Education as the Elixir of Growth III

Just in case you thought the correlation between human capital and economic development was an artifice of the post-socialist world, here is a similar graph (R2=0.4273) for all the world’s countries that have participated in the Math and Science portions of the PISA or TIMMS (8th grade) international standardized student assessments.

education-economy-global-1

The methodology is the same as described in the previous post. As you can see, the relation is every bit as strong at the global level. However, you may point to a few outliers. How to explain them?

Corruption, institutions and “governance”, “ease of business” indicators, etc. are all next to useless; in fact, it has even been found that some corruption is better for growth than no corrupt at all (though there is a critical point of extreme corruption at which it becomes deeply harmful).

But these are minor technical discussions. As far as I can see, there are only three major factors that explain why some countries diverge from the close correlation (R2=0.8393) between human capital and economic development observed in normal countries with a long history of capitalist development: (1) Major exporters and mineral exporters, relative to their total GDP; (2) Countries with a legacy of socialism and central planning; and (3) Countries with small populations that are also major financial, tax haven, or tourism centers.

education-economy-global-3

As you can see from the graph below, the conventional countries would form a nice best fit exponential curve (R2=0.8393). So would the countries with socialist legacies (R2=0.4908), albeit with greater dispersion and at a systemically lower level than the normal capitalist ones – especially once you remove those among them with substantial resource endowments. The same in reverse applies considering those countries that have managed to occupy niches in tourism, providing tax havens, and above all in financial services (R2=0.6014) - they do systemically better than the normal capitalist countries. The only countries to defy this iron correlation between are those whose oil production enables their populations to live off the rents from it (R2=0.0002); but these Rich Oilmen countries are very few in number, and concentrated in the Gulf.

The Capitalist Normals

The Capitalist Normals (blue) have long histories of capitalist development, and while some – like Australia or Argentina – may have large primary resource endowments, they cannot be said to dominate the economy. They have a very close correlation (at least by social science standards) between levels of human capital and economic development. The developed countries in this band occupy the global technological frontier. As usual, the outliers tend to be exceptions that prove the rule, so I’ll focus on them.

Argentina does slightly better than its PISA scores might otherwise indicate, but here there may be a few explanations: (1) Older Argentinians are far better educated than their counterparts in most of the rest of Latin America; (2) Low school-leaver human capital may be in part compensated by having the continent’s highest tertiary enrollment ratio.

UPDATE: The Argentina outlier is solved. According to Steve Sailer, Argentina’s low score is thanks to the scrupulousness of its school administrators, who – unlike most other countries – took the effort to track down the truants and drop-outs, who constituted 39% of its school-age population. Without this effect, Argentina’s score would have been about 40 points higher, i.e. above Mexico, and similar to Chile and Bulgaria, that is to say right where it should be. Sailer also makes the observation that since truancy tends to be more prevalent in poorer countries – a factor that is only rare adjusted for in the PISA tests – the gap in the human capital of older schoolchildren between the high-scoring developed world and the low-scoring developing world are, if anything, even higher than recorded in these tests.

Syria and Jordan both do a bit worse than their potential. Perhaps the influx of poor Palestinian refugees depresses Jordanian per capita wealth, while Syria is hampered by an extremely statist economy.

Israel is a major positive outlier. One explanation is that there is a lot of math and scientific aptitude diversity within Israel, with Arabs and Sephardi Jews performing badly and Ashkenazi Jews doing much better and perhaps a great deal of variation within the higher-IQ Ashkenazi group in particular; however, this is not borne out in the statistics, with the standard deviation for Israeli scores no higher than in many other countries. So why is it richer than, say, Turkey? No idea. Maybe because of US financial help, which is not inconsiderable. Maybe because the entrepreneurial Jew stereotype is correct even if the clever Jew stereotype isn’t.

Greece is a minor positive outlier, but their debt crisis is cutting it down to where it should be; as with Ireland a few years ago (it used to be an outlier in 2007 but is no longer). I guess the invisible hand has a sense of justice.

The United States is the most significant positive outlier, getting almost $10,000 more GDP than would be warranted by its human capital levels, which are comparable to Sweden or Australia. One major factor is surely that Americans simply work much longer than Europeans; their productivity levels, output per hour worked is, in fact, virtually equal to that of Germans or Swedes. It also helps that it has plentiful land per capita with the world’s best natural riverine transport system – and useful land, not permafrost like in much of Russia or Canada – and controls the world’s reserve currency.

