| Hello, *|NOME|* Among the many factors that affect and determine an individual's social mobility, education is certainly the main one. There seems to be no doubt that education increases the productive capacity of individuals and firms and determines both the remuneration of each individual and the increase in productivity of a society. But this understanding was not born that way. It took almost four centuries from the first schools before the concept that education fulfills this dual role was established: it affects the lives and income of individuals and impacts society’s productivity. Adam Smith, in the second half of the eighteenth century, advocated that professional training was something akin to an investment in machinery and equipment. One would have to sacrifice the consumption of other goods in order to have it, but the result was a remarkable increase in productivity. Like Smith, classical economists understood education as technical education and vocational training, but they did not see basic education as an important factor in increasing productivity. Schultz, rescuing the ideas proposed by Marshall, though forgotten for a few decades, clearly states that education is a factor of production and, as with physical capital, the greater the investment, the greater the productivity of individuals – and, consequently, of workers. It is he who coins the term "human capital" that has come to be used throughout economic literature. It is true that education alone is not capable of producing economic growth or generating productivity gains, but what is observed around the world is that, on average, higher levels of schooling correspond to higher economic growth and greater productivity gains. Brazil entered late in schooling its population. It was only in the last decade of the last century that we were able to universalize primary education. High school is still a huge bottleneck for a good part of our youth. Despite being universalized, elementary and junior high school education has an very poor standard of quality. This can be seen in the results of Pisa, the theme of Edition 33 of "IMDS Letter" dated 12/12/2023 (See here). It is a fact that historically we have improved: at the beginning of the twentieth century only 10% of young people had any schooling. A century later, practically all young people up to the age of 18 have completed elementary or junior high school. It is a huge step forward, but we are off to a late start, and we are way behind our international competitors. IMDS prepared the study "Main challenges for Youth in Brazil and impacts on income and productivity", the object of Edition 29 of this "Letter" dated 10/17/2023 (See here). There we showed that we are far behind Chile and Korea. We also showed that if our young people had Chilean-level schooling, we could have an income growth of up to 25%, for the 25 to 29 age group. If we were to consider Korean schooling, this growth would be up to 55%. In other words, we are much too late. But the central point is why, after all, have we not been able to provide quality education for our children and young people, despite the fact that we have universalized primary education for more than 20 years and in that same period, we have practically doubled the real expenditure per student, and we have increased total spending on basic education by more than 70% in terms of GDP?
We know that education has a complex and multifactorial production function. The engagement of principals, teachers, assistants, parents, and students is required. It is necessary to provide adequate teaching materials, healthy eating and a creative and challenging environment for our children and young people. It is also necessary to establish mechanisms that encourage managers to implement good educational practices and reward these managers based on their performance. In the latter case, the legal design of the ICMS distribution to municipalities may contemplates the results of children in national exams. It may do it a) by increasing the share of ICMS to those municipalities in which the quality is higher and b) by awarding with a higher share, municipalities that, despite having a weak performance, significantly improved their results. In the last years, state legislations have being changed to add such features in the ICMS sharing mechanism, as mandated by a federal law. There are examples of successful educational policies in the country, which could easily be followed by other states of the federation, as shown by the State of Ceará, a state that successfully implemented the literacy program at the right age (PAIC) with very satisfactory results. Quality improvement has also been implemented in a perennial way, enabling its children to perform above the national average. The federal government could guarantee financial resources for technical assistance for those municipalities that wanted to implement good practice programs that have already been evaluated and recognized. Similarly, it could open a funding program for the evaluation of experiments associated with the recovery of school delay and the prevention of abandonment and dropout, for example. This is a huge challenge, but it is certainly the priority agenda for this decade. We can no longer afford to lag behind in the education of our children and young people. See you at the next “Letter from IMDS”! Paulo Tafner CEO | 
