The National Development Plan on Education and Labour

Without doubt the strongest policy direction that came out of the ANC National Conference (December 2012) was full endorsement of the National Development Plan. This is great news. Over the last 5 years, South Africa has been in policy drift. In Zuma’s attempts to appease all ideological faction within the ANC, he created opposing ministries, each with their own competing and completely contradictory policy documents. The NDP is the most sensible of the lot and now we know that ANC is serious about implementing it.

So, what does the NDP say? The NDP is a strategic vision for 2030. It encompasses a broad (and quite comprehensive) set of policy proposals and guidelines. On the whole it is a coherent and sensible set of policies. It wants to overhaul public services, so it becomes more technocratic and meritocratic. It proposes sensible measures to hold civil servants more accountable and make corruption more difficult. It wants a more flexible labour market and less regulatory burden to small firms. Our country will be in a far better place in 10 years if we can implement some parts of it. With Cyril Ramaphosa, who was deputy chair of the Planning Commission, elected as deputy president of the ANC, this seems more likely than before.

In education, it wants to introduce more “results orientated mutual accountability” in schools. This entails introduction of better performance indicators, communicating these indicators to the school community, and strengthening of institutions, such as school governing boards, so that parents are in a powered position to demand quality of education. It wants a more transparent process of appointing accountable principals and make it easier to replace under-performing principals.

These are all good proposals. Lots of evidence points that spending more money is not sufficient in improving education in South Africa. South Africa spends 8 times more per pupil than the rest of the Africa, yet poor South African students perform worse than equally poor students in the rest of Sub-Saharan Africa. Rather, it has a lot to do with school management and teaching activity: teachers from privileged schools spend nearly twice as much time teaching than teachers from disadvantaged schools. The principal and parents can play an instrumental role in ensuring motivated teachers.

In terms of labour policy, it cuts a fine line of a more flexible labour market combined with employer protection. First, it supports the use of labour brokers, but with increased government oversight. The use of labour brokers has become a pretty controversial topic in South Africa, since it allows employers to circumvent labour legislation by continually employing temporary workers. However, these brokers perform a valuable role in matching workers with firms, much needed in a fragmented labour market. The NDP recommends a continuation of these brokers, but combined with basic protection for workers who have been employed for more than 6 months. In another policy that would anger the unions, the NDP wants to make it easier to fire workers, by providing a “probationary period” of employment for 6 months and simplifying dismissal procedures. This is a good idea. One reason for the high youth unemployment in South Africa is that firms are reluctant to employ new workers if they know they cannot fire under-performing ones.

Actual implementation of all these ideas, of course, is a different story. Most certainly there is a role for civil society in implementing some of the education proposals. But the fact that the ANC officially and strongly endorsed this document, is a step in the right direction.

Peer Effects in Education in South Africa

A great paper presented at the NEUDC conference by compatriot Rob Garlick on peer effects in education.

Children’s success in school depends, partly, on the actions of their peers. An important policy question is therefore the assignment of children in schools. Should we, for example, track students by separating the “weak” and “strong” students into different classes? Garlick finds that, at least when it comes to dormitories at the University of Cape Town, tracking leads to a reduction in average grades.

Garlick stumbled into a natural experiment at his old University when residential admissions changed from tracking to random assignment. So, he could take the change in average marks in the dormitories, before and after the policy, and compare this to the whole university. He also looked at how particular students (based on their high school grades) are affected by the policy. Turns out that the weaker students benefit massively from being in a dormitory with stronger students; however, the stronger students don’t seem to be badly affected by the reverse. Combing weak and strong students in a dormitory therefore leads to improved grades.  

What explains this peer effect? It seems like it has more to do with the friends you make, rather than the people you work or live with. The peer effects don’t operate across races. Since South African students still tend to socialise across racial lines, this suggests it only helps to live in a dorm with a strong student that you actually socialise with. Another paper at the same conference on peer effects found similar evidence. In a leading business school in India, students are randomly allocated to a dorm and a classroom. The paper finds no peer effects in the classroom, but strong peer effects in the dormitory.

