Johan Fourie's blog

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Posts Tagged ‘education

Bad boys, what you gonna do?

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A social revolution is underway that most of us are blissfully unaware of. Its causes are fuzzy, but its consequences are likely to be significant: it could radically alter how we work, whom we marry, how many children we have, and, perhaps in the extreme, the likelihood of conflict. This social revolution is a relatively recent phenomenon. We’ve seen it emerge only in the last two decades, but it’s accelerating at a rapid pace. Welcome to the era of the widening gender gap in education.

Girls, nowadays, outperform boys at astonishing rates, both at school and at university. Two new studies, both by economists at Stellenbosch University’s Research in Social Policy unit, attest to this. First, a study by Chris van Wyk, Anderson Gondwe and Pierre de Villiers follow all 2007 Western Cape Grade 6 learners (77,633) until matric in 2013. They find that men are 29% more likely to have dropped out of school by 2013 compared to their female counterparts. These results confirm nationally representative studies of reading and math scores. Hendrik van Broekhuizen and Nic Spaull show that the gender gap in reading at South African primary schools is one of the largest in the world. But it is also in mathematics, a subject where boys traditionally outperformed girls, where the closing and then widening of the gender gap is most evident. Says Van Broekhuizen and Spaull: “In the 2000 and 2007 rounds of SACMEQ, South African grade 6 girls outperformed their male counterparts, but this difference was not statistically significant. However, in the more recently conducted TIMSS-Numeracy assessment of 2015, grade 5 girls outperformed grade 5 boys by a statistically significant margin of 16 points. This was the fourth largest (pro-girl) gender gap in mathematics of the 49 countries that participated.”


Source: Van Broekhuizen and Spaull (2017)

Not only do girls do better than boys at school, women outperform men to an even greater extent at university. Van Broekhuizen and Spaull follow the 2008 matric cohort, and show that, while girls obtained 27% more bachelor passes in matric, more females access university (34% more), and considerably more females complete any undergraduate qualification (56% more) or any undergraduate degree (66% more). These gaps exist for all of South Africa’s race groups, although it is slightly bigger for white and coloured students. The pyramid summarizes the gap at every level: for every 100 females in matric in 2008, there were only 8 females that earned any undergraduate degree by the end of 2014, and only 5 males.

We don’t yet know what explains this gap. One argument, with some supporting evidence, is that women have more traits and behaviours that are favourable to schooling in its current form, also known as non-cognitive skills. These skills include self-control, self-motivation, dependability, sociability, perceptions of self-worth, locus of control, time-preference and delayed gratification. But why exactly these non-cognitive skills have become more valuable in the last two decades is not entirely clear. Others have pointed to technological change, particularly in computer and video games, as an explanation for why men are performing worse. But that does not explain gender differences at very young ages.

What is more interesting, though, is to think through the likely consequences. The most obvious is the effect on the job market. Graduates have a much lower unemployment rate (5%) compared to those without any tertiary qualification (33%) in South Africa. If more women have degrees, women are likely to have significant lower unemployment rates than men. And because the best students in almost all subject fields are now women, they are likely to find the best jobs, and move up the job ladder quicker.

We know that men have historically held the majority of high-ranking positions in the workplace, and this outcome can do a lot to balance things out. But it is also important that we think carefully through the full range of consequences. People prefer to match on education, meaning that women prefer men with a similar level of education, and vice versa. What does the gender-unbalanced pool of graduates mean for finding your soulmate? If women become the main (or only) breadwinners, how will that affect family planning? Women already face a more difficult trade-off than men between having to balance a family and career – will this cause fertility rates to fall further, especially for those at the upper-end of the income distribution where the gender gap is most pronounced?

And what of the men? Will they be happy to step in and take up more of the family responsibilities? In a world that increasingly rewards human capital, a large pool of unskilled men will find no outlet for their only productive resource: manual labour. If these men, without proper interventions, become more indolent and isolated, what are the likely political and social consequences? It is not surprising that the political extremes are often dominated by men. Men already outnumber women in all major crime categories. If unchecked, violence and conflict, at the household, community and international level, will in all likelihood increase.

