the target, the incentive would then act as a gain. The Kahneman-Tvesky value function tells us that losses are given greater weighting than gains (Tversky, A., & Kahneman, D. 1981). It then makes economic sense that loss aversion is a much stronger motivation than the prospective of receiving a lump at the end of the year.
Although the above is economically sound, one cannot simply conclude that it would also work perfectly in a South African context. There are many things that effect the motivation of teachers; these include salaries, management in schools, resources afforded to that school, socio-economic wellbeing of the students etc. Giving a teacher a lump sum incentive will not make much of a difference if the management of a school still treats the teachers badly. The fact that different schools are afforded different resources would also have an effect on the motivation of the teachers. However, if all of those variables were held constant in all schools, a monetary incentive at the beginning of the year would prove to be a better motivation for teachers to improve student performance. We must also however, not ignore the financial implications that such a scheme would bring. As it is, so many South Africans are in debt and giving money to teachers and then having to claim it back if they don’t meet their given targets would put these teachers in some financial strain at the end of the year.
People living in the high-income bracket are much better off than those who in low-income bracket when it comes to accessing education, and that incentivising teachers at the beginning of the year is much more effective than an incentive given at the end of the year. This blog has also examined the relationship between income and quality of education as well as the implications of being denied a high quality education as well as what the benefits of having a nation that is educated are. This blog has further addressed whether or not the teacher incentive scheme would work in a South African context considering the different factors that affect the motivation of teachers.
Economic theory reveals to us that the above observations are sound and that in an ideal world, they would work perfectly. However, we do not live in an ideal world and what could be true for one group of people could not be for another. Thus, we are unable to conclude that all the above would work perfectly and although it is all economically sound, one must still leave room for variation, and be it large or inadequate, variation will still occur.