So, what conclusions can be reached from this paper? This is strong evidence that tracking within a school is seriously detrimental to the weaker students. The more interesting question in South Africa, however, is the distribution of education outcomes between schools. Certainly, township schools suffer when their smartest students get scholarships and leave for good schools. But what about the flip side: will students in under-performing schools benefit if they are placed in well-performing schools? This paper suggests that positive peer effects might not operate if students don’t socialise across racial groups. 

External Validity and False Positives in Randomised Control Trials

Two presentations at the latest NEUDC grabbed my attention in providing some necessary caveats on the conclusions we can reach from RCT's. 

First, a paper looked at the scalability of a proven intervention. Researchers intentionally select able NGO’s to implement the projects. (They often also put a lot of individual effort in to ensure quality implementation). However, policy conclusions often involve large-scale government roll out. Can a government repeat on scale the success of a highly motivated and able NGO?

This paper looked specifically at the use of contract teachers in education. (a great summary of this on the CSAE blog). Duflo Dupas and Kremer (2009) show that the use of contract teachers can significant increase educational outcomes in Kenya, partly because they face stronger incentives to teach well. However, turns out that implementation relied on a food NGO. When the NGO scaled up the project it worked, but when the government scaled up the project it didn’t.

This places some caveats on the policy conclusions we can reach from many RCT’s.

The second paper applies the standards required from RCT’s in medical trials to economic papers and finds us severely lacking. We have stolen the method of RCT’s from medicine, but we ignored what they have learnt about the shortcomings of RCT’s. This is a glaring gap and I can’t believe that this paper is the first to do it.

Randomisation solves endogeneity problems; however, biases emerge in the way that we conduct and report our studies, which could lead to false positives.

One big source of bias is lack of “blinding”. Participants respond or act differently because they know they are being treated, a kind of “Hawthorne effect”. This change in behaviour could have nothing to do with the actual treatment. In medical trials this is solved by giving the control group a placebo, but this is far more difficult in social projects. Furthermore, data collectors might ask questions differently in treatment units, because of the perceived pressure from the researcher to get a positive result.

The big problem, of course, is that researchers are biased. Aspirational graduate students (like myself!) invest years in a project and future job prospects often depend on finding a positive result. So, the more discretion is left to the researcher (in sample selection or reporting of results, for example), the higher the bias.

The authors propose introducing standards for conducting RCT’s and reporting results, similar to that in medical trials. The more we can tie the hands of the researchers, the less chance that /she can bias results. This would be a massive contribution to the field.

Marikana and Collective Bargaining - good or bad?

A lot has been written on the role of collective bargaining in the current labour relations in South Africa. How did it impact the Marikana massacre? What are the consequences for the future of collective bargaining? Is this a good or a bad thing?

Collective bargaining means that bargaining agreements are binding at an industry level, rather than an enterprise level.

Some, like sociologist Peter Alexander, believe that collective bargaining is the cause of current labour unrest in South Africa, since it gives undue power to the dominant labour union. If NUM membership has 50%+1 of all union membership in an industry, it can bargain on behalf of all workers. Smaller unions feel unrepresented and not all worker concerns are addressed.  It has the further danger that the dominant union can get too “cozy” with the capitalists, since it is insulated from enterprise-specific labour issues.  

What I don’t understand about this argument is that collective bargaining is weaker in the platinum industry than in the rest of the mining sector; yet it is in the platinum industry where labour conflict is most severe. In all other minerals, agreements are binding for all mines, whereas in the platinum industry, agreements are only binding to other platinum mines. Furthermore, the response of NUM and industry after Marikana, was to strengthen collective bargaining in the platinum industry.

Others, like Jay Naidoo, bemoan the potential demise of collective bargaining, and claims that it is the “cornerstone of our democracy”.

So, is collective bargaining a good thing or not? The evidence seems to point that it is a bad thing for South Africa: bad for employment and often bad for employer-worker relations.

 A recent paper by Berkeley economist finds that collective bargaining in South Africa comes at a prohibitive cost for small firms, and thus contributes to lower employment. South Africa has a smaller proportion of small firms relative to other countries. This is worrying since small firms are a large source of employment in a country. The problem is that small firms have lowe capacity and thus cannot afford the collective agreements, that are commonly reached between the largest firms and unions in an industry. More flexibility for firm-specific labour negotiations would thus allow for more entrants of smaller firms in an indsustry.

