CEE - 10 challenges for the new decade
No.7 Education

Educational attainment is positively correlated with employment prospects as well as wage. With technological change, demand for highly-skilled workforce is likely to grow. While CEE has improved in terms of educational attainment, quality of education should be policy focus.

Quality of human capital seems to matter for productivity and economic growth. Since its transition, the CEE region has improved significantly in terms of educational attainment. Higher educational attainment is also correlated with better employment prospects (lower risk of being unemployed) and a wage premium.

With technological change, the demand for a highly-skilled workforce has been growing. The tasks have become more complex, moving away from routine and manual jobs. Such a development raises the issue of how well the skills of the workforce match employers’ demand in CEE. Not only may the lack of high cognitive skills in the population be a problem (high unemployment, reduced productivity), overqualification can be as well.

Despite a big leap in educational attainment, the CEE region still lags behind the EU not only in terms of the share of people with tertiary education, but also in terms of quality of education. The highest-ranked universities in the region are between 401 and 500 in the world ranking. Access to education is also more difficult in CEE. In particular, the region lags behind in terms of participation in early childcare, which is believed to have a long-lasting (well into adulthood) positive impact. This impact is also the biggest among socially disadvantaged groups, such as the Roma population, which remains a challenge for Slovakia, for instance.

Education affects employment and wages

Educational attainment has been continuously improving in the EU and particularly in CEE. The convergence story of CEE has also been supported by the improving educational attainment level. Since 2005, the share of people with tertiary education increased from 20% to 28% in the EU, while in CEE8 it almost doubled (up from 13.8% to 26.5%). However, the share of people with tertiary education in the region remains below the European average of 30.2%, with Romania having the biggest gap.

Interestingly, the gender education gap also widened, with more females obtaining a higher level of education than males. Back in 2005, the gap was almost non-existent, while in 2019 it was 3pp in the Eurozone and as much as 7pp in the CEE region.

At the same time, higher educational attainment is associated with a lower risk of being unemployed. Last year in CEE, the average unemployment rate of those with tertiary education stood at 2.2%, compared to 3.5% of those with upper secondary education. The premium seems to be particularly high, however, if compared to those who have only primary education, for whom the unemployment rate was at 10.3% in 2019.

Within CEE, Slovakia clearly stands out, as one in four people with primary education remains unemployed, while in other CEE countries it is one in ten people, at most. In Slovakia, such a high unemployment rate in the group with primary education is most likely driven by the Roma minority. During times of crisis, those with primary education also seem to be more exposed to job loss. Over the following three years after the 2009 crisis, the unemployment rate of those with primary education went up by almost 4pp, while those with upper secondary and tertiary education saw a rise of roughly 2pp.

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CEE Challenges for the new decade:

No.1 Demography

No.2 Going Green

No.3 Rule of Law

No.4 Healthcare

No.5 Euro Adoption

No.6 Labor Market

No.8 Regional Development

No.9 Capital Markets

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