GEORGIA Human Capital Review This project is funded by the European Union © 2022 International Bank for This work is a product of the staff of The World Bank with external Reconstruction and Development contributions. The findings, interpretations, and conclusions / The World Bank expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments 1818 H Street NW, they represent. Washington DC 20433 Telephone: 202-473-1000 This publication was produced with the financial support of the Internet: www.worldbank.org European Union. Its contents are the sole responsibility of World Bank staff and do not necessarily reflect the views of the European Union. Rights and Permissions The material in this work is subject The World Bank does not guarantee the accuracy of the data to copyright. Because The World included in this work. The boundaries, colors, denominations, and Bank encourages dissemination of other information shown on any map in this work do not imply its knowledge, this work may be any judgment on the part of The World Bank concerning the legal reproduced, in whole or in part, for status of any territory or the endorsement or acceptance of such noncommercial purposes as long boundaries. as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. ii GEORGIA Human Capital Review Georgia Human Capital Review Contents: ACKNOWLEDGMENTS v LIST OF ACRONYMS vi EXECUTIVE SUMMARY 1 Human capital challenges remain significant 2 Maintaining the reform momentum to deliver better and more equitable services 3 1. Human capital: the key to long term prosperity 7 The importance of human capital for sustainable and inclusive development 10 2. Georgia’s human capital: the need for a quality and equity boost 13 3. Building human capital: overview of the education, health care, and social protection systems 19 The importance of service delivery for human capital 19 Overview of the education sector 21 Overview of the health care sector 23 Overview of the social protection sector 26 4. Maintaining the reform momentum to deliver better and more equitable services 29 Improving the quality and effectiveness of delivery 29 Putting greater focus on equitable delivery and the needs of vulnerable 35 population groups Increasing spending levels and making spending more efficient 38 Boosting cross-sectoral collaboration 42 5. Learning from the COVID-19 response: improving the effectiveness and resilience of human development systems 43 6. Conclusions and recommendations 47 Sector-specific reform areas 49 REFERENCES 53 iii GEORGIA Human Capital Review List of Figures: Figure 1: Georgia experienced sustained growth and dramatic 7 poverty reduction Figure 2: A high proportion of youth are not in employment, 8 education or training (NEET) Figure 3: Aging and migration will require boosting workers’ 8 productivity Figure 4: Inequalities are not only observed across people, but 9 also across regions Figure 5: Human capital is essential for growth 10 Figure 6: Early investments in human capital deliver the highest 11 returns Figure 7: Georgia’s Human Capital Index remains below the ECA 13 average Figure 8: Gaps in human capital accumulation start early in life 14 Figure 9: Low and unequal learning outcomes 15 Figure 10: Georgians face among the highest incidence of NCDs 16 in ECA Figure 11: Impoverishing health expenditures are among the 17 highest in the region Figure 12: Public education expenditure remain below regional 22 and global averages Figure 13: Georgia’s health care spending is larger than that of 24 many countries in the region Figure 14: In 2018 out-of-pocket expenditure was the largest 24 source of health financing Figure 15: Social protection spending remains below the ECA 26 average Figure 16: Structure of the centrally administered social 27 protection system in Georgia Figure 17: The TSA is the largest social assistance program 28 List of Tables: Table 1: COVID-19 emergency-related social protection budget 45 Table 2: Reform areas - Education 49 Table 3: Reform areas - Health 51 Table 4: Reform areas – Social Protection 51 List of Boxes: Box 1: Why social protection matters for human capital 21 iv GEORGIA Human Capital Review Acknowledgments This report has been prepared by a World Bank team led by Jamele Rigolini and Ahmet Levent Yener, composed of Zurab Abramish- vili, Irina Abuladze, Ekaterine Asatiani, Volkan Cetinkaya, Marjorie Chinen, George Gotsadze, Maddalena Honorati, Rafael de Hoyos Navarro, Nia Khachidze, Nino Kutateladze, Nino Moroshkina, David Okropiridze and Roberto Sormani, with substantial inputs, contributions, and feedback from Alan Fuchs Tarlovsky, Susanna Hayrapetyan, Igor Kheyfets, Natsuko Kiso Nozaki, Patrizia Poggi and Serge Randriamiharisoa. The team would like to thank representatives of the European Commission and EU Delegation to Georgia for useful feedback and inputs, in particular Hoa Binh Adjemian, Thibault Charlet, Colombe De Mercey, and Nika Kochishvili. The team also appreci- ates the validation of findings and comments received from Anna Platonova, UN; Ketevan Melikadze, and Nino Davitashvili, UNICEF; Allison Ekberg, WHO; Irina Abuladze, ADB; Bérengère Callamand, and Marike Gleichman, AFD; Natia Partskhaladze, NILC; Magda Magradze, Millennium Foundation; Lidija Christmann, Embassy of Germany to Georgia in writing and at a consultation meeting in December 2021. Special thanks to Matthew Naumann for editing and providing detailed comments, as well as Elizaveta Tarasova for the cover page and graphic design. The team would also like to thank the Government of Georgia for sharing feedback and views on findings and recommendations, in particular Ekaterine Guntsadze, Deputy Minister of MoF; Tamar Gabunia, First Deputy Minister of MoILHSA; Tamila Barkalaia, Deputy Minister of MoILHSA; Ekaterine Dgebuadze, First Deputy Minister of MoES. The note was prepared under the guidance of Sebastian A. Molineus (Country Director for the South Caucasus), Fadia M. Saadah (Regional Director for Human Development, Europe and Central Asia Region), Tania Dmytraczenko (Practice Manager, Health Nutrition and Population, Europe and Central Asia Region), Cem Mete (Practice Manager, Social