Korea is a major negative outlier, one of the world’s cleverest countries but one that hasn’t yet even fully caught up with Italy. However its case – as is, to a lesser extent, that of Finland and Taiwan – is explainable by the simple fact that for them, “convergence” isn’t a finished process; they continue to grow relatively rapidly by already-developed country standards, they do not have any debt or fiscal crises, and they can expect to continue moving in the direction of ultra-rich countries like Switzerland and Singapore in the next decades. That said, Japan – also a minor negative outlier – indicates there may be diminishing returns to ever more impressively educated populaces.

It is important to emphasize, also, which countries in this category are NOT outliers: Brazil, Mexico (despite a substantial oil endowment), Indonesia, India, and Turkey. Also South Africa, which is not in this database, but can be inferred to have very low human capital based on its still prevalent illiteracy and very low TIMMS (4th grade) results. Now Brazil and India are regarded in the Davos press as superior to Russia, and in the long-term superior to China also (by virtue, so their argue, of their democracy and “demographic dividends”); the other nations cited here have all at one time or another been suggested as replacements for Russia in the BRIC’s.

If we are however to regard human capital as the main determinant of the natural level of economic development, and the “potential gap” between the two to be the most reliable determinant of future growth prospects, then the best BRIC by far is China, followed by Russia; to the contrary, India and Brazil (and any prospective BRIC’s members) are unremarkable.

The Red Tigers

The Red Tigers (green) are countries with major legacies of socialism and often central planning. It is interesting to observe that countries where reforms started earlier (e.g. ex-Yugoslavia, East Central Europe) and where markets played a greater role under socialism are much closer to the “equilibrium level” indicated by their levels of human capital. That said, despite their relative affluence, their “potential gaps” are still substantial; for instance, the Czech Republic and Poland have human capital basically equivalent to that of Germany or the US, but are still up to twice as poor in terms of GDP (PPP) per capita. This implies that this group will continue converging to advanced developed countries in the years ahead.

Practically all outliers in this group are negative, and were already covered in the previous post. But to recap:

China is the mother of all outliers, and no doubt a very significant one – it has 1.3 billion people living at lower middle income levels (although a few provinces remain distinctly Third World) but their high-school students now outperform the US and most of the EU. In my opinion this is the result of a very special situation.

The Maoist state suppressed economic growth to a degree unprecedented in virtually any other state in the socialist camp; it also started from a very, very low base. But despite its ruinous economic views, its social policies – including basic education – were implemented far better than in almost any other low income country, and that on top of (a) their reverence for scholarship that only had its equivalent in the Protestant emphasis on literacy and (b) the observed high IQ of Chinese overseas communities which may have a genetic component. This means that when China introduced market reforms, the “potential gap” between its human capital and existing level of economic development was vast to a degree probably unprecedented anywhere else in the world and in all history. Hence thirty years’ worth of 10% GDP growth that shows no sign of stopping (in fact, China’s relative performance exceeds that of any other Asian tiger in their stage of rapid development). And barring a major and unexpected discontinuity is should NOT stop until China reaches the level of per capita wealth Korea, Taiwan, or even Switzerland.

One minor caveat is that rapid development means that this “potential gap”, while vast, may no longer be quite as vast as indicated by the graph. Note that according to some estimates, China’s PPP GDP is now larger than America’s, which would give a GDP (PPP) per capita of $10,000-$12,000 or so.

Armenia, and to a lesser extent Serbia and Bosnia-Herzegovina, are negative outliers. Their cases are clear; they suffered from destructive wars in the 1990′s, and in Armenia’s case it remains surrounded by neighbors from hell.

The ex-Soviet countries without oil, such as Ukraine and Moldova, tend to be deeply negative outliers. One reason is that they reformed slowly (while the Soviet-era system crumbled about them), and late; and have suffered from particularly incompetent and avaricious governance; as I argued in a prior post, Ukraine never left the period of “anarchic stasis” that characterized Russia in the 1990′s. However, Ukraine’s perspectives aren’t looking good, at least in the short-term. Perhaps it’s because corruption, etc. are still so high that – while they normally don’t have much of an effect – reach such critical levels that they significantly stymie growth; an alternate, and more benign, explanation is that Ukraine’s GDP (PPP) is underestimated – it was not adjusted upwards like Russia’s in the recent OECD and World Bank recalculation of relative prices – meaning that Ukrainians already live better than the statistics indicate, their “potential gap” is smaller, and thus understandably there is less room for fast GDP growth.

