Free SHS, Human Capital and Economic Growth


Knowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family – Kofi Atta Annan

If there is one economic and or social intervention promised by the current government that Ghanaians need to rally behind then it is the truly Free Senior High School education policy. I have read with keen interest some misconceptions relating to the feasibility and sustainability of the policy. This article is an attempt to explain the potential impact of the Free Senior High School Education policy on Ghana’s human capital and economic growth.

A country’s human capital, at the individual level, can be described as that aspect of education that adds to an individual’s productivity which then contributes to the productivity of the firm. So that human capital is essentially the skills acquired by an individual through education that enables the individual to be able to transform capital and raw materials into goods and services efficiently.

Notwithstanding its importance, human capital is difficult to measure. This is partly because human skill is difficult to observe. Thus, there has been an attempt to measure human capital in many ways: literacy rates, school enrolment rates and number of years of schooling. The said measures are spurious in that, the literacy rate for example does not measure educational attainment, the enrolment rate applies to school-age children. And the years of schooling, while successfully measuring the human capital stock does not capture the skill-level of the workforce in a country. That said, the average number of years of schooling coupled with test scores gives a better picture of the skill level and quality of the human capital stock in a country.

In 2016 for example, there was widespread outrage and disappointment with the performance of candidates enrolled for the West African Senior Secondary School Certificate Examination in Ghana. The reasons for the abysmal performance is varied, ranging from low quality tuition to the accessibility of books, stationery, computers and other items needed for teaching and learning. This, also seemed to be the case in recent years.

One of the most well-debated and researched topics in economics is what determines long-run economic growth. Specifically, why do economies grow and what factors determine the pace of economic growth. The economic production function developed independently by Robert Solow and Trevor Swan both in 1956, relates economic growth to the inputs needed to create it. These inputs are physical capital (building and machines) and labour (human capital). The increase in these inputs over time is what determines economic growth. Usually, the assumption made is that if the inputs double then economic growth will double as the inputs are used as before. But there is a caveat.

Sustained long-run economic growth is not only contingent on the increase in human capital but also on an increase in the productivity of a worker. Of course, an increase in physical capital also contributes to long-run economic growth but eventually the worker must know what to do with the said physical capital (including technology) and that is where education comes in.

By far, technological progress is the crucial element which determines sustained economic growth. That said, advances in technological progress is by itself, determined by advances in the level and quality of the human capital stock of an economy. Technological progress enables workers to produce more with the same stock of physical and human capital.

It is important to note that historically, economically relevant technological progress has not always been breathtaking or one that relies on cutting edge innovations. It can be modest innovations such as the Post-itÒ note introduced in 1981 which economists believe had a significant positive impact on office productivity.

So, we have seen the link between education, human capital and economic growth and invariably improvements need to be seen in education and human capital for sustained economic growth to occur. It is the last piece of our economic jigsaw and one that cannot be toyed with.

Free Senior High School should be seen by Ghanaians as an economic and social investment i.e. public investment. Specifically, there are two types of government expenditure. These are capital and current expenditure. Current expenditure benefits today’s voter only while capital or public investments benefits today’s voter and future generations. Free SHS as a public investment will not only have an impact on current economic output, it will also increase future economic output and have a significant positive effect on society.

So, naysayers who have an issue with costs should look at the tradeoffs and the payoffs in terms of revenue resulting from increased economic activity and technological innovations. That is assuming Ghana had no income from production and sale of natural resources to support such an important investment. While some of the benefits may be hard to quantify and even measure, their collective effect is palpable.

Indeed, current research in economics shows that human capital i.e. a skilled and educated workforce is crucial to understanding sustained long-run economic growth. This implies a very important role for the teacher and the school meaning that not only should education up to the secondary level be free; it should deliver quality. Therefore, investments in teacher training, teacher training colleges and renumeration should be added to the policy ‘package’.

In doing so, teaching and learning should then become student-centred i.e. emphasis should be placed on getting the student to understand so they can apply what has been learnt in the classroom to solve real-world problems and challenges.

Previous governments have focused on infrastructure development as a means to produce rapid economic growth. This approach, itself is largely inadequate in that while increases in infrastructure (physical capital) can produce economic growth, there is a diminishing return to increments in infrastructure in an economy especially if human capital and technological improvements/innovations are held constant and here is why.

Adding to the physical capital (infrastructure) of an economy is less productive unless this is matched by a similar increase in a skilled and educated workforce. For example, a farmhand with a GH₵ 30,000 tractor who has been trained and has the technological know-how is almost certain to be thrice as productive as a farmhand who has only GH₵ 10,000 tractor and did not attend Senior High School probably due to financial constraint. They may even struggle to read the manual or the ‘how-to’ on the equipment to start with.

Ghana is a very unequal society. And a walk through the streets of any city in the country is replete with precarious examples. From children of school going age hawking to scenes of a single mother with a child selling wares, the entirety of which could be bought for a few Ghana Cedis.

What is clear is that none of these are meaningful jobs that can sustain a decent living. Most children will prefer to be in school with their peers and gain employable skills or skills that equip them to set up their own business rather than hawk on the street.

Free Senior High School education policy will address this inequity. It will also ensure that regardless of the circumstances of one’s birth, the individual has a good chance of succeeding in life. This is a key difference between advanced and emerging economies.

Free SHS is not an economic policy that should be subject to unconstructive political debates if Ghanaians want to see the country succeed. It rightly should be a national economic and education policy – one that should be accorded the same importance as the fight and struggle for our political independence. And the best time to implement the policy is NOW especially if Ghanaians want to see an end to the low economic growth rates. It is the one policy I would urge President Nana Addo Dankwa Akufo Addo to see through. He will be remembered for it by generations yet to come.

Solow, R. F. (1956), ‘A contribution to the theory of economic growth’, Quarterly Journal of Economics, 70, 65–94.

LUCAS, R. E. J. 2015. Human Capital and Growth. American Economic Review, 105, 85-88.

Son, H.H., 2010. Human capital development. Asian Development Bank Working Paper No. 225

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