Protection and Jobs Global Practice, Europe and Central Asia Region), and Harry Anthony Patrinos (Practice Manager, Education, Europe and Central Asia Region). The note was made possible by generous funding from DG NEAR’s Europe 2020 Trust Fund. v GEORGIA Human Capital Review List of acronyms ALMP Active labor market program ECA Europe and Central Asia ECD Early childhood development ECE Early childhood education EMIS Education Management Information System ERC Education Resource Center EU European Union GDP Gross domestic product GEL Georgian lari HIV Human immunodeficiency virus HMIS Health Management Information System ICT Information and Communication Technologies IDP Internally displaced person ILO International Labour Organization IT Information technology LIC Low-income country MIC Middle-income country MoES Ministry of Education and Science MoESD Ministry of Economy and Social Development. MoILHSAMinistry of Internally Displaced People from Occupied Terri- tories, Labor, Health, and Social Affairs NAEC National Assessment and Examination Center NCD Non-communicable disease NCDC National Center for Disease Control and Public Health NCEQE National Center for Educational Quality Enhancement NEET Not in employment, education or training NHA National Health Authority OECD Organisation for Economic Co-operation and Development PHC Primary health care PISA Programme for International Student Assessment PMT Proxy means test SESA State Employment Support Agency SSA Social Service Agency STEM Science, technology, engineering and math TPDC Teachers’ Professional Development Center TSA Targeted Social Assistance UHC Universal health coverage UN United Nations UNESCO United Nations Educational, Scientific and Cultural Organi- zation UNICEF United Nations Children’s Fund US$ United States dollar VET Vocational education and training WHO World Health Organization vi GEORGIA Back to table of contents Human Capital Review Executive summary Georgia’s economy has grown significantly across individuals and regions also undermine over the past decade, leading to dramatic the country’s ability to share prosperity. With a reductions in poverty and increases in the Gini index close to 0.38, Georgia is among the middle class. With a small and open economy, most unequal countries in Europe and Central Georgia has a population of 3.7 million and a Asia. Inequalities emerge early in life, and stem per capita gross domestic product (GDP) of in part from major differences in human capital US$4,275 in 2020. Georgia’s economy grew endowments. Inequalities are associated with at an average annual rate of 4.8 percent in the many characteristics, such as ethnicity and decade prior to the COVID-19 pandemic, and gender, but can also be observed across regions because of sustained growth for almost three – with the poorest regions not only facing decades the country’s GDP per capita rose more people in destitution, but also greater from 10 percent of that of the European Union challenges to the delivery of quality services. (EU) in 1995, to a third in 2019. The poverty rate also fell dramatically, from 37.3 percent in 2010 Because of Georgia’s human capital endow- to 19.5 percent in 2019, with the largest decline ment, a child born in the country today will on in poverty observed in rural areas. However, the average only be 57 percent as productive as rate increased slightly to 21.3 percent in 2020 he or she could be with complete education due to COVID-19. and full health. While Georgia’s Human Capital Index score is similar to those of countries with New challenges are emerging that may similar levels of development, it remains well threaten the country’s path towards pros- below the Europe and Central Asia (ECA) aver- perity. Poor quality employment, rapid aging, age for low- and middle-income countries, and high migration rates and substantial inequal- well below the EU average. Moreover, if ele- ities across the territory and between soci- ments that include the performance of higher oeconomic groups are slowing the country’s education and non-communicable diseases path towards long-term, shared prosperity. (NCDs) are included productivity drops even At close to 12 percent in 2019, unemployment further – to 40 percent. was among the highest in Europe and Central Asia pre-COVID-19; and many jobs continue Boosting inclusion and quality human capital to be of poor quality, with much of the pop- will be crucial for addressing emerging pro- ulation trapped in precarious and low produc- ductivity, aging and inclusion challenges and tivity jobs.1 Labor market opportunities also steering the country towards sustainable and remain quite dire for youth: one in four youth inclusive growth. Better skills and health can aged 15-24 is neither in employment, educa- help people find better jobs, be more pro- tion nor training. Moreover, Georgia’s economic ductive at work, work longer, and age more development brought higher welfare, but also healthily. Quality human capital would also alle- a lower fertility rate and higher life expectancy, viate supporting the elderly population, both both of which are contributing to rapid popu- because people would be able to work longer, lation aging: by 2050 each working age adult and because they would be more productive. will have to support 0.4 elderly people. The More quality jobs at home may also help control challenge of an aging population is exacer- the flow of migrants searching for better eco- bated by high outmigration, mostly of work- nomic opportunities abroad. Addressing ine- ing-age people, which is further reducing the qualities in human capital endowments, labor size of the labor force. Substantial inequalities market opportunities, and incomes will also be 1 To ensure comparability over time, labor market indicators are computed using the pre-2020 methodology. Indicators may therefore 1 differ from the official GEOSTAT ones, which incorporate the new International Labour Organization (ILO) standards but cannot be directly computed from microdata before 2020. GEORGIA Back to table of contents Human Capital Review essential for supporting long-term prosperity, the