Azerbaijan, Kazakhstan, and Russia are curious creatures in that in their case, the resource windfall boon works against the socialist legacy curse. This means that, despite that they are ex-Soviet – i.e., the economy was more deeply distorted and reforms started later than in much of the rest of the socialist camp – they are nonetheless on the upper part of the human capital and economic development curve, along with countries like the Czech Republic or Romania, and are not outliers like Ukraine or even Latvia.

At this point I would also like to demolish the myth of Georgia as a shining beacon of unimpeded economic progress in the Caucasus. It will not transform into Switzerland or Singapore, or even Estonia, any time soon, i.e. the next few decades. Its human capital is very low and it is already fairly close to the maximum economic potential enabled by it; this may be an achievement on Saakashvili’s part, who massively – one might say recklessly – liberalized the Georgian economy, which caused (or accompanied) a big growth spurt in the mid to late 2000′s. But it is unsustainable, first because Georgia is now far nearer the limits imposed by its low level of human capital; second, because if anything human capital has declined under Saakashvili (e.g. tertiary enrollment has nearly halved as university fees exploded, making post-school study much less affordable for ordinary Georgians).

The Oilmen

The Oilmen (red) are those very lucky countries with lots of oil and small populations. It is almost always oil; the sole exception in my sample is Botswana (diamonds and minerals).

Unlike either the Capitalist Normals or the Red Tigers, there is no correlation between levels of human capital and economic development among the Oil Guzzlers. That is because the oil production per capita effect, which relies on geological luck of the draw, overpowers all others. That said, they could be divided into a few distinct groupings.

(1) The Rich Oilmen. Qatar, Kuwait, and the UAE, and to a lesser extent Saudi Arabia, Bahrain, and Oman, are all fabulously rich thanks almost exclusively to their resource endowments. Their human capital is unimpressive and would not otherwise come anywhere near supporting their oil-enabled luxurious lifestyles. Their attempts at diversification are to be lauded, e.g. finance and tourism in Dubai, or journalism in Qatar, but these efforts are critically reliant on attracting foreign specialists with (oil) money so they are not sustainable.

(2) The Casual Oilmen. Norway and Russia benefit greatly from their oil windfalls; for a start, they largely rule out fiscal worries. Benefiting from uninterrupted capitalist development, Norway has transformed itself into one of the world’s wealthiest nations; even if it didn’t have oil, it would still be as rich as Sweden. Russia will probably never reach Norway’s level because the latter has far more oil per capita; nonetheless, it has a decent manufacturing base (e.g. capable of making stuff like GLONASS and advanced fighters) and a moderately growing economy that has no reason not to converge to Italy by 2020 and perhaps Sweden by 2025 or 2030. Tight supply and growing demand means that it is very unlikely that oil prices will fall and remain low in the foreseeable future, but even on the off chance that they do, Sergey Zhuravlev has calculated that the effects on Russia’s economy are going to be modest in the medium-term and negligible in the long-term.

(3) The Poor Oilmen. Oil is likewise of help for plugging budget holes to Algeria, Kazakhstan, Iran, Venezuela, Mexico, and Azerbaijan. However, unlike the case for the Rich Oilmen, their populations are too numerous to live off in sumptuous comfort off the rents; oil production per capita is too low. This means they can’t fly off into the stratosphere like the Rich Oilmen. They need non-oil based growth to become rich. But unlike the Casual Oilmen they are unlikely to achieve much of that because their human capital levels are very modest. If there is an oil crash, past experience – e.g., Venezuela in the 1980′s and 1990′s – suggests that they will be in for many years of stagnation and fiscal crises.

The Bankster Nations

The Bankster Nations (crosses) tend to be small countries which have managed to become major financial, tax haven, or tourism centers. Their GDP (PPP) per capita tends to be higher than the level suggested by their human capital, but not to anywhere near the same extent as the Rich Oilmen.