It is natural to ask what can be done about this. Those who argue that the cause for the gender gap is the sudden increase in rewards for non-cognitive abilities would argue that the schooling system can do more to nurture these traits in men. Others would argue that the technological change that make men less productive – like video games – should be taxed.

Others, again, will say that it is pointless to intervene – why should we care about men when women have been suppressed for centuries, and many remain the victims of abuse and dominance? I would argue that that is exactly why we should care about the rising gender gap in education: if we don’t, the consequences are likely to be dire, for men and women.


Written by Johan Fourie

March 26, 2018 at 08:30

Can South Africa’s empirically-minded public intellectuals please stand up?

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Much has been said about South Africa’s economic situation in recent months. Even more has been written about the underlying ills that explain everything from protests at universities to the persistent poverty in the former homelands. This piece by Raymond Suttner, a principled intellectual who paid a heavy price – seven years in jail – for his political activities during apartheid, perhaps best exemplifies the tomes of op-ed pieces trying to make sense of the situation.

And then Dan de Kadt*, an MIT student in Political Science, wrote the following on Facebook in response to the Suttner piece:

In my opinion this is the type of article we need fewer of in South Africa. Not because Raymond Suttner is fundamentally “wrong”, but because this article is a platitudinous summary of what we already know. And somehow it even gets the summary wrong, by being deeply non-empirical.

1) Pretty much everyone who is not a racist bigot (e.g. all those white folks posting on “White Genocide” groups or commenting on News24) knows that South Africa is still living through the legacies of Apartheid – political, sociological, economic, geographic, etc. The structural challenges facing people in South Africa clearly cut along race lines, and the consequences of that are deeply troubling. Egregious inequality, limited inter-generational mobility, social violence, state violence, etc, all following racial lines. It is anecdotally obvious, and empirically obvious too, if you bother to look at actual data.

But understand that the racist bigots aren’t going to change their opinions because of the nth article stating these facts, no matter how well written or persuasive it is. Trying to convince Apartheid dinosaurs is a fruitless (and actually unnecessary) enterprise.

2) While the above claims are undeniable, they are also stylized – they are generalizations and simplifications. As Suttner points out, a lot of progress has been made since 1994. But then he turns around and says things like “Black people’s life opportunities are little different from that of their parents.” On average, that’s simply false for any reasonable definition of “little different”. And it’s obviously false if you just look at the (slow, but real) emergence of the black middle class, a group that tends to be young and upwardly mobile. There’s ample census and labour force data that backs this up – for black South Africans there is better inter-generational mobility now than before, and income and wealth are slowly (far too slowly) being redistributed to the emerging urban black middle class.

The same is true of many many things in post-1994 South Africa. Electricity, water, sewerage, refuse collection access? Virtually non-existent for black South Africans in 1994, much more existent now. If you actually bother to look for it, we have the data needed to examine where the country is failing and where it is not, where Apartheid persists, and where it does not. That is what we need from our public intellectuals, rather than endless repetitive platitudes about how “things are essentially the same”.

3) The failure to recognize this subtler empirical reality means that Suttner fails to capture emergent intra-race class cleavages. There are indeed many young black South Africans whose opportunities/lives are as limited/horrifying as their parents’ were. But these are, for the most part, not students at universities (certainly not UCT). They are, for the most part, not the people participating in RMF or FMF. They are the children of some 17 million exclusively black (read almost half) South Africans who are still forced to live in, essentially, Apartheid-era Bantustans, the only parts of the country where service provision is systematically worse now than it was in 1996. They are the children who eagerly went to school in grade 1 only to find their teacher absent 3/5 days a week. They are that young man on the trash heap while Gareth and Dali walk by laughing. An entirely contrary reading of the RMF/FMF movement is that it is an expression of the emergent black middle class, and its ignoring of (not to say dislike of, or indifference to) the plight of those who remain “below” them. Free university? For whom, the 5%?

