Education plays a critical role in the labor market, in both developed and developing economies. In MENA (Middle East and North Africa), a well-structured labor market is characterized by the level of education attainment. Some studies conducted on some particular countries within MENA show that educated employees receive more earnings especially in the public sectors. This implies that the employers are more concerned with the people who have attained a higher level of education than those who are not well educated (Lietz et al. 6). These countries include Yemen, Jordan, Morocco and Egypt. As a result, the higher education attainment level attracts higher wages. This shows that there is a strong positive relationship between the level of education and the wage rate. However, the education is considered as a random variable that may vary with other variables such as the ability, family background, and experience among others. This paper attempts to explore theoretical approach to derive the relationship between the education and earnings of employment in MENA.
According to the economic concept, wage of an employee depends on the skills acquired by an individual. Consequently, the wage increment or decrement of workers depends on their skills. With the high education, workers develop skills that enable them to receive attractive wages in the labor market. Therefore, the wage differential is created where unskilled workers get lower wages than the skilled laborers.
The human capital earning function (HCEF), derived from the Mincer’s frameworks show that there is a strong positive relationship between the wage and the education (Card 1805-1807). The model suggests that the wage rates be higher to people with higher education attainment. This has led to many countries in the MENA region to invest in education to increase the earning of the employees and hence increase the economic performance of the country. These countries argue that, for a wage increment, the level of education must be considered. This is the reason these countries such as Yemen and Egypt are emphasizing on “learning to learn” so that they can be able to achieve an internationally competitive performance standards. People with higher education levels receive high wage rate because they have skills that enable labors “to be flexible, to analyze problems and to synthesize information gained in different contexts” (18).
However, studies indicate that the difference in earnings due to education depends on the levels of education and labor demand in the MENA region. According to a report by Human Development Sector Middle East & North Africa Region, an educated workforce can result to low wages and low economic growth rate. By using the demand theory, where the labor demand is very high, the wage rate is too low and vice versa. Most of the MENA countries are developing economies indicating the level of education workforce is low hence low demand of labor and hence high wages. Various world band reports indicated that those countries that have a higher level of economic growth and schooling in the labor market usually attract higher returns than those countries with lower economic growth. On the other hand, the wages for people who attained primary education is lower than those who have attained secondary and tertiary education. This is because the secondary and tertiary graduates have acquired best skills and knowledge required in the labor market. In other words, the education quality differs with the levels of education.
Dissimilar with theoretical expectation, the impact of educational credential in some MENA region does not reflect the productivity differences. However, studies have indicated the level of reward, in terms of earning, depends on the education level. For example, higher education credentials are more awarded in the public sectors than in the private sectors. However, in Egypt, university graduates in the private sector receive higher returns than in the public sector. This implies that the employers in the private sector value the university employees than the primary and secondary employees in the country. In Morocco, studies show that there is a high possibility of higher income for the educated people in the private sector compared to the public sector. This is because of positive correlation between the productivity differences and the educational credentials in the country (Lietz et al 23). Therefore, the earnings of the employees are not only affected by the level of education but also the relationship between the productivity differences and the educational credentials. In some case, the educational credentials do not match with productivity capacity. Therefore, in this case, education cannot be used as the sole determinant of wage rate in the labor market. Other factors such as education quality and marginal productivity must be considered.
A research conduct in the American University, in Cairo, provides a significant argument to the theory of Human Capital Earning Function and the skilled differential concept. A study conducted through the interview of janitors indicated that there is a strong correlation between the skilled differential and education. In order to get better skills, one has to be sufficiently educated. The janitors stated that they are working in those job positions because of their low education levels. However, provided with free English and computer course, they were aiming to acquire better jobs, in term working condition and skilled differential. However, the research yielded controversial result to the theory since the same janitors claimed that the education does not have an impact on the earning in the country. They argued that, in general terms, there are workers in Egypt who are working in the same field, but have different education levels. This implies that, with good education, a person is not guaranteed for a job that paying well in the labor market. Despite that, the education is the most important factor in the increment or decrement of the earnings; there are other factors that have to be considered, such as gender unemployment level in the economy. For instance, in most of the Middle East countries, women are discriminated in the labor force irrespective of their educational credentials.
In conclusion, it is clear that the education is the driving force for increment in the earnings of the workers. However, according to the human capital earning function, the wage differential due to the level of education varies with different country. The theory is not applicable in all the MENA countries because of the diverse factors. For instance, workers who prefer fringe benefits such as medical insurance will appear attractive to the employers who can offer such services at lower costs. Other factors that disqualify the education as the sole determinant for earnings include ability, gender, and the labor demand of the country.
Card, David. "The Causal Effect of Education on Earnings." Department of Economics, University of California at Berkeley (1999): 1802-1858. Print.
Human Development Sector Middle East & North Africa Region. "Education in the Middle East & North Africa: A Strategy Towards Learning for Development." Human Development Network (2011): 3-35. Print.
Lietz, Petra, Hans Wagemaker, Oliver Neuschmidt, and Juliane Hencke. "Educational issues in the middle east North Africa region : outcomes of the IEA Arab region training seminar series 2006/2007." (2008): Print.