Improving the education and health of people not only leads to a better quality of life but also has positive impacts on economic development. Consequently, the provision of education and health is a key element for policies that promote broad-based economic growth. Provision of education and health services leads to improved productivity and earnings of workers. Education also helps to mitigate many of the problems faced by developing countries. Similarly, the linkages of health to poverty eradication and long-term economic growth are strong. Education and health are important tools to empower poor people and overcome exclusion based on gender, location and other correlates of poverty (United Nations Economic and Social Commission for Asia and the Pacific, 2003). The challenge, of course, is to ensure that public expenditure is productive and not unproductive.
At no time has a total, coordinated and fully adequate programme been conceived. As a consequence, fragmentary and spasmodic reforms have failed to reach down to the profoundest needs of the poor. Martin Luther King (King, 1967)
For example, a study conducted by Maitra and Mukhopadhyay (2012) in Asian Pacific countries found that the impact of education and health-care spending on gross domestic product (GDP) was not uniform. In the majority of countries education spending has been found to exert a positive impact on GDP. A similar result was found for health-care spending.
However, in some countries, public expenditure on education and healthcare was found to have a negative impact on GDP. The study also found that the impact of education and health-sector spending on GDP growth is instantaneous and that the length of the time lag varies across countries depending on the state of the socioeconomic and administrative structure in a country. The authors also note the importance of good governance, efficient institutions and skilled manpower for positive outcomes. The European Parliament commissioned research (Eichhorst et al., 2010) that reinforced the importance of social protection, both as a stabilization measure during times of recession, helping to maintain overall demand for goods and services produced in the economy and protecting employment, and also as an important contributor to the reduction of social and economic inequalities.
Two indicators were selected by Inter-agency Expert Group on Sustainable Development Goal Indicators (IAEG-SDG) to measure progress towards this target, these being, first,
The percentage of resources allocated by the government directly to poverty reduction measures and second,
Spending on essential services (education, health and social protection) as a percentage of total government spending. Unfortunately, at the time of writing, data to populate these indicators are unavailable (United Nations Statistics Division, 2016). However, some data are available from the World Bank World Development Indicators database. Data on expenditure on education as a percentage of total government expenditure and as a percentage of GDP are available, but data on expenditure on health are only available as a percentage of GDP. No data on expenditure on social protection are available. For this reason, government spending on health and education as a percentage of GDP is used here.
While the data on health expenditure are quite complete, the same cannot be said for education expenditure. Only a limited set of countries have data for the year 2000 and at the same time data for one of the three years 2012, 2013 or 2014. In 20141.6, for the selected group of countries presented, public expenditure on education ranged between 1 per cent (Monaco) and 8 per cent (Sweden) of GDP, whereas spending on health ranged between 1 per cent (Azerbaijan, Bangladesh, Cameroon, India, Lao People’s Democratic Republic, Madagascar and Pakistan) and 10 per cent (Sweden) of GDP. Figure 1.5 shows there was a wide range of public spending on health and education as a percentage of GDP across countries in all regions.
While, between 2000 and 2014, public spending on health and education as a percentage of GDP increased in most countries for which comparable data are available (but most particularly in Burundi, Ecuador, Gambia, Malawi, Netherlands, Niger and Republic of Moldova), it also fell in several countries, most notably Belarus, Bhutan, Fiji, Guyana, Madagascar and Sierra Leone.
Average public expenditure on education in the countries of the Organization for Economic Cooperation and Development (OECD) in 2012 as a percentage of GDP was 5.3 per cent (OECD, 2015a). The comparable percentage for health expenditure was 8.9 per cent in 2013 (OECD, 2015b). As noted above, there are no data available on global social-protection spending. However, these data are available for OECD countries. In 2014, average social spendingThe OECD define social expenditure as comprising cash benefits, direct in-kind provision of goods and services, and tax breaks with social purposes. Benefits may be targeted at low-income households, the elderly, disabled, sick, unemployed or young persons.
more for OECD countries as a percentage of GDP was 21.6 per cent (OECD, 2016).