Labour mediator Brand claims that collective bargaining often hurts both employer and employee, since it does not allow bargaining on firm-specific issues. He cites the case where Impala Platinum actually wanted to pay a wage premium for Rock-Drill Operators (RDO’s) because of competition from other mines, which NUM rejected.  

The puzzle is that collective bargaining seems to work in other countries. It is seen as one of the reasons for wage equality and stability in north European countries like Germany and Sweden. But then again, the largest source of inequality in South Africa is not wages, but employment. 

Does South Africa need "decent jobs" or just plain jobs?

A priority in South African policy is the creation of “decent jobs”. With an unemployment rate of close to 25% (or closer to 40% depending on how you count), can we as a country afford to focus on “decent jobs”, rather than just plain jobs?

In a recent blog Professor Teal, from Oxford University, he argues that “it is the creation of these kinds of jobs which increases poverty, precisely because such jobs are so scarce”.

Teal attributes the rapid decrease in poverty in Ghana over the past two decades to a dramatic increase in employment, especially in low paying jobs in small firms. He contrasts this with the dual labour market in South Africa where the few who are lucky enough to be permanently employed earn well.

Research in South Africa suggests fact that “decent jobs” would come at a cost of fewer jobs. For example, in a recent paper, Bhorat et al find a significant reduction in employment figures in the agricultural sector in South Africa, due to an increase in the minimum wage.

The poorest in South Africa are those without permanent employment. So, if we as a society care most about the poorest shouldn't the priority be to get more into the formal labour market?

The issue, of course, is that the South African labour market is fundamentally different to other sub-Saharan African countries. We have a highly developed economy floating in a (much larger) underdeveloped economy. This has two implications. First, some people are earning exceptionally well. Large wage disparities breed discontent. Relative deprivation matters for well-being. So, even if the creation of “bad jobs” will do more to alleviate poverty in South Africa, it might not be politically feasible in a highly unequal society. Second, there are more opportunities for “decent jobs” in South Africa, compared to other sub-Saharan African countries. The business community complains of a massive skills shortage. So, if only our education system could improve, then maybe there would be no need to legislate “decent jobs”. 

Service Delivery Protests and Community Monitoring

I believe there is great potential for more community involvement to assure quality provision of public service in South Africa. Just look at the increasing number of public service protests all over the country. People are angry and are prepared to act. However, burning cars and throwing bricks might get government’s attention, but won’t increase nurse or teacher attendance rates. We have seen NGO’s that hold central government accountable (such as Equal Education that pressurize government spending on education), but we also need NGO’s that help citizens hold service providers accountable at a local level. 

What is needed is a more structured way to direct this growing discontent in a productive way to encourage improved service delivery.

There is growing research in economics on how community involvement can lead to improved service delivery. In health care project in Uganda, “report cards” were created on the quality of health care provision in communities. NGO’s then visited these communities, where (i) the report cards were disseminated and discussed; (ii) a “contract” was reached between community members and health care providers on how to improve health care provision; and (iii) measurable deliverables were agreed upon and a system was set up for community members to measure these deliverables. As a result of the project, health care treatment improved dramatically, leading to notable improvements in health outcomes (such as lower child mortality).

Primary Health Care and Community Monitoring

In Jonny Steinberg’s book on HIV/AIDS, “Three Letter Plague”, he follows the life of one young man who refuses to get tested. His life is contrasted with a project initiated by Medecins Sans Frontiere (MSF) and its champion, Herman Reuter, who believes that access to health care is the core problem, rather stigma over the disease. 

What I learnt most from the book was the work from the MSF project.

First, there should be a refocus of health care policy towards primary care. South African health care is vastly under-staffed and under-resourced. However, you don’t need to a doctor to diagnose and treat TB or HIV; you need a nurse or a trained volunteer. Furthermore a nurse is worth more in a rural clinic than in a hospital. The poor living in rural areas do not have access to hospitals. They can only afford to visit a hospital when they are very sick, by which point it is often too late. A lot of prevention and care could be done in clinics.

Second, there is great capacity for communities in South Africa to play a more active role in demanding good quality health care. In the health care project mentioned in the book, MSF initiated HIV/AIDS support groups. These support groups not only provided each other with support, but placed pressure on clinics to supply medicine and provide quality care. More on this, in my next blog