China's Looming Human Capital Crisis: Upper Secondary Educational Attainment Rates and the Middle-income Trap

Abstract

Abstract Accumulation of human capital is indispensable to spur economic growth. If students fail to acquire needed skills, not only will they have a hard time finding high-wage employment in the future but the development of the economies in which they work may also stagnate owing to a shortage of human capital. The overall goal of this study is to try to understand if China is ready in terms of the education of its labour force to progress from middle-income to high-income country status. To achieve this goal, we seek to understand the share of the labour force that has attained at least some upper secondary schooling (upper secondary attainment) and to benchmark these educational attainment rates against the rates of the labour forces in other countries (e.g. high-income/OECD countries; a subset of G20 middle-income/BRICS countries). Using the sixth population census data, we are able to show that China's human capital is shockingly poor. In 2010, only 24 per cent of China's entire labour force (individuals aged 25–64) had ever attended upper secondary school. This rate is less than one-third of the average upper secondary attainment rate in OECD countries. China's overall upper secondary attainment rate and the attainment rate of its youngest workers (aged 25–34) is also the lowest of all the BRICS countries (with the exception of India for which data were not available). Our analysis also demonstrates that the statistics on upper secondary education reported by the Ministry of Education (MoE) are overestimated. In the paper, we document when MoE and census-based statistics diverge, and raise three possible policy-based reasons why officials may have begun to have an incentive to misreport in the mid-2000s.

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