Health and Education Sectors

Continuing from an earlier post (What ails our health and education system?) on the problems faced by the education and health system in developing countries, I have certain observations about the inherent nature of health and education sectors, and Government activity in general.

One, unlike other sectors, increasing investment in social welfare service sectors like education and primary health care, does not by itself necessarily translate into better quality of service delivery. Though hard infrastructure assets like building, teaching materials and medical and diagnostic equipments are important, they are not the critical factor in ensuring quality service delivery in these sectors. The crucial role is that of the teachers, doctors and nurses, or more generally the human resource. Just as the knowledge industries, health and education sectors too need to place a premium on human resources development. It is their motivation, skills and initiative that determines the quality of services delivered. While typically Government interventions in education and health care focus on the physical assets, limited attention is paid to the aforementioned more softer dimensions. But, even with more focussed attention, there are no short cuts to instilling the aforementioned skills in these functionaries.

Second, health care and education suffers from what is commonly called "Baumol's Disease". It refers to the phenomenon whereby in sectors where productivity is flat and is relatively inelastic with respect to investment, the costs and prices keep going up. This also means that even when Government spending keeps increasing, the outcomes do not improve by much. Both sectors are labor intensive, in so far as we cannot significantly reduce the staff strength, either by improving their productivity or using technology, without adversely affecting the quality of service delivery. Further, while productivity improvements are smaller, the wage increases are more regular and always higher.

This gives the impression that health and education sectors eat up more and more revenues without commensurate improvements in quality of services. The reality is that typical Government sectors like health, education, policing, regulation, general administration are low productivity growth sectors. Thus Government share of expenditure will always tend to be higher, due to the inherent nature of the actrivities it does!