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Promoting growth for all people

High levels of inequality and social exclusion are significant problems in Chile and act as a drag on development (see Chapter 1). Three distinct categories of people are affected by a lack of income opportunity: urban poor, rural poor and indigenous people. The underlying causes of their disadvantage differ significantly and policies to improve conditions will necessarily differ due to these differences in circumstance. The problems of the urban poor are largely outside the scope of this report, except for the reality that a major cause of rural to urban migration is an inadequate standard of living. Thus one of the best ways to reduce the incidence of urban poverty is to reduce the incidence of rural poverty. Similarly, while there are large numbers of indigenous people in urban areas, the focus here is on efforts to provide better opportunities in native communities that are located in rural Chile.

Addressing rural poverty through education

Using the revised definition of rural areas (see Chapter 1), poverty stands at about 9.3% of the rural population below the national poverty rate, and this number has been declining over time. By comparison, the urban poverty rate is about 14.4%. To a great extent, rural poverty reflects either a low level of income from being engaged in a marginal farming or fishing enterprise or being unable to find work that pays a high enough wage to escape poverty. Thus ultimately the main solution to rural poverty is rural economic development. While transfer payments can provide short-term relief, they do nothing to address the fundamental causes of poverty.

But improving education levels is crucial to achieving economic development in rural areas. In many parts of rural Chile, the current school system fails to adequately prepare students for jobs. This is not a matter of not providing technical skills, it is more a matter of not providing basic levels of literacy and numeracy that are prerequisites to technical training. In 2003, a joint FAO and UNESCO study on the connection between rural development and education found that low enrolment rates, weak parental and community commitment to education, poorly trained teachers and inadequate facilities lead to substandard educational outcomes. In turn, low levels of educational achievement prevent increases in productivity in traditional rural industries, limit the introduction of new industries in rural areas, and result in less capacity for local self-government.

Education is inherently more costly in rural areas, where students are dispersed across a large territory, the road network is sparse, funds for building schools and paying staff are scarce, and parents have limited budgets to afford the household expenses associated with sending children to school. Yet the economic trends in rural areas place an increasing premium on an educated workforce. The natural resource industries are characterised by an ongoing substitution of capital for labour in order to increase productivity. While the number of workers falls, the skill requirements for remaining workers grow. Since it is difficult to recruit skilled urban workers to rural regions, there is a crucial need to improve rural education.

The OECD has found that improving workers’ skills, especially the skills of lower income workers, is a crucial factor in enhancing economic growth in regions. This is a particularly crucial finding of rural areas because they have a higher incidence of lower skilled workers than urban areas because of the urban concentration of high-skilled professionals.

In Chile, responsibility for education has largely been devolved to local government and there have been efforts to stimulate innovation in education by introducing vouchers and charter schools. The benefits from these changes have not been evident in rural areas. Block grants for education based on student numbers fail to recognise the much higher costs for operating numerous small rural schools or the costs of travel for moving children to schools. The idea of school choice may be an effective stimulus to improvement in an urban setting where there are multiple schools but it fails in a rural setting where there is no possibility of competition. This suggests that a different approach for rural education is needed that focuses on improving achievement, but which provides appropriate resources for a rural school system.

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