Liechtenstein is the biggest outlier in my database; its human capital is respectable, but its GDP (PPP) per capita at $141,000 is literally off the chart. No wonder when their population is a mere 30,000 souls. Luxembourg, Singapore, and Hong Kong have all carved themselves out very profitable niches as financial centers serving neighboring economies that are much bigger but also more regulated. Macao is Asia’s gambling center (and unofficial a conduit for Chinese money laundering). Cyprus serves a similar money laundering and reinvestment function for Russian nouveux riches, to the extent that the Russian government recently bailed out the island. Mauritius is a tax haven, and is also – along with Malta and Trinidad & Tobago – a popular vacation spot.

Switzerland is an entire nation that has devoted itself to financial services (including the more shady, secretive ones) as well as other very high added-value stuff like precision engineering and pharmaceuticals. And it has become extremely rich.

Without exception all these places are doing better or far better than the average Capitalist Normal country. That said, even here there is a definite correlation between human capital and GDP (PPP) per capita. These activities may require less hard work and scruples than is typical for other industries but they still require brains – especially for the high-end finance stuff. Not so surprising then that it is the highest human capital countries like Singapore, Hong Kong, and Switzerland that have become so prominent in it.

Comments

  1. Interesting, according to this graph, there seems to be very weak (if any) correlation between “human capital” and GDP among high-income countries ($25,000+).

  2. Alexander Mercouris says:

    These are two quite exceptional articles Anatoly.

    Do you have any objections if I show them to a number of people I know in Oxford and Cambridge and at London University?

    There has recently been a major reform of university funding in Britain whereby the government no longer directly funds universities, which have to raise all their funding via student fees. The government does offer students loans to pay the fees, but the fear of getting into debt seems to be putting many young people off and there has been this year a sudden sharp fall in university enrolment. This is all bitterly controversial especially as the Liberal Democrats who are part of the governing coalition gave the clearest possible indication before and during the parliamentary election that they opposed student fees. In the light of all of this I think some people I know (including a person who is actually researching a Ph.d on university funding) will be very interested in these articles.

    • This is an agenda being implemented in Canada too. The objective is to reduce the technical literacy of the population. Some elite will get a good education but the majority will be peasants who do as they are told. This is not a wacky notion. The less educated, the less able to think independently. So some moron pundits droning on TV will sound like intellectual giants. Intellectually insulting advertisements will sound like God’s revelation. Et cetera. Basically a reversion back 200 years.

    • Certainly not, Alex. Please feel free to!

      (1) A cautionary caveat: Mere correlation, albeit very strong here (R2=0.8393 for the Capitalist Normals is excellent in social sciences), does not strictly prove causation.

      (2) Unlike my first Human Capital Index, this one only measures the mathematical and scientific aptitude of children of 15-16 years of age (from the PISA and TIMMS tests) close to their school-leaving age; it does NOT cover university enrollment. So while obviously universities help build human capital further, and hence expand economic potential, this point can only be made by implication from the contents of this post.

      The reason I decided not to use tertiary enrollment in this version of the Human Capital Index is for the same reason as I consider statistics on school enrollment or average years in school to be of limited use – the quality of those schools differs greatly across countries, and it’s the same case with universities / higher ed institutions.

      (3) For more evidence on causation, I wrote on this matter in the past (1, 2, 3). The first of these appears to have been cited in a formal publication).

    • Alex,

      Australia has had a scheme since 1989 under which university students must pay a portion of the costs they incur in studying at university. The original scheme was known as HECS but the name was changed in 2007. The Australian Government tinkers with the scheme all the time and may very well move to a version of the British scheme in the future. The Wikipedia article on tertiary education fees in Australia is detailed and you and your friend may like to visit it: http://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia

      I also found an article about the casualisation of the higher education workforce in Australia which might interest you both as well. I’d been aware for a long time of how insecure jobs in universities have become as I have two cousins working in the library at Macquarie University and they have to reapply for their jobs at regular intervals (usually every two years). I wasn’t prepared though to discover that most academics are employed as casuals and have no job security or entitlements such as holiday and sick leave. This is in a country where higher education is one of its top exports! Here is the link to the article: http://www.universityworldnews.com/article.php?story=20101210221002512

      I’d be interested to know if the situation regarding higher education employment in the UK and Canada is similar to Australia’s. It would certainly account in part for the general trend towards more vocationally oriented university education to the point where universities simply become fancy vocational training centres. Even the so-called elite will get a dumbed-down education and be unable to think independently.