mother’s educational attainment is lower especially given an aging and shrinking popu- secondary education, than those where she has lation: with fewer working-age people left to higher education. Children living in rural regions support an increasingly larger elderly popula- are thirty percentage points less likely to have tion, it is essential for workers of both genders more than three children’s book at home than and all backgrounds to reach their full produc- children from urban areas. Less than one in tive potential. three children of Azerbaijani ethnicity attend kindergarten, compared to more than eight in The COVID-19 pandemic also highlighted ten Georgian children. These early gaps affect the importance of building resilient delivery brain development and will prevent effective systems to support people during crises and accumulation of human capital all along peo- avoid losses in human capital. Robust delivery ple’s life cycle, ultimately affecting their wellbe- systems and crisis preparedness are key for a ing and impeding them from realizing their full solid response. For instance, decentralization of productive potential. online teaching arrangements, lack of training on use of information technology (IT), and lack of Progress in improving education outcomes regular monitoring of students and school per- remains modest. Georgia managed to achieve formance reduced the effectiveness of distance relatively high enrollment rates: at 106 percent learning. And the absence of an unemployment (in 2013), gross primary and basic (through insurance scheme obliged the government to grades 1-9) school enrolment rates are close to implement a less effective temporary unem- the EU average (110 percent). However, Geor- ployment assistance scheme for formal workers. gia has the second lowest reading score in the region in the 2018 Programme for International Student Assessment (PISA) test scores, which Human capital challenges remain captures the reading and understanding abil- significant ity of 15-year-old students: 65 percent of the country’s 15-year-old students are functionally Despite substantial progress, child develop- illiterate, meaning that they cannot correctly ment outcomes remain significantly below the process and understand a simple text. Qual- EU average. In the past two decades Georgia ity also remains an issue in higher education, has embarked on a series of important reforms which remains far below the average of the across human development sectors that led to EU and of many other ECA countries. The low significant improvements in child development quality of the education delivered is affecting outcomes. Despite this progress, however, chal- people’s incomes and employment opportuni- lenges remain. Stunting – which affects cogni- ties, and Georgia’s ability to boost productivity: tive development all along children’s learning not having the skills sought after in the labor path – can still be observed in close to 6 per- market significantly reduces the chances of cent of children. Nearly 40 percent of children workers securing quality jobs, which will affect aged 2-7 have high concentrations of lead in their incomes and productivity throughout their blood, affecting their cognitive and socio- their careers. emotional development. Almost half of Geor- gian children younger than five have less than Gender biases also affect women’s opportuni- three children’s books at home; and almost one ties. The gender gap in labor force participa- in four children does not attend kindergarten, tion stands at 19 percentage points; and the compared to close to universal enrollment in wage gap results in men earning 16 percent the European Union. more than women, after controlling for differ- ences in demographic and job characteristics. Gaps in early childhood development reflect The occupational and sectoral segregation of strong inequities across income, geographical, women also locks them in economic activities and ethnic lines that will continue along the with lower earnings and tends to exclude them life cycle. Stunting, for instance, is more than from science, technology, engineering, and three times as prevalent in households where math (STEM) fields. 2 GEORGIA Back to table of contents Human Capital Review Later in life, Georgians face among the highest remote teaching; and throughout 2020-2021 incidence of non-communicable diseases in education was offered in a hybrid mode. Inter- ECA: this, again, is affecting productivity, life national evidence suggests that the pandemic expectancy and healthy aging. The prevalence will result in substantial learning and earning of NCDs in Georgia is much higher than the EU losses, especially for marginalized groups average and the average of its development including the poor, students with special peers. These high rates of NCDs negatively needs, and minority ethnic groups. Finally, the affect people throughout their life cycle. At pandemic also had a significant impact on working age, NCDs affect workers’ productiv- people’s livelihoods that may leave long-term ity; and some people may be forced by NCDs to scars: more than one-third of the employed work less or retire earlier than they would have were unable to work at the peak of the restric- liked to, thereby shrinking the working popula- tions. Poverty is estimated to have risen by 5.4 tion further in a country that is already rapidly percentage points in 2020, even as the gov- aging. The high incidence of NCDs is also one ernment’s sizable support package likely pre- of the main causes of low life expectancy, vented an even greater increase in poverty. especially for men, and also affects aging and the quality of life of many elderly persons. High prevalence of NCDs also increased the likeli- Maintaining the reform hood of developing severe forms of disease momentum to deliver better and during the COVID-19 pandemic. While preven- tion of NCDs at primary care level is relatively more equitable services cost effective, providing comprehensive treat- ment is expensive and adds an unnecessary While substantial reforms have been imple- fiscal burden to the health