4) What this country needs is intellectuals who write articles that explain how to FIX the legacies we’ve inherited. Suttner gives us a brief paragraph about how “we could have done better” on NSFAS because “other places have”. Like where!? Tell us!? That’s valuable f*cking information! Problems in the education system limit black South Africans prospects? No sh*t! Now, please tell us how you think we should fix it, or at least start a debate about how to fix it, preferably one based on actual evidence.

There are so many brilliant minds in this country, and so many brilliant ideas worldwide about how to address the kinds of problems we face. Our problems are not unique. But all we deserve, it seems, is yet another article from a celebrated public intellectual telling us what’s wrong (and with little empirical evidence to back it up, to boot).

Diagnosing the ills of South Africa in broad strokes is, to be honest, extremely straightforward. Apartheid makes it so. What we need are bright minds and public intellectuals leading empirically grounded debates about policy and about how to fix the problems we (smart/not-bigoted people) know exist.

Yes, yes, and yes! First, this is why South Africa’s best and brightest students should study fields (and equip themselves with tools) that will allow them to address these serious questions. Second, we need to expect more of our public intellectuals. A research paper or policy document or even an op-ed cannot simply be a few bundled ideas and theories without empirical proof. Third, there is way too much emphasis in South Africa on who says something, rather than what is being said. Science should be anonymous. Regardless of the nationality, gender or religion of the scientists, if results are falsifiable and repeatable, then they are all that matters. This is not entirely the case in the social sciences, because the real world is not a laboratory. But empirically-grounded research where social scientists analyse large data sets of household earnings, voter behaviour or race relations, for example, depend less on who is doing the research and more on what is being done. To use one example: we don’t care about the nationality, gender or religious orientation of the researcher who showed that less than 9% of South Africans use state-sponsored public transport (trains and buses) to get to work. Instead, we care about what this finding tells us about the inefficient transport system in South Africa, and the policies that could best fix it. I accept that not all research is quantitative, and that not everything can be reflected in numbers. (I’m an economic historian; sometimes numbers just don’t exist.) But what we should be cautious of is opinion (i.e. arguments not grounded in empirics). The ease of publication these days means that opinion often gets more attention than it deserves.

Dan’s last sentence is therefore indeed very important, so let me repeat it: What we need are bright minds and public intellectuals leading empirically grounded debates about policy and about how to fix the problems we know exist.

Can South Africa’s empirically-minded public intellectuals please stand up?

*I asked Dan’s permission to quote him. I tried to cut, but it was all just very good, and very valid. Thanks Dan.

Discrimination on the job market

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Job market discrimination has been at the centre of the last few months’ furore about the lack of transformation at universities across South Africa. On the one hand, those appealing for faster transformation believe, I surmise, that black candidates are not hired or promoted because of discrimination by the panels making the appointments. In contrast, those citing practical difficulties of hiring black staff believe, I surmise again, that the constraint rather lies with a shortage of black candidates.

I suspect both these premises are true. To solve the second – i.e. to increase the supply of black candidates – is a time and resource-intensive process that universities have neglected for too long but which the events of the last few months have certainly hastened. Perhaps that is the topic of a future blog post. Instead, I’ll focus on the former: discrimination at the hiring and promotion level. If this is indeed happening, and I think there is some evidence to suggest that it is, what can be done to forestall such discrimination and speed the much-needed transformation of universities? I should note that discrimination in the workplace may be overt through an undisguised preference for a specific race or gender. When and where this happens, there should be immediate action through the correct channels. But my suspicion is that it more commonly manifests unconsciously – a preference for the culturally familiar (“he went to the same school as I did”, or “she speaks the same language”) which reduces transaction and decision-making costs. Discrimination is then borne through a rational desire to hire the best candidate in a world of asymmetric information.

This type of discrimination was most famously demonstrated by Claudia Goldin and Cecilia Rouse in a 2000 American Economic Review paper. They showed that a change in the auditioning procedures of symphony orchestras – adopting a ‘blind’ assessment with a screen to conceal the candidate’s identity from the jury – increases the probability that a woman will be hired. Because conductors are often male and orchestras male-dominated, male musicians were considered (by the judges, also male) to be better than their female counterparts. Anonymous assessment (playing the violin behind a screen so that the candidate’s gender could not be seen) reduced the bias and meant that more females joined the orchestra.

