Investing capital in people

Those of you reading this book all have one marketable asset in common, a knowledge of the English language. If you are earning a living this asset probably adds at least $300 a year to your income.

Most of you did not acquire this source of income in the ordinary process of growing up. It was the result of an investment by your father and probably a larger investment by the Government. You probably have other assets of this kind too, built up by an investment in your hands or brain.

Of course this knowledge is more than an asset enabling you to earn more money. But I am going to concentrate on education and training as an asset, which enables people to do more valuable work. Let us consider, say, a doctor as an investment. A doctor is worth more than a new born baby, though neither of them are normally sold. We can work out the difference that the doctor's skill makes to his earning power in comparison with the baby, and this difference depends on an investment in the past; perhaps $15,000 by the doctor's father and $50,000 by the Government. The additional income made possible by this investment is enough to repay it in, say, five years; perhaps less. But it all goes back to the doctor himself.

Now, why is the Government willing to spend all this on helping one man to earn more money?

If it were not for the Government, this valuable training would be available only to the rich. And it would be useful only to those who were both rich and reasonably clever. Since such people are uncommon, the supply of doctors' services would be more expensive than at present. Moreover, fathers are not always wise about their son's abilities and rich men's sons are not always very industrious. Most people would get poor medical treatment or none; and the total earnings of doctors would be lower than they are now, even though a few did very well.

Since the Government is interested in having prosperous citizens who can (among other things) pay high taxes, it pays the Government to invest in the educational market. Such investments increase the national income and are among the chief things that distinguish a modern, developed country from an undeveloped one. It is not necessary, and is usually unwise, for the Government to try to get its money back directly from those whom it educates by making them work for reduced pay or otherwise refund part of the cost of educating them.

Malaya, when we consider its development in other respects, is exceptionally short of education, and so education is a very profitable investment here. You will see from Chapter 7 and Technical Report 9 of the International Bank Mission Report that Malaya is neither best nor worst in the region in this respect. But you must remember that Malaya is among the richest countries in the region in other respects; for example, in income per head, and in transport, housing, electricity supplies and various other signs of development.

In education, however, Malaya suffers from a number of severe handicaps. First, its whole population structure has changed very remarkably because many Chinese women came as refugees during the late thirties and have settled down here. In 1947, Malaya's employed population was hardly any greater than in 1931, but its total population was about a third greater because of the women who had come in and the children they had produced. Naturally the education system was not adapted to the change.

Then, before the War Malaya usually imported its trained workers. This was very sound policy in pre-war conditions, and it meant that Malaya benefited from the technical skills of China and the educational system of India and Ceylon, just as America in the nineteenth century benefited greatly from the skilled and educated labour it attracted from Europe. After the War this source dried up, partly because the increasing numbers of young people here began to resent importation of skilled labour from abroad. This imposes another strain on the educational system.

Why then are we opposing the immigration of skilled workers, trained for us at someone else's expense? The only creditable reason is the fear that these immigrants may have the political power to hamper the development of local education and training.

Education has certainly been hindered here by the possibility of importing labour, and it is high time we got more education and training of our own. I will not deny that immigrants whether European or Chinese may show coolness toward the training up of potential rivals. That is human nature and Malayans are right to be on guard against it.

I hope you will be equally on guard against all vested interests, even Malayan ones, which obstruct local training. There are older men trained for subordinate positions, who obstruct the exercise of responsibility by better trained younger men. There are trained men who block new training indirectly by preventing the engagement of expatriate trainers when no local men are available. As a citizen your standard of reference is more training. See that you apply it vigorously and fairly to all.

But leaving aside frivolous opposition based on vested interest, I should like to deal with three more sincere and creditable reasons for opposing individual cases of local training. They are: a desire to adapt supply to demand and see that trained people are not unemployed; a desire to maintain very high standards of work; and unwillingness to let individuals profit too much from the country's needs.

None of these reasons really justify holding up local training. If you are too afraid of having skilled men unemployed you will never remedy the shortage of skill. Present salaries of skilled men are the result of scarcity. They must inevitably fall it we overcome the scarcity, and they cannot fall without some unemployment.

Standards based on other countries may lead to waste. If your housing standards are too high you get corrupt officials, subsidized flats for the black market, and the bulk of the population in cubicles. Similarly if you have excessively high standards for training carpenters or doctors the wealthy can enjoy perfect home-made radiograms and the latest and most fashionable diagnoses, while the bulk of the population live in shacks and die of diseases that a skilled dresser could diagnose.

Finally, if a thousand skilled men are needed and there are only five hundred with the basic qualifications for training, it is useless to expect them to make sacrifices to become trained, when they know their market value and the country's need. If their attitude is mercenary, expatriates who are willing to accept their own market price amid the poverty of Asia are in no position to throw stones. And it is training, and more training, that will break the monopoly and make training itself cheaper.

Trained people make untrained people more productive and so raise the standard of living of the whole population. But the more trained people there are the less scarce they are, and so the less advantage they can get over their fellows. Any of us who are trained have an interest in increasing the amount of training in other occupations, because we shall share in the general prosperity. But in our own occupation, which is the one we know best, we may have an interest in suppressing training. This suppression is often done indirectly, and from respectable motives. But both for the prosperity of the country and for greater social equality we must be on guard against it.

Training is a long, costly, and difficult job. It is a long job because children take a long time to grow up, and even before they can begin to be taught, teachers have to be trained who must have some previous standard of education. It is a costly job, because educated people are scarce and because the population of Malaya is increasing so fast that nearly one person in five is a child of primary school age. It is a difficult job for many reasons, one of which is that Malaya is a small country, of many races and languages.

Let me consider each of these three aspects in turn a little more fully.

First, it is a long job.