  3. Observations
    What shape is the curve? It is not a zero/zero plot. If it were linear then a score of zero for human capital would imply negative economic output, yet the San survive in the Kalahari desert. The curve is therefore not linear. There is a power law at work. Thus incremental improvement of educational attainment at 15 has a very high payoff, perhaps higher at the higher levels of income. So what happens if the special situations that you have already identified are removed, the San are given an educational score of zero and an assumed income and an attempt is made to fit a curve?

    In this context, the university educated are not the people who matter most. It is the skills of the middle level. The mechanics, electricians, hairdressers, nurses and van drivers. These people need to be available in numbers at every locality. Aerospace engineers can relocate to a new place of work. India is a good example of overproduction of a graduate elite without the backup of trade skills. Nigeria is another one. The best place for incremental investment is not the University sector it is at technical college level and the supply feed into that level. This is also the group most vulnerable to otherwise falling out of skill development. It is also a group that is not vocal about their “entitlements”. No protests from the pampered elite about being offered low interest, payback when you are prosperous graduate taxes disguised as loans for them. Germany, France and Sweden deal well with Trade level skills. I don’t immediately know of others. Perhaps Israel because of their military requirements?

    The UK is a bankster with natural resources both of which have eroded away manufacturing (by virtue of excessive exchange rates). Neither Banksterism nor oil pumping offer much incentive for the lower middle level of attainment to acquire serious skills. The health of manufacturing and construction in an economy might be a positive feedback in the demand to acquire skills. Japan is allegedly going backwards in this respect.

    • “In this context, the university educated are not the people who matter most. It is the skills of the middle level. The mechanics, electricians, hairdressers, nurses and van drivers.”

      I believe this is called “smart fraction theory” or something like that – the idea that for the intellectual elite to flourish, you need a highly competent group lower down to provide them adequate support. Somebody (it might have been Lee Kuan Yew, but I don’t remember exactly) said that the secret to Japan’s success was that they had the best lower 50% of people in the world.

    • Philip,

      I suggest that in the future, university-educated people will matter even less due to the increasing trend for firms to outsource white-collar work like accounting, legal work and architectural drafting to Third World countries. At the law firm where I work as a corporate record officer, clients are already pressuring the legal practice to outsource basic legal work to India.

      I heard IBM is trialling a project in Germany in which IT workers compete for work contracts on the cloud. If the project succeeds, IBM may extend it worldwide. Workers apply to join a cloud-based platform to compete for international work contracts which last for the duration of the work projects assigned to them. To join the cloud, workers must provide quality assurance certification as specified by IBM and put up a Facebook-style profile that’s to be made available to other firms that may access the cloud.

      To see full details of the IBM trial project, here is the link: http://www.wsws.org/articles/2012/feb2012/ibmc-f11.shtml

      Another trend in online white-collar work outsourcing might be the use of competitions rather than contracts. I found this article on Freelancer.com very interesting indeed:
      http://technologyspectator.com.au/emerging-tech/start-ups/exploits-freelancercom

  4. I see. You fitted a curve last time. Inverse square law.

  5. Very interesting analysis AK, but on Trinidad and Tobago I think you have placed them in the wrong category. Trinidad and Tobago produces oil and gas and those two resources account for something like 40% of T&T’s GDP and 80% of exports (but only about 5% of the labour force). Although it is a major regional financial centre (I know, I’m West Indian and encounter Trini financial institutions and other companies all the time), financial services do not account for a major part of its GDP. In fact financial services only account for 13% of its GDP. They have banks (Republic Bank and Royal Bank of Trinidad & Tobago which was an offshoot of the Royal Bank of Canada and recently bought out by RBC and thus returning to the RBC fold) and insurance services (like CLICO which ran into trouble recently), but the largest banks in the region are all Canadian (RBC, Scotiabank and CIBC’s FirstCaribbean International Bank). In the region, Barbados is more of a financial centre than Trinidad (and of course tax havens like the Cayman Islands beat the rest hands down in terms of volume and contribution of financial services to GDP). With Barbados services (tourism, financial, etc) account for over 80% of GDP and financial services in particular seem to account for about 40% of GDP (or 27% of PPP GDP). Certainly in terms of insurance the Barbados based Sagicor seems to have a wider reach than the Trinidadian based CLICO. I’m not sure if T&T would be classified as a casual or poor oilman (I would lean towards the casual classification or maybe even the rich oilman classification with somewhat successful diversification in the field of finance and tourism), but in terms of popularity as a vacation spot…..eeehhh…not so much. There are hotels there but not nearly as many as you would find in say the Bahamas, Jamaica or Barbados (all of which are far more popular vacation spots for tourists as Trinidad’s peak tourist season is during Carnival which just ended – it’s quite the experience by the way). Tourist arrivals in Trinidad have never exceeded 470,000 in any given year that I know of (and cruise ship tourism is negligible) whereas for Malta and Mauritius tourist arrivals of 800,000 to 1 million are fairly common (and these are countries with similar or smaller populations than Trinidad so they would have a higher tourist per capita ratio). Barbados alone can get over 500,000 tourists regularly and at least as much again in cruise arrivals while both Jamaica and the Bahamas will see 1 million visitors each as tourist and at least another million again as cruise ship passengers.