There is a long history of studies showing similar biases for race. In the US, studies have repeatedly found that résumés with traditional white names are substantially more likely to lead to job interviews than identical résumés with distinctively black names. Roland Fryer and Steven Levitt have found that these effects, though, are not causal for later life outcomes: “we find no compelling evidence of a causal impact of Black names on a wide range of life outcomes after controlling for background characteristics”. Instead, black names better predict life outcomes for the parents than the children.

But given the evidence that people discriminate on race or gender, how does one mitigate the possibilities of such (unconscious) discrimination? Of course, it would help to have more diverse appointment and promotion panels, but given the much-highlighted current racial profile of staff, this will either not be feasible or it would impose heavy costs on black staff who now would have their days filled by sitting on appointment and promotion committees. Another option is to have anonymous résumés and promotion applications. Anonymous résumés or CVs would, theoretically, allow all candidates to be judged according to the exact same criteria, with the top five chosen for the interview process. It is difficult to imagine how to conduct anonymous interviews, but it is not entirely impossible: technology may allow each interviewer and interviewee to create a digital avatar, with the conversation through a Skype session and a mechanical voice transformer. It sounds silly, but it may be the only way to rid the selection committee of any biases (good or bad) they may have towards the candidate. Similarly, promotion applications could be done anonymously, with theoretically only the best candidates making the grade.

So why aren’t we seeing more of this? Well, a new paper just published in the American Economic Journal: Applied Economics suggests we should be cautious. The authors

evaluate an experimental program in which the French public employment service anonymized résumés for firms that were hiring. Firms were free to participate or not; participating firms were then randomly assigned to receive either anonymous résumés or name-bearing ones. [They] find that participating firms become less likely to interview and hire minority candidates when receiving anonymous résumés.

They ascribe their surprising results to two things: 1) self-selection into the voluntary programme and, 2) anonymization prevents the attenuation of negative signals when the candidate belongs to a minority. The latter may be most revealing for South Africa: it simply means that making things anonymous makes it harder for the adjudicators to account for the poorer performance of some candidates at a younger age. Here’s one example: the high school marks of a black South African who attended a poor school may be lower than a white South African who attended a better school, despite the two of them having the same capabilities. An anonymous panel – where school names are removed – would not allow adjudicators to see the high school marks in the context of a poor-performing school. (Education economists in South Africa know that a 80% math score for a kid in a poor school is a much stronger signal than a 80% math score for a kid in a wealthy school.) Instead, anonymous procedures do not factor in past inequalities. Anonymization perpetuates past inequalities; everyone is treated equally but unfairly.

The French government, having hoped that the system would lead to greater representation of minorities, actually abandoned the system as soon as the results became known. It just shows again that what might sound plausible in theory is not always the policy reality. The equal treatment that anonymity provides does not result in equal opportunity. That’s why policy evaluation is so important, and why addressing inequality so difficult.

Written by Johan Fourie

June 29, 2015 at 07:09

The cheapest way to fix South Africa’s education catastrophe

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A muppet a day will make you clever one day: More funding for early childhood education is the cheapest solution to improve education

A muppet a day will make you clever one day: More funding for early childhood education is the cheapest solution to address South Africa’s harrowing education outcomes

There is little doubt that one of the main constraints to South African economic development and prosperity has been the failure of our education system. The new government in 1994 inherited an intolerably unequal system, with white kids receiving world-class education while black kids obtained such a poor quality of education that only the really talented ones could escape the poverty cycle. Two decades later, while the racial inequality has abated with many more black kids in good-performing schools, the sad reality is that too many poor South Africans are stuck in schools where they learn basically nothing.

But the problem runs deeper than the sorry state of South Africa’s schools. As Nic Spaull points out, our poor performance in matric (the final year of high school in South Africa) is rooted in weak foundations in grades 1-3. And in truth, those weak foundations in school are often rooted in weak foundations at home.