To introduce a new skill it is necessary to acquire trainers who must normally have both training and experience. This may be done by sending local people abroad for training; but experienced men cannot be produced quickly. Ideally before they train others they need a basic education, overseas training and experience, and local experience. Also they need intelligence and imagination to apply overseas experience to local conditions and not merely imitate.

If overseas people are imported instead, the process may be speeded up. But if they are really distinguished they are likely to be so fantastically expensive that contact with the local people may be lost; while if they are the usual average or sub-average specialists they are likely to impose irrelevant overseas features that have to be slowly unlearnt by local experience.

Even without the political complications which hold up training, it cannot but be a long job.

It is common for investments to take some time to make, but in education, this time is even longer than in most other investments.

It is a costly job first because of the number of children. About one worker in every seventy-five would be needed in Malaya as a primary teacher, if every child were to receive basic primary education. In England the corresponding figure would be about one in two hundred and thirty, because there are fewer children and more workers per thousand people.

Then, just because education is scarce, educated people are expensive. To pay primary teachers only twice the average earning of the whole employed population would need. more than 22% of our national income (over a hundred million dollars) for salaries alone without anything for school buildings or inspectors, let alone secondary education, technical training, adult education, Universities and so on. But we could not give primary education to all Malaya's children, with the present shortage of educated people, without paying primary teachers a good deal more than double the average income of the employed population. At no manageable cost can we get enough primary teachers for all the children, until the number of educated people is increased.

Secondary and technical teachers are bound to be much dearer because they have first to study in a foreign language. Historically the language used here is a result of Colonial rule. But for any small and under-developed country, the problem of education through foreign languages must be faced.

In universities in almost all countries, whatever the language used in lectures, the library work, if it is to reach real university standards, demands a good reading knowledge of English. This is because of the high proportion of all learned journals produced in English, and has nothing to do with politics; though of course politics may affect the medium of instruction in lectures, the proportion of foreign teachers (and students) and the countries from which they come.

Below the university level the question whether it is cheaper to translate books into local languages or teach students foreign languages depends, quite considerably, on the size of the country and its level of education. The more potential readers there are, the cheaper it is to translate books.

At any level below the university, education is technically possible in almost any language. But, for some time, the teachers at least will need English. If the children are not to be educated in English a large range of new textbooks will be needed, and even this will be a heavy drain on the country's educated manpower; and the more languages there are, the heavier this will be.

Since the War, trade school work and apprenticeship through the services and government departments in Malaya have been conducted in English. This has undoubtedly made it more difficult to train enough technicians. On the other hand, learning on the job, in building and several other trades has been mainly in Chinese, while junior agricultural training has been given in Malay. As the level of skill rises, all secondary technical education might have to be given in English as the only practicable source of teachers and textbooks for all races. But if this happened it would again make the educational system a great deal more costly. The recent Education Report indicates that a serious effort is to be made to do this work in Malay without sacrificing flexibility. It is encouraging that this seems to have been accepted by all races.

Because English education is expensive, if only a third of the children went on from primary to secondary school we should almost certainly need another 2% of our national income for salaries of secondary teachers alone. Of course, salaries are by no means the whole cost of education, and primary and secondary education are only the beginning for a modern state.

So the cost of education is bound to be a severe headache for our politicians during the next decade. Taking the figures from the International Bank Mission Report, we can expect costs for education to exceed two hundred and twenty million dollars for the Federation and Singapore together before 1960. This is for a programme which still leaves half our children without education and barely improves existing standards. The Report suggests that some of the financing should be done by local authorities, but points out that no transfer of the financing of education to local authorities would be at all fair, unless it provided for special help from central funds for backward rural areas. One of the most striking features of the Malayan economy is the great difference in economic standards between urban and rural areas, and this difference would never be reduced by education if all local areas had to pay for their own education.

Finally, the expansion of education in Malaya is a difficult job. It is specially difficult to raise standards in rural areas to something nearer those of urban areas.

The shortage of all but the most elementary education in rural areas makes it difficult to find teachers who would be acceptable there, and the conditions of work make it difficult to interest suitable teachers from the towns in going to these areas. This is especially true of post-primary education in Malay areas, because of the heavy demand for educated Malays; but it is by no means only a racial problem. Whatever happens, the problems of education and training in Malaya will not be solved easily, and its development is likely to be held back by shortage of trained manpower. Developing human resources is a good investment but it can only be done by the Government, which can only do it if it receives proper public support. This implies not merely willingness to pay the cost, but also willingness to study the difficulties so that they will not be aggravated by ignorant public opinion.

1. This article was written by Thomas Henry Silcock (b. 1910, d. 1983), the son of a Quaker missionary, Harry Thomas Silcock (b. 1882, d. 1969).
   
   
   
   After graduated from Oxford, Silcock went to Singapore and became a professor of economics at Raffles College. During the war, he was taken by the Japanese to work on the Burma-Siam railway. After the war, he was involved in establishing the University of Malaya.
   
   The lecture forms a part of the lectures broadcast over Radio Malaya between 13 April 1956 to 8 July 1956. It is included as Chapter 11 in Problems of the Malayan Economy.
   
   
   
   
2. The tuition fee for enrolling your children to a typical MBBS program in a private university in Malaysia is approximately RM \(\frac{1}{2}\) million (e.g. 0.5975 million in IMU and 0.5 million in UM or 0.075 million if you are privileged enough to be enrolled under the UPU channel). For the Bachelor of Dental Surgery, the fee is slightly higher (RM 0.674 million), so even for an average dentist working in Malaysia today, Silcock's arithmetics is still approximately true, assuming that the earning power of a newly graduated dentist is RM \(\frac{1}{10}\) million per annum.
   
   
3. Chapter 7 is titled The currency and banking system of Malaya, written by P. W. Sherwood.