system. mented in the past two decades, Georgia’s human capital requires an inclusion and quality High out-of-pocket health expenditures boost, and human development spending force many poor and vulnerable households an efficiency boost. Overall, spending in the to choose between falling further into desti- human development sectors remains low and tution to pay for health care and not seeking inefficient; most workers in the social sectors treatment when it is required. Impoverishing are poorly remunerated, and many lack the nec- out-of-pocket health expenditures are the essary qualifications and support mechanisms; highest in Europe and Central Asia, and an esti- monitoring and quality control mechanisms mated 5.7 percent of the population is pushed are insufficient; and – while decentralization of below the poverty line each year because of service provision brings accountability at the health expenditure. Such a harsh tradeoff rein- local level – poor municipalities lack the finan- forces inequities in health outcomes through- cial and technical support required to deliver out people’s life cycles. quality services. To cope with these pitfalls the government has initiated several important The COVID-19 pandemic affected human reforms: the ongoing development of a social capital in both the short- and the long-term. code, for instance, may help to improve the From February 2020 to January 2022 there effectiveness of social spending by strength- were around 1,000,000 confirmed cases of ening intersectoral dialogue and improving the COVID-19 in Georgia, with around 15,000 institutional framework. Nevertheless, because deaths. But the health impacts of the pan- of the pandemic and other factors some reforms demic went beyond COVID-19: rehabilitation, are stalling, and some crucial aspects – such palliative and long-term care services expe- as investing in regular monitoring and evalua- rienced major disruptions, which have been tion – may still be missing in some sectors. To particularly problematic for those living with further improve human capital, the Ministry of NCDs who need regular or long-term care. In Finance and the line ministries should keep the the field of education, Georgia was forced to reform momentum going. Important areas for close schools for 65 days – almost a third of the reform include: 2019-2020 academic year – and transition to 3 GEORGIA Back to table of contents Human Capital Review • Increasing the level and efficiency of spending in the social sectors. Despite the social sec- tors making up a large share of the government’s budget, spending remains low by inter- national standards. Major efficiency gains can also be achieved through better use of exist- ing resources; but without increasing spending it will be difficult to implement effective and impactful reforms. • Making social spending more equitable. Inequalities in learning outcomes across socioec- onomic groups remain high, as students from disadvantaged backgrounds receive lower quality education and little additional support to help improve their learning outcomes; and gender disparities in the labor market remain substantial. High catastrophic health expend- iture also means poor households can face a health shock where they need to make a dire choice of either further impoverishment or forsaking treatment. It is thus important to make spending more pro-poor across the social sectors, facilitating access to quality education – including at the tertiary level – for the poor and vulnerable and ensuring that catastrophic health expenditure does not push people further into poverty. To promote more equitable labor market outcomes across gender groups, it is also important to promote skills among girls that are relevant for the labor market; end occupational segregation and promoting STEM; provide formal care for children and the elderly; and proactively assist women to tran- sition into labor markets. • Revisiting the decentralization process. Decentralization brings many benefits – but to be effective, it requires strong oversight and substantial support for financially vulnerable munic- ipalities that have capacity issues. Too many responsibilities are given to municipalities with- out adequate monitoring and accountability mechanisms, technical support, and adequate mechanisms to compensate for substantial differences in municipalities’ wealth and incomes. • Boosting monitoring, evaluation and feedback loop mechanisms, making use of the new opportunities offered by digitalization. In education, regular student assessments and links to school performance are missing, and it is not possible to follow students’ performance through the years. In the health sector, paper-based reporting is still common, and data col- lected are rarely used for monitoring quality and service volumes. And despite the existence of a Social Registry for the social protection sector, it is still not possible to have a holistic understanding of all the central and municipal programs accessed by households, and no “one-stop shops” have been implemented, under which centralized management of social programs would help vulnerable households more easily access the programs they would be qualified for. Employment programs are also not rigorously evaluated. While the manage- ment of the social sectors is being progressively digitalized, it is also important to ensure that more and better data are used to improve performance through feedback loop mechanisms and to build the capacity of workers to make use of these digital platforms. • Improving the social sectors’ workforce management and support. The quality of medical and pedagogical education, both undergraduate and graduate, requires improvement. In all human development sectors, low salaries and poor working environments make it difficult to attract and maintain qualified professionals. The low salaries of doctors, for instance, leave them open to accepting in-cash or in-kind gifts from the pharmaceutical sector. But low pay is only one element of a bigger workforce management challenge. Staffing is often insuffi- cient, or poorly distributed: there are not enough social