The field of early-childhood development is an exciting and challenging new area of research. More and more studies show the large gains from investments in the early years of a child’s life. James Heckman, probably the leading scholar on education economics, writes:

A critical time to shape productivity is from birth to age five, when the brain develops rapidly to build the foundation of cognitive and character skills necessary for success in school, health, career and life. Early childhood education fosters cognitive skills along with attentiveness, motivation, self-control and sociability – the character skills that turn knowledge into know-how and people into productive citizens.

HeckmanHeckman investigated the Perry Preschool programme in the United States and calculated a return on investment of between 7 and 10% per year through better school and career achievement as well as reduced costs through remedial education, health and criminal justice system expenditures. The graph above shows how the returns to education investment falls as the level of education rises. While Rulof Burger’s research shows that these returns may not be exactly true for South Africa (the quality of education for many kids is so poor that they don’t gain anything from an additional year in school), my expectation is that South Africa’s return on investment will be much higher at these very early levels.

But what are these early investments? They can be many things: providing mothers with tool-kits containing basic necessities for newborns (an ongoing study within the Economics department at Stellenbosch University is testing the effect of exactly this), providing young mothers with information about early childhood nutrition and health (see, for example, the Ilifa Labantwana programme), improving the way teachers interact with kids in nurseries with limited resources (my mother-in-law is doing her PhD on this topic!), or something as simple as a television programme.

The latter, at least, is the finding of a new NBER paper on the effects of Sesame Street, a well-known television and radio programme that has expanded across the world, including to South Africa, in the guise of Takalani Sesame. Melissa Kearney and Phillip Levine, the authors of the new study, show the large gains from something as affordable as a TV programme for kids: not only in terms of immediate outcomes but, as Kearney and Levine show, also later in life:

Sesame Street is one of the largest early childhood interventions ever to take place. It was introduced in 1969 as an educational, early childhood program with the explicit goal of preparing preschool age children for school entry. Millions of children watched a typical episode in its early years. Well-designed studies at its inception provided evidence that watching the show generated an immediate and sizeable increase in test scores. In this paper we investigate whether the first cohorts of preschool children exposed to Sesame Street experienced improved outcomes subsequently. We implement an instrumental variables strategy exploiting limitations in television technology generated by distance to a broadcast tower and UHF versus VHF transmission to distinguish counties by Sesame Street reception quality. We relate this geographic variation to outcomes in Census data including grade-for-age status in 1980, educational attainment in 1990, and labor market outcomes in 2000. The results indicate that Sesame Street accomplished its goal of improving school readiness; preschool-aged children in areas with better reception when it was introduced were more likely to advance through school as appropriate for their age. This effect is particularly pronounced for boys and non-Hispanic, black children, as well as children living in economically disadvantaged areas. The evidence regarding the impact on ultimate educational attainment and labor market outcomes is inconclusive.

Early childhood development is one of the few expenditure categories that would win support across the political spectrum. National and provincial funding should therefore not be an issue. Trade unions that plague the transformation of the education system are less involved at the preschool level: there is thus no reason not to rapidly expand early childhood programmes across South Africa, particularly in poor areas.

I also see a lucrative private sector opportunity, although Curro has already entered this space with its Curro Castle model. What we really need, though, is an affordable model for millions of poor families unable to afford preschool. Why can government not institute a voucher scheme for every kid to attend a nursery of their choice and let the private sector provide the services?

A national nursery scheme won’t have an immediate effect on South Africa’s growth or prosperity. But a new generation of kids will grow up without the inequalities in cognitive abilities that are already entrenched when they reach school. Instead, a successful national preschool system can show voters and bureaucrats (and hopefully trade unions) the benefits of private sector participation, which will allow the system to be expanded to primary and perhaps even secondary school.

Perhaps it’s just wishful thinking, but, in my opinion, this is the most effective (and affordable) way we can begin to address the massive inequalities so persistent at present.

