The recent concern on reviving relationship between education and labor markets is deeply rooted in the recent interest of human capital theory. One of the most typical treatments of such relationship is the link between the level of education and the level of earnings in labor markets. Under the human capital theory, the earnings are determined by the individual?s stock of human capital. This capital may be increased by investment in education, health, or training. The conference on Enhancing Links Between Education and Labor Markets in Arab Countries is related to the first type of investment.

Since education plays a substantial role in accumulating human capital, and consequently economic growth, the literature on this role is immense. Unlike investment in physical capital, investment in human capital is affected not only by increase in stock, but by transfer of the existing stock from one generation to another (Salehi, Isfahani, 2001).

One of the well-known contributions in this regard, is the work of G. Psacharopoulous, where 29 developing countries were included. The study revealed that the contribution of education in economic growth ranges from 1% in Mexico to 23% in Ghana in the early 1980s (Psacharopoulous, 1984). On the contrary, L. Pritchett reported a negative relationship between education and economic growth based on data of 91 countries. He attributed this result to (a) schools do not help in accumulation of human capital; (b) marginal returns on education tend to decline remarkably when the demand on educated labor is constant; and (c) institutional environment does not allocate educated labor to growth-enhancing activities (Pritchett, 1999).
On the other hand, where cross sectional analysis for 58 countries showed a negative relationship between education and economic growth in the African region, Middle East and North Africa, insignificant relationship was found in the case of Latin America and South Asia, and a positive and significant relationship in East Asia region (Lawrence, Jamison, and Louat, 1991).

Speaking of Arab countries, as part of Middle East and North Africa region, Pritchett pointed out that despite the positive effect of physical capital on economic growth, human capital (education) exercises a negative effect. The latter effect may not be attributed to the labor force, which is the highest among regions. Pritchett further stressed the fact that non-oil producing ACs which witness a higher educational growth, observe as well, a lower economic rate of growth. Many explanations are provided in this respect, such as: (a) educational quality deterioration; and (b) labor market distortions due to government policies in terms of securing employment. The findings of N. Fergany support, as well, the above-mentioned findings. In his attempts to estimate the production function in Egypt (1960-1995), using physical capital, labor force, average schooling years (as a proxy for human capital), and number of students in a class room (as a proxy for education), he found no significant relationships between economic growth and human capital (cited by Ali, 2000).

The modest role played by education to enhance economic growth through higher productivity in labor market may be explained by several factors, among which are: Firstly, the weak contribution of household in accumulating new knowledge. The findings of Salehi-Isfahani in the case of Iran, which might as well apply to the Arab countries, would suggest that too much emphasis is placed on government?s role in education, and little on the parents? education. Special attention is therefore needed to achieve a close cooperation between schools and parents to enhance the role of education (Salehi-Isfahani, 2001).

The second factor relates to the quality of education. In this respect, a number of indicators are usually used to evaluate this quality. Barro and Lee (1996) tested various indicators on quality of school inputs: pupil/teacher ratio, public spending per student, estimated real salaries of teachers, and length of the school year (days per year and hours per day). These indicators were applied on 105 countries representing eight regions, including Middle East and North Africa, for the period 1960-1990. The results showed, at primary school level, a notable decline in pupil/teacher ratio in OECD region, from 30 to 16, compared to a slight decline in the case of Middle East and North Africa region, from 21 to 19. As far as spending per student indicator at primary level school is concerned, the ratio increased from 0.13 to 0.20 in OECD, and decreased from 0.14 to 0.10 in developing countries region (Barrow and Lee, 1996).

A study on the quality of education in Egypt revealed the underlying causes of the dropping out of primary school-aged children. One of his central findings was that the quality of children?s prospective school is strongly affecting schooling decisions. Other findings included: (a) higher skilled workers tend to be the ones who stay in school, whereas lower skilled workers seem to be those who leave school earlier; (b) a student who attended a lower quality school is more likely to drop out; (c) the rate of return to education is overestimated when quality is not included. If this is the case, expansion in schooling might never result in the expected gains forecast by standard estimates of rate of returns; and (d) since production function approach links the measurable educational inputs and outputs, then it should not be considered as a right approach to evaluate educational quality. Quality indicators are: teachers? training, curriculum quality and its appropriateness to labor market requirements, parental education, student ability, and public policy influences (Hanushek and Lavy, 1994).

Thirdly, the insignificant contribution of education in economic growth may be explained as well, by variation between social and private returns to education. Rent seeking activities may be seen as a profitable one from an individual?s point of view, but it may not be seen so from social perspective, since it reduces the rate of growth. K. Murphy and others attempted to explain the declining trend of productivity, with reference to human capital in the American economy. One of the main findings was that, if educated, most talented people enjoy a high return in rent seeking activities with the entrepreneurial capabilities to flow towards these activities. This will be at the expense of productive activities. Other finding stated that countries with higher proportion of engineers (where rent-seeking activities are less) grow faster, whereas countries with higher proportion of lawyers (where rent-seeking activities are obvious), grow slowly (Murphy, Shleifer, and Vishny, 1991).

Fourth, the growing employment of child labor is reducing, as well, the effect of education on labor market, and hence, economic growth. The Egyptian experience as presented in the Labor Force Sample Survey of Egypt for the year 1988 revealed that 1.3 million children (between the age of 6-14) participated in economic activity, which account for 7.6% of total labor force. The child labor was concentrated in the agricultural sector, of which only 44% were waged. Wahba (1999) came out with the following conclusions: (a) Child labor increases with age, whereas schooling decreases with age; (b) Participation of girls in child labor and attending schools are less compared to those of boys; (c) Child labor is affected by the level of parental education; and, (d) Rural children are more vulnerable for child labor than urban children.

To assess the contribution of education in economic growth, the links between education and labor markets in the ACs and related topics, the conference proceedings covered a number of issues: (a) the role of household in accumulating human capital; (b) returns on education; (c) the relationship between education and economic growth; (d) quality of education, educational reform and labor market; (e) labor market characteristics of the Gulf Cooperation Council (GCC); (f) strategic perspectives of the relationship between education and labor markets, education and unemployment; (g) quality of higher education; (h) female labor; and (i) child labor.