agents and social workers, there are too many teachers in rural areas but still a shortage of qualified teachers in certain areas (par- ticularly in STEM subjects), and there are not enough nurses. Hiring and promotions are not always based on merit, or even on candidates having achieved some minimal qualifications. And support and continuous education and training opportunities provided to many workers in the social sectors are limited, making it difficult for people to grow professionally. In some 4 GEORGIA Back to table of contents Human Capital Review instances, such as for social workers, there is also a need to boost workers’ qualifications by improving training and limiting entry of unqualified staff. • Boosting cross-sectoral coordination and collaboration. Better cross-sectoral coordination will be essential to address challenges such as early childhood development (ECD), nutri- tion, school dropouts, youth employment and aging: many of these challenges have mul- tiple roots, and only a comprehensive approach tailored to the needs and vulnerabilities of each individual will be able to effectively address them. Effective coordination will require the putting in place of institutional arrangements with clear roles and responsibilities for each institution, and the development of referral protocols and cross-sectoral monitoring tools. Equally important, it will also require the provision of financial and other incentives for insti- tutions to work effectively with one another: often arrangements that look sound on paper do not function well because of the institutions’ lack of incentives. • Preparing and investing in crisis response plans. Overall, Georgia’s response to the pandemic appears to have been relatively effective given the need to act quickly. Nevertheless, there was a clear relationship between sectors’ crisis preparedness, and ability to respond quickly and effectively. To be sure, one is never prepared for a crisis; but one can learn from the past and be better prepared to address future crises. Ensuring that Targeted Social Assistance (TSA) is flexible enough to be used as a crisis response program or boosting online teachers’ support, for instance, may help to improve the response to future crises, including rising food and commodity prices and future waves of COVID-19. 5 GEORGIA Back to table of contents Human Capital Review 6 GEORGIA Back to table of contents Human Capital Review 1. Human capital: the key to long term prosperity Georgia’s economy has grown significantly Figure 1: Georgia experienced sustained over the past decade, leading to dramatic growth and dramatic poverty reduction reductions in poverty and culminating in its GDP per capita (PPP) as proportion of EU (percentage) 2019 classification as an upper-middle income country. A small and open economy, Georgia 80% has a population of 3.7 million and a per capita 70% gross domestic product (GDP) of US$4,275 in 60% 2020. Georgia’s economy grew at an average 50% annual rate of 4.8 percent in the decade prior to the shock caused by the global COVID-19 40% pandemic. As a result of sustained growth for 30% almost three decades, the country’s GDP per 20% capita as a proportion of the EU’s rose from 10% 10 percent in 1995, to a third in 2019. Poverty 0% also dropped dramatically, from 37.3 percent in 1995 2000 2005 2010 2015 2020 2010 to 19.5 percent in 2019, with the largest decline in poverty being observed in rural areas. Georgia New EU Member States The poverty rate worsened slightly to 21.3 Eastern Europe Turkey South Caucasus Russian Federation percent in 2020 due to COVID-19 (Figure 1). Absolute poverty rate, 2010-2019 A new set of challenges are, however, emerging that may slow Georgia’s path towards long 45 43.3 term, shared prosperity. The performance of 40 labor markets has remained sluggish – particu- 37.3 37.7 larly for youth – and many jobs remain of poor 34.1 35 35 % of population quality, impeding further productivity gains. 33.4 High migration rates are exacerbating the 30 32.7 30 29.4 31.3 27.5 challenges generated by an aging population, 26.2 26.4 27.4 26.6 with less workers left to support an increasing 25 23.5 23.1 23.7 26.3 22 number of elderly people. Finally, economic 21.6 21.9 21.3 20.1 growth and prosperity are also unequally 20 19.5 20.8 distributed, with many people and regions 19 18.6 18 1818 benefitting disproportionally less from them. 15 16.4 17.1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Unemployment, inactivity and poor-quality Urban Rural Georgia jobs are affecting people’s ability to achieve Source: Authors’ calculations from World Development higher incomes. At close to 12 percent in 2019, Indicators and World Bank (2021a). Note: Eastern Eu- before COVID-19 the unemployment rate in rope includes Belarus, Moldova, and Ukraine. Georgia was one of the highest in Europe and Central Asia; and many jobs continue to be of poor quality, with many people being trapped in precarious and low productivity jobs: half of the workers are active in the informal sector, and 37 percent of male workers and 41 percent of females still work in the agriculture sector (World Bank 2021a).2 Moreover, labor market opportunities for youth remain quite dire. A dispropor- tionate number of youth (one in four aged 15-24) is not in employment, education or training 7 To ensure comparability over time, labor market indicators are computed using the pre-2020 methodology. Indicators may therefore differ from the 2 official GEOSTAT ones, which incorporate the new ILO standards but cannot be directly computed from microdata before 2020. GEORGIA Back to table of contents Human Capital Review Figure 2: A high proportion of youth are not in employment, education or training (NEET) 35% 30% 25% Share of population ages 15-24 20% 15% EU Average 10% 5% 0% CZE EST SVN LVA MLT POL LTU SVK HUN HRV CYP BGR ROU SRB MNE MKD BIH ALB GEO TUR ARM KOS Note: Data are for 2019. Source: World Development Indicators. (NEET; Figure 2), and among youth willing to Figure 3: Aging and migration will require work the youth unemployment rates reach 30 boosting workers’ productivity percent. Inactivity and unemployment during Emigrant stock youth have long-term scarring effects, as they 60% prevent youth from gaining much-needed 50% experience, send negative signals to prospec- tive employers, and may discourage further job Dependency ratio 40% seeking (McQuaid 2015; Nichols, Mitchell, and 30% Lindner 2013). 