Why you should not get married before you’re 25

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Wedding“When a girl stays in secondary school, she is 6 times less likely to marry young,” UNICEF tweeted on Thursday evening. Education, and especially female education, is one of the pillars of development, with countless positive externalities for society, including, as the UNICEF tweet notes, an older age at marriage. Getting married at an older age may seem inconsequential, but a recent literature has shown that it may partly explain why Western Europe first escaped the Malthusian trap and led to the Industrial Revolution.

During the early-modern period, women in Western European countries began to marry at an older age. While this observation was first made by John Hajnal in 1965, it is only recently that scholars have begun to consider the causes and consequences of this shift. Tine de Moor and Jan Luiten van Zanden in ‘Girl Power‘ argued that because of the preachings of the Catholic Church which promoted marriage based on consensus, the rise of labour markets, and institutions of property rights that encouraged women to work before they marry, Western European women changed the average age at which women married from around 20 to around 25 years. A higher age at marriage meant a shorter period of fertility for women, meaning fewer children were born and a shift thus occurred from having a higher number of children to having fewer children but investing more in them by, for example, sending them to school.

This is a compelling thesis, but the causal direction is not clear. Did women not simply react to the development of labour markets and, if so, what caused such development? Investigating this, Jeanne Cilliers and I considered the Dutch Cape Colony marriage pattern (the paper is only available in Afrikaans). In South Africa, Dutch immigrants (obviously of Western European origin) settled, bringing along their own institutions, like property rights. Yet the Cape did not have a wage labour market similar to Holland, which, we argue, provides a nice experiment to test their theory. We find that the Cape did not exhibit a European marriage pattern throughout the eighteenth and early nineteenth-centuries. It was only after the shift to a wage economy, helped by the discovery of minerals in the interior of the country, that a marriage pattern similar to Europe emerges. This suggests that it is labour markets that causes marriage patterns, and not the other way round.

So here’s some marriage advice from Dr Phourie. Unsure about when to get married? Don’t do it before you’re 25. You may not start an industrial revolution, but, on average, you will have fewer but more educated kids (which is what society needs more of).

The seven pillars of highly effective freedom fighters

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Julius Malema, expelled ANC Youth League leader, released a ‘Central Command’ press statement today explaining his seven non-negotiable pillars for economic freedom in South Africa. These pillars will form the foundation of his new political party, the Economic Freedom Fighters (a ‘radical, Left, and anti-capitalist and anti-imperialist Movement with an internationalist outlook anchored by popular grassroots formations and struggles’), and are:

  1. Expropriation of South Africa’s land without compensation for equal redistribution.
  2. Nationalisation of Mines, banks, and other strategic sectors of the economy, without compensation.
  3. Building State and government capacity, which will lead to abolishment of Tenders.
  4. Free quality education, healthcare, houses, and sanitation.
  5. Massive protected industrial development to create millions of sustainable jobs including Introduction of minimum wages in order to close the wage gap between the rich and the poor.
  6. Massive development of the African economy and advocating for a move from reconciliation to justice in the entire continent.
  7. Open, accountable, corrupt-free government and society without fear of victimisation by State agencies.

It is, or should be, evident to any reasonable individual that these policies are mutually exclusive. For example, if agriculture (land), mines, banks, and other strategic sectors are nationalised, they don’t pay tax. (They also don’t earn any income for the government, because their main objective is to employ, not to engage in the evil capitalist activity of earning profit.) If they don’t pay tax, the government cannot afford the free quality education, healthcare, houses and sanitation they hope to build. This is not economics, it is accounting.

Or, to use another example, introducing higher minimum wages will cause higher unemployment. This is not neo-liberal economic ideology. It is a basic supply and demand graph.

Or, as a final example, if State agencies can expropriate anything from anyone at any time, won’t society live in fear of ‘victimisation of State agencies’? Hello Stalin.

