Jobs and Education: A Nobel Laureate’s Views on a Tangled Connection

“The fact that educated people in the Middle East and North Africa are almost always employed by the government suggests a problem with the private sector,” says Joshua Angrist, a co-winner of the 2021 Nobel Memorial Prize in Economic Sciences. “However, I have not seen any evidence of any reform done yet.”

Angrist, an American labour economist and professor of economics at the Massachusetts Institute of Technology, won the prize along with David Card and Guido Imbens. (See a related article, “Nobel Laureate David Card Believes Scholars Need a Global Perspective”.)

In announcing the prize, the Royal Swedish Academy of Sciences said that the laureates had demonstrated that many of society’s big questions can be answered using “natural experiments—situations arising in real life that resemble randomised experiments.”

Angrist has used such methods in research on topics including the effects of school inputs on student achievement, the impact of increased higher education on people’s income.

In an interview with Al-Fanar Media, Angrist talked about his research and its implications for the Arab world.

In your research, you have argued that higher education results in higher income.

In a paper with Alan Krueger, we came up with a natural experiment to estimate the economic return to schooling. … In the American education system, people who are born later in the year start school younger. So, if you are born in the fourth quarter of the year, you will start first grade by September when you are not 6 years old yet. As you are not allowed to drop out of school before your 16th birthday, you will spend more time in school (than those born in the first quarter).

The work Krueger and I did showed that there is indeed a large economic return (to schooling). That was one of the papers that the Nobel committee emphasizes.

If that is so, why does the Middle East have increased unemployment rates among university graduates?

I have lived in Israel for many years, where I used to teach at the Hebrew University in Jerusalem. I did some academic papers on the Palestinian labour market. I think I was the first academic researcher to get the micro data collected between 1981 and 1992 in the West Bank and Gaza. That was a pretty good data set with information on workers, their earnings, working hours, and education.

In one study, I showed that there was a rapid growth in the number of Palestinian college graduates in the 1970s. … A lot of new universities opened and the labour market was flooded with new college graduates. My research, published in the American Economic Review, showed that when the supply of college graduates increases, the economic return to schooling fell dramatically. It actually went down from a very large number to essentially zero. (See a related article, “Palestinian University Graduates Face Harsh Futures”.)

My explanation is that the labour market was not very open. It was hard to create jobs to employ educated workers. Israel, as the occupying power, discouraged it and did not make it easy. So, we went from many work opportunities to more college graduates to a lower economic return. … I think you have similar situations in other places in the MENA region.

Exactly. Currently, even engineers find it hard to be employed.

This is unfortunate. It has to do with the fact that much of the labour markets in the Middle East are not very open to trade and are highly regulated, and employment is highly protected. All this makes it costly to employ educated workers. Middle Eastern countries do not take advantage of all these skilled workers and many of them eventually leave—to the United States, for example.

Does this have to do with people’s interest in government jobs only? 

That is often seen in the Middle East. This suggests there is something wrong with the private sector. It is not dynamic enough.

There is something revealing about the fact that educated people in North Africa and elsewhere are almost always employed by the government. That suggests a problem with the labour market. However, I have not seen any evidence of reform yet. (See a related article, “Jordan’s Plan to Reduce Unemployment by Cutting Some Majors Stirs Doubts”.)

You have also studied the effect of classroom size on student achievement. Do we need fewer students in smaller classrooms?

The most important input in schools is the teacher. If you hire more teachers, you would reduce class sizes, but that’s expensive.

Victor Lavy and I wrote a paper about class size in Israel, conducting a very nice natural experiment. Class size is actually something you can use a real experiment to study. You could randomly assign kids to classes, bigger and smaller. Israel tended to have bigger classes compared to the United States. We used Maimonides’ rule of 40 as a maximum class size to construct instrumental variables estimates.

Imagine there are 40 kids in a classroom. If another kid comes, you have to split the class into two, with 20.5 students in each. If you have 80 kids, you will have two classrooms of 40. If another kid joins, you need to add a class, again splitting it into three and the class size falls. This is a kind of ratcheting function with sharp drops and multiples of 40.

Our work showed that smaller classrooms seem to promote learning. In spite of the fact that if you compare kids in bigger classes to those in smaller ones, you tend not to notice that because good schools are usually in big cities and cities tend to have bigger classrooms.

Is that applicable to private schools that usually have fewer pupils? And should not we consider the financial angle in this?

That was in Israeli public schools. Even within the public system, you have larger classes in urban areas than in rural areas. Urban kids tend to have better test scores. This might have something to do with higher income families and educated parents.

However, a few years ago, we went back and had new data from Israel and we did not find that effect. Using recent data showed there is no relationship between class size and student achievement, using the same research design.

With the current refugee crisis in Europe and the Middle East, how do you assess the impact of immigrant workers on host countries’ local workers’ wages?

In a famous paper, David Card studied the impact of Cuban refugees in Miami. He did not find an effect. Whether we like it or not, there is a very objective question on the effect of refugees on the wages of people who already live in the country. It could be negative, but Card’s paper found it has no effect.

Other studies based on data from France after Algeria was granted independence, when hundreds of thousands of people moved to France, both Algerians and French. This did not seem to have an effect either.

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I have a paper on Europe looking at the war refugees from Bosnia and Kosovo. That seemed to have an effect on some countries. You could have different effects in different locations. The ability of an economy to absorb refugees partly indicates how flexible the labour market is.

What are your thoughts about online education, especially in low-income countries with poor infrastructure and poor Internet connection?

I haven’t studied this yet. My guess is that online education is not as good as the real thing. The mostly preliminary work I have seen is consistent with that. (See a related article, “The Shift to Online Education in the Arab World Is Intensifying Inequality”.)

As a professor, I found it is much harder to get students to pay attention online. I am happy that I am no longer teaching online. I hope we will not be teaching online this spring.

So you do not agree that online learning is the future of education?

I hope it is the past.

This interview has been edited for brevity and clarity.