20% High migration rates and an aging population will require boosting the skills and productivity 10% of the remaining workers. Georgia’s economic 0% development led to higher welfare, but also ECA* TJK KGZ TKM UZB KAZ AZE TUR ARM MDA GEO RUS MNE BLR ALB MKD UKR SRB BIH EU lower fertility rates and higher life expectancies, both of which are contributing to rapid popula- Old age dependency ratio (2020) tion aging. While Georgia is aging less so than Old age dependency ratio (2050) the European Union, it is aging much faster than other low- and middle-income countries Old age dependency ratio in ECA, and by 2050 each working age adult 50% will have to support 0.4 elderly persons (Figure 3). The challenge of an aging population is exac- Share of total population 40% erbated by high outmigration rates, mostly of working-age people: these are further reducing 30% the size of the labor force. Going forward, it will therefore be essential to boost the skills and LIC & MIC ECA Average 20% productivity of the remaining workers, both to improve their ability to support an increasing 10% proportion of elderly people and to manage the flow of migrants, many of whom leave the country for economic reasons. 0% TUR TKM UZB TJK RUS AZE KGZ UKR SRB BLR ROU BGR KAZ GEO MKD KOS ARM MDA ALB MNE BIH Substantial inequalities across individuals and Source: UN Population Projections (2020) and KNO- regions also undermine the country’s ability to MAD database. Note: Averages are population weight- share prosperity. With a Gini coefficient close ed. Dependency ratio: Population with ages 65+/ages to 0.38, Georgia is among the most unequal 15-64. ECA*: LIC & MIC ECA (excl. Russia). 8 GEORGIA Back to table of contents Human Capital Review Figure 4: Inequalities are not only observed across people, but also across regions Municipal poverty rates SAE Poverty Estimates (2014) 0.0-10.0 10.0-20.0 20.0-30.0 30.0-40.0 40.0-50.0 50+ No Data 0 50 100 150 200 km Source: World Bank (2020b). countries in Europe and Central Asia. As we shall economics. This will not only require economic see these inequalities emerge early in life, and policies to support the poor and vulnerable stem in part from major differences in human through social programs and progressive taxa- capital endowments. Inequalities are associ- tion, but also investments in human capital and ated with many dimensions such as ethnicity quality services to ensure that youth across and gender but can also be observed across regions and income groups will be able to reach regions (Figure 4) – with the poorest regions their full productive potential. not only having more people in destitution, but also facing greater challenges to delivery of Boosting quality human capital will be key for quality services. Where someone is born affects addressing the emerging productivity, aging therefore that person’s chances of prospering and inclusion challenges and steering the in life, an issue that can partly be addressed by country towards a sustainable and inclusive improving the equity of service delivery. growth path. Better skills and health can help people find better jobs, be more productive at Addressing inequalities in endowments, labor work, work longer, and age more healthily (see market opportunities and incomes will be next section). It can also help to lower the burden essential for supporting long-term prosperity, on the working-age population to support the especially with an aging and shrinking popu- elderly, both because people would be able to lation. Inefficient use of countries’ productive work longer, and because they would be more assets has major economic implications: it has productive. Finally, more quality jobs at home been estimated, for instance, that gender gaps may also help to control the flow of migrants in labor participation reduce GDP in Georgia by in search of better economic opportunities 11 percent (Cuberes and Teignier 2016). More- abroad. It is therefore not surprising that the over, with fewer working-age people left to government program – in both its 2021-2024 support an increasingly larger elderly popula- strategy and in its new development plans – tion it will be essential to address inequalities asserts the importance of human capital as a and guarantee that workers of both sexes and constituent of economic development, with from all backgrounds reach their fully produc- the top government priorities of an education tive potential, as well to support human capital system playing a key role for competitiveness policies that enable the elderly to remain and quality, a universally accessible health healthy and active for longer. Failure to do so care system and a sustainable system of social will only exacerbate the burden on a shrinking security. pool of workers to care for a growing elderly population, giving them even stronger incen- The COVID-19 pandemic also highlighted tives to migrate. Boosting inclusion is not only the importance of building resilient delivery therefore an ethical issue, but is also smart systems to support people during crises and 9 GEORGIA Back to table of contents Human Capital Review avoid losses in human capital. Robust delivery education, training and health – play an essen- systems and crisis preparedness are key for a tial role in promoting development and growth solid response. For instance, decentralization of (Becker 1992). Production is the product of three online teaching arrangements, lack of training interacting forces: the quantity and quality on the use of IT, and lack of regular monitoring of labor, which is affected by human capital; of students and school performance affected physical capital; and total factor productivity the effectiveness of distance learning. And – the ability to use and combine capital and the absence of an unemployment insurance labor effectively through, among