Yet I suspect that the ‘seven pillars’ is not a policy document. It is popular rhetoric to appeal to a group of people that the ANC has failed to empower: young, unemployed, black South Africans. And appeal it will. This is good; democracy is about voting for those politicians whose policies you believe will benefit you most, even if it is ‘Instant Nirvana’-type policies as Max du Preez called it on Twitter. A clear political option on the left will make South African politics easier to understand, as it moves voting from Luthuli House to the national ballot box. But it will also put pressure on politicians (and, frankly, all educated South Africans who are eager to improve this country) to explain clearly to those caught in the hype of ‘revolution’ why Malema’s dreams and aspirations will yield little more than pain and deeper poverty. Or let them see it for themselves: buy them a ticket to Latvia, or Cuba, or North Korea. In each of those cases, the State adhered to Malema’s seven pillars, with disastrous consequences. The poor of these countries did not escape poverty; the best they could hope for was to escape their miserable circumstances by fleeing to affluent, capitalist societies.

Julius Malema’s policies may score an EFF in logic, but they appeal to a large constituency frustrated by the failed promises of politicians past. Yet we need to spread the message that the only way to achieve our economic freedom is to give our economic fighters the tool to engage with our globalised world: quality education for all. This is an ideal which we should hope to live for, and to see realised. But, my friends, if needs be, it is an ideal for which we should be prepared to die. That is the revolution. Viva Economic Freedom Fighters, Viva!

Written by Johan Fourie

July 11, 2013 at 18:16

Why and what to study in South Africa

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Career_LetsTalkAboutVarsityIt’s exam time at universities across South Africa, which means most students will suddenly have too much time to ponder the existential questions of life: Why am I here? What am I doing? Why am I doing this? (If you haven’t had these thoughts yet, try studying econometrics.) So I thought I’d provide some answers so that you can get back to thinking about the more pressing matters, like passing Ecos 2.

Why study?

A new research paper by two Stellenbosch economists provides the answer: South Africans (of all races) with a university degree (not a diploma or certificate) enter a labour market with an unemployment rate of 5.9% (in 2012), compared to the 25% unemployment rate for the total population. In other words, a university qualification reduces the odds of you not finding a job from 1 in 4, to 1 in 17. The more surprising thing is that this result holds across all universities and disciplines: a degree – no matter where or what type – makes a significant difference in your likelihood of finding a job.

From the existing data and research there is not much statistical evidence that either the type of degree acquired, or the university attended, leads to a greater likelihood of being unemployed for a graduate (although we still need better data and more research to understand these aspects fully). Unemployment rates are relatively low even amongst black graduates who currently are more likely to enrol for courses in the arts, humanities and social sciences and attend ‘formerly disadvantaged’ universities. While the composition and quality of a degree may play a role in black graduate unemployment being higher than for white graduates, black graduates still experience lower graduate unemployment than in the European Union, for example.

What to study?

So what you study doesn’t seem to matter? No. The above study measures your likelihood to get a job. And even though an art historian is as likely to get a job than a chemical engineer, their remuneration (salary) is likely to be different. Few of us are only concerned about getting a job; most of us care about the financial rewards (and auxiliary benefits) that that job offers.

A recent list by PayScale, a US company, ranks the top-paying degrees in the United States. I think this is a pretty accurate reflection of South Africa too, with one exception (which I’ll get to later). If you want to earn the big bucks, engineering is a good place to start, occupying six of the top seven highest paid degrees. Only Actuarial Mathematics – Actuarial Science in South Africa – can compete. An obvious feature of the top thirty top-paying degrees is that they require a heavy dose of mathematics, and one could argue that, given the poor performance in maths at South African schools, the premiums on these degrees would be even higher. The point is this: if you get an A for Matric maths, your best option is to enrol in an undergraduate degree that further develops your math skills (Engineering, Physics, Actuarial Science, Statistics, Applied Mathematics, Computer Science). Studying mathematics is an excellent core skill to have; it opens up doors (at the graduate level) to many other applied fields, from the medical sciences, to software programming, to game theory, to managing your own business.

But not everyone can or want to (or should) be mathematicians. As the PayScale list shows, there are many other rewarding fields. One underrated field I consider to be increasingly important is supply chain management (or Logistics). Coding and computer programming will become increasingly important. And, as an economist, I must recommend Economics (and History): if you don’t believe me, read Noahpinion on why a PhD in Economics is the best thing since sliced bread. (Michael Jordaan, CEO of First National Bank, recently retweeted Noah’s post…)

And, remember, it is actually really really really important to do something you enjoy doing. You will spend most of your waking hours at work. You don’t want to hate it. (I’m happy that Ben Bernanke, chairperson of the Federal Reserve, shares this view. See point 7.)