  6. AK,

    On reading the Argentina outlier update and the Steve Sailer article, I was reminded of a story I had heard about Saddam Hussein when he became Education Minister in Iraq in the late 1960s. His major act in that capacity was to make education compulsory for all school-age Iraqis up to and including age 15 years, and any Iraqi kid in the relevant age group who was not at school was threatened with jail-time. Overnight it seems, school attendance levels among young people sky-rocketed and became the basis of Iraq’s impressive educational levels and a foundation for its middle class in the 1970s.

    I haven’t been able to verify this story but if it’s true, there’s some wry black humour there, in that the US and the UK at least seem to be unconsciously working towards the Saddam Hussein solution of solving school truancy without having the law on their books: cut enough young people out of school, college or university and then throw them into jail anyway when they play up or riot.

  7. AK, Brilliant. Love your stuff. As an extension of your analysis, may I also suggest Google Code Jam test results by country and pass/fail for each round. Google Code Jam is an extremely good test for Human Capital. I suspect it will track your GDP per capita very well too.

    • JFreegman says:

      Programming competition results rarely correlate closely with GDP per capita (eg. http://aichallenge.org/rankings.php).

      Generally people with above-average intelligence will be way over-represented in programming competitions. With things like PISA and TIMMS, you have an even distribution of above and below average students, as the only prerequisite for being included in the average is attending school in the first place. Programming competitions just tell us which countries have the best programmers.

  8. Thanks. Great stuff.

    A few other things to keep in mind.

    - There can be some random element in the results depending upon how motivated students in a particular country are to try hard on these tests. For example, in the 2009 PISA report, there’s a note that the teachers were going out on strike when the PISA was being given, and the OECD people have a suspicion that Austria’s mediocre score was related to the teachers either not motivating students on the test, or actively disparaging the test as part of the work stoppage. I wonder if Finland’s excellent PISA scores aren’t related to Finns working hard on the test. (Still, a high score has predictive value: that Finns must be relatively either A) smart/educated, B) hard-working, or C) smart/educated and hard-working are all good things to be.)

    - Another random element is that we don’t know how much cheating goes on. The 2009 reports says that cheating was discovered in one of the Central Asian countries (I forget which — but they scored low anyway). Somebody else might be doing a better job of cheating and hasn’t been caught.

  9. Excellent. I’d love to see more study of the “bankster nations” in particular. A wonderful phrase. Laurent Pinsolle (http://www.gaullistelibre.com/) had come with “fiscal parasites,” another evocative term.

  10. Very good article. Other than the truancy issue there’s a discrepancy in educational levels between social and schooling classes.
    Germany has a basic 3 tier system with very good grammar schools for the elite that go to university, a middle class middle school that produces craftsmen and low level “bachelor” scientists, while the lowest level school for almost all left-overs, the “Hauptschule”, trumps in truancy, inefficiency and lack of knowledge, both among teachers and students and is ripe with corruption. That said, these guys having virtually no useful education make a major contribution in statistics because they have a hard time earning a living in Germany, similar to the US, for a very well off upper-class group there’s an ethnically diverse low class incapable of doing much useful things in such a high wage country.
    Solving this loss of human contribution capacity as a factor for loss of skill or lack of acquiring it by new generations was part of the agenda 2010 by the former German chancellor Gerhard Schröder that lowered German wages for a long time and seems to have helped stave off the high unemployment. Germans aren’t much better then their Polish and Czech counterparts, but demand a lot more pay.

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