Accounting for accounting

At this point, let me say something about the study of Accounting. Advising brilliant students (students that has the ability to study anything), school councillors in South Africa would most often suggest a career in either Actuarial Science and Accounting. To become a Chartered Accountant (following four years of study and two board exams) is seen as a ticket to riches and the logical option for many high-school students. To give one example of the preference for accounting; the School for Accounting at Stellenbosch now constitutes a third of the Faculty of Economic and Management Sciences, which also include Economics, Management, Marketing, Logistics, Actuarial Science, Statistics, Industrial Psychology and the Business School.

This is a peculiar choice, and is unique to South Africa. Accounting is not a career choice for the brightest students in Europe or the United States, as is also clear from the PayScale list (Accounting doesn’t rank in the top 50). There are historical and institutional reasons for Accounting’s dominance at South African universities: the South African Institute of Chartered Accountants sets strict guidelines as to what should be included in undergraduate and graduate training, determines the difficulty of the board exams, and can thus limit the supply of Chartered Accountants (CAs) in the market. A limited supply increases the price, meaning qualified CAs earn well, which makes it even more sought-after. It is also a well-defined career path: get your Honours, write two exams, and you’re set. Make no mistake: these are some of the toughest exams to write, requiring years of hard studying. Only the toughest survive. The pay-off is a qualification with nearly limitless job opportunities (at least until the financial crisis hit) and guarantees high incomes.

Well-trained accountants have certainly contributed to the quality financial institutions South Africa is known for.  But – and this is a question I have no answer for – at what cost for the individuals and for society? I have not met many accountants who enjoy their job; they enjoy the benefits, yes, but not necessarily the auditing. These are driven individuals (you have to be to pass those exams) and they often rise quickly in an organisation, but is it because of the knowledge they gained studying Accounting or is it because they are inherently intelligent, motivated individuals? Would they not have climbed the corporate ladder in any event – perhaps even faster – with some other degree? More importantly for society, what if the most brilliant of South African high-school students, instead of learning auditing rules and tax principles and accounting standards, were grappling with the Hodge conjecture (in mathematics), the Gettier problem (in epistemology), the Golgi apparatus (in cell theory), the Equity Premium puzzle (in financial economics), or supermassive black holes (in astrophysics)? Or instead decided to create something brilliant: as authors, as artists, as entrepreneurs?

If Einstein was born in South Africa, he would probably have studied accounting. I’m not sure that he – or South Africa and the world at large – would have benefited much from such an arrangement.

I’m still at school and don’t know what I want to study

The good news is that it doesn’t really matter what you study, as long as you study something and make sure you get your degree. That degree – regardless of what you know – is already a sign to potential employers that you can work hard. But there are a few things you can do to improve your salary and job satisfaction:

  • Learn a computer language at school. Coding will open many job opportunities that probably don’t even exist yet.
  • In a world of information overload, writing succinctly is a skill that will be prized in all professions. To write well, read. Why not learn another language while you’re at it? (I would recommend Portuguese (for the fast-growing markets of Brazil, Mozambique and Angola), Swahili (East Africa), Mandarin (China), Spanish (the Americas) or French (West Africa, and to impress girls).
  • Of course, the richest people under 30 in the world are not the ones who studied. They are the entrepreneurs that had a great idea and put in a lot of effort to make those ideas a reality. Entrepreneurs are the life-blood of society. I can think of nothing more rewarding than building your company from a small garage workshop into something that has a profound impact on society, employing dozens or even hundreds or thousands of people. The sooner you start, the better.
  • If you need more information of university life, please read this book. It’s available (for free) on Google Books. If you’d like a hard copy, I still have thousands in my garage. (I started too late.)

Written by Johan Fourie

May 25, 2013 at 10:19