others, good scheme forced the government to implement a and effective governance and the provision of less effective temporary unemployment assis- quality public services (Figure 5). Human capital tance scheme for formal workers. is therefore a key factor supporting long term growth and prosperity. The objective of this Human Capital Review is to assess human capital outcomes in Georgia, Figure 5: Human capital is essential for growth identify delivery challenges and reform prior- ities, and support a path towards greater Total Factor Productivity prosperity. The review is not intended to be Human Capital a thorough assessment of the human devel- and Labor opment sectors. Rather, it is an overview that (Inclusive and summarizes the current status of knowledge sustainable) Development and identifies priorities for reform in the human Physical development sectors to improve the quality of Capital human capital. Accordingly, while the COVID-19 pandemic did affect service delivery and human capital outcomes, the review will place greater emphasis on longer-term delivery challenges, The extent to which human capital is equitably many of which were already present before the distributed across the population also affects pandemic. This review also builds on a previous the sustainability and inclusiveness of devel- assessment of the human development sectors opment. If only a few people have the skills to by exploring further important delivery chal- use new technologies, for instance, not only will lenges (World Bank 2020b). the majority face lower incomes and wellbeing, but the country as a whole may face constraints The review unfolds as follows. The next section to boosting growth through the adoption of explains the importance of human capital for these technologies. Hence, worrying about sustainable and inclusive development. Chapter equity and inclusion and how human capital is 2 reviews human capital outcomes in Georgia. distributed across the population is a matter Chapter 3 provides an overview of the educa- not only of ethics but also of smart economics. tion, health care and social protection systems. Chapter 4 reviews the principal challenges that Microeconomic studies find a significant and affect the delivery of quality services in each robust association between people’s human sector. Chapter 5 briefly reviews the response capital, and their incomes and success in the of the human development sectors to the labor market. At the macroeconomic level there COVID-19 pandemic and draws lessons for seems to be a strong association between the improving resilience to future crises. Chapter 6 quality of learning and countries’ economic concludes by discussing reform priorities. performance (Hanushek and Woessmann 2020), although because of measurement and methodological challenges the causality The importance of human capital of this association is difficult to assert (Flabbi for sustainable and inclusive and Gatti 2018; Jones 2014). Nevertheless, development3 microeconomic studies seem to confirm this causal relationship as they consistently find a Human capital investments – in individuals’ solid relationship between various elements 10 This section draws substantially from Flabbi & Gatti (2018). 3 GEORGIA Back to table of contents Human Capital Review of human capital, and people’s incomes and African-American children from birth to age success in the labor market, as we discuss below. five, including nutrition, access to health care and early learning, and a recent analysis found Investing early in human capital delivers the a long run rate of return of 13 percent per year highest returns. Most brain development (García et al. 2020). happens in the womb and in the first 1,000 days of life; moreover, a given investment in Proper design and quality of ECD and social human capital today not only affects future protection services remain, however, crucial payoffs but also positively influences subse- for delivering high impacts. The benefits of quent accumulation of human capital. There- ECD programs are disproportionately concen- fore, investing early in human capital delivers trated among children from poor and vulner- the highest returns (Figure 6). This is why able households, as they may not receive ensuring proper early childhood develop- adequate nutrition and stimulation at home. ment (ECD) is becoming a policy priority. On It is therefore important to ensure that poor the health side, low birth weight and under- and vulnerable households receive priority weight of members of the current workforce access, as well as adequate social protection has been estimated to be causing a produc- services to help them surmount the many tivity loss between 2 percent and 11 percent other constraints that, both directly and indi- (Martínez and Fernández 2008); and Galasso rectly, also affect children’s development. and Wagstaff (2019) find that implementing a Moreover, quality of implementation is key. For package of 10 nutrition interventions to cope instance, poorly implemented early childhood with stunting and malnutrition in low and education (ECE) programs (such as programs middle income countries delivers, on average, that employ poorly trained staff or use out-of- a benefit-cost ratio of 15:1. The returns on early date teaching methods) deliver few benefits, or childhood stimulation and education programs even have negative effects – i.e., children may can be equally high. In Jamaica, for instance, be better off staying at home (Berlinski and Gertler et al. (2014) found that an early stimula- Schady 2016; Elango et al. 2016). tion program led to 25 percent higher incomes 20 years later. Combining both health and Later in life, education is a powerful booster of education interventions delivers even higher poverty eradication, good health and success returns. The Carolina Abecedarian Project and in the labor market. Across the developed and the Carolina Approach to Responsive Education developing world the labor market return to program, for instance, offered comprehensive education is, on average, 9 percent per year of developmental resources to disadvantaged schooling (Psacharopoulos and Patrinos 2018). Figure 6: Early investments in human capital deliver the highest returns Prenatal programs Rate of Return to Investment in Human Capital Early childhood Preschool K-12 education Job training Prenatal 0-3 4-5 School age Post-school age Source: https://heckmanequation.org 11 GEORGIA Back to table of contents Human Capital Review Moreover, women experience higher average Good health outcomes during childhood, returns to schooling, showing that girls’ educa- youth and adult years are also essential for tion remains a priority. Education also delivers healthy aging, as they enable people to live positive effects beyond income, including better and work longer. The population is aging impacts on crime, health, and good citizenship across the region. According to UN Population (Brunello, Fabbri, and Fort 2013; Lance 2011). estimates, the ratio of elderly to working age But the importance of ensuring access to solid adults in Georgia will increase from 1:4 to 1:3 education goes beyond individual gains: poor between now and 2050. Promoting healthy learning outcomes among the disadvantaged aging is therefore not only a priority from a — those with lower incomes — affect countries’ public health perspective, but also the best productivity and even their ability to innovate way to ensure the elderly population will be (Bell et al. 2019). able to remain productive beyond the current retirement age. Again, the quality of the education provided matters significantly, especially for children from disadvantaged backgrounds. Schooling is not equivalent to learning: it is not only impor- tant to go to school, but also to learn skills that are in demand in the labor market. Literacy, for instance, is extremely important: one standard deviation more on the literacy scale increases the probability of being employed by 0.8 percentage points and is associated with a 6 percent increase in wages (OECD 2016). In the European Union, however, one in five students aged 15 is functionally illiterate (meaning they may have problems understanding and processing a text), and the average is much higher in low and middle income countries (OECD 2019b). Quality of higher education is also extremely important: in fact, the quality of some universities may be so poor that their students would have been earning more if they had not attended them and but had gone to work right away (González-Velosa et al. 2015). Good health also affects incomes and well- being. The labor market trajectories of workers with disabilities tend to be less successful than the trajectories of their peers with no disabil- ities (Campolieti and Krashinsky 2006). Over- weight and obesity not only increase the risks of non-communicable diseases (NCDs), but also are associated with lower wages (Brunello, Michaud, and Sanz-de-Galdeano 2009; Gilleskie and Hoffman 2014). And again, malnu- trition during childhood has long-term effects: Hoddinott et al. (2013) find that prevention of one fifth of stunting in high-burden coun- tries would increase households’ income by 11 percent on average. 12 GEORGIA Back to table of contents Human Capital Review 2. Georgia’s human capital: the need for a quality and equity boost Because of Georgia’s human capital endow- 2013, and the implementation of a Targeted ment, children born in the country today will Social Assistance (TSA) program since 2006. only be 57 percent as productive as their full Accordingly, infant mortality dropped three- education and health potential (Figure 7). The fold over 20 years, from 32 deaths per 1,000 Human Capital Index captures basic education in 2000 live births to less than 9 per 1,000 in and health elements of human capital that have 2020 (World Development Indicators). a clear impact on people’s productivity (World Bank 2020c). While Georgia’s level of human Despite recent progress, early childhood devel- capital is aligned with those of countries with opment outcomes remain, however, signif- similar levels of development, it remains well icantly below the average of the European below the ECA average for low- and middle-in- Union. Stunting – which affects cognitive come countries (63 percent), and well below the development all along children’s learning path EU average (74 percent). Moreover, if elements – can still be observed in close to 6 percent of that include the performance of higher educa- the children. Close to 40 percent of children tion and NCDs are included productivity drops aged 2-7 have concentration levels of lead in even further – to 40 percent (Demirgüç-Kunt the blood – a toxic element that also affects and Torre 2020). children’s cognitive and socioemotional devel- opment – that are greater than 5 μg/dl. Close In the past three decades, Georgia has made to half of Georgian children younger than 5 substantial progress towards improving child have less than three children’s books at home; health outcomes. The country has embarked and almost one in four children does not attend on a series of important reforms across human kindergarten (Figure 8), compared to almost development sectors that led to signifi- universal enrollment in the European Union. cant improvements in child health outcomes. Among others, these include early investments Gaps in early childhood development reflect in health in the 1990s, the establishment of a strong inequities across income, geographical, Universal Health Coverage (UHC) Program in and ethnic lines that will only worsen along the Figure 7: Georgia’s Human Capital Index remains below the ECA average 80% EU Average 75% 2020 Human Capital Index 70% LIC & MIC ECA Average 65% 60% 55% 50% 45% 40% TJK MKD KOS GEO AZE ARM BIH MDA ROU KGZ BGR UZB KAZ UKR MNE ALB TUR SVK SRB RUS HUN BLR LTU LVA MLT HRV CZE POL CYP SVN EST HCI Average of Development Peers Source: World Bank (2020c). Note: Averages are population weighted. The LIC & MIC ECA average does not include Russia. The average of development peers is obtained using a kernel regression. 13 GEORGIA Back to table of contents Human Capital Review Figure 8: Gaps in human capital accumulation start early in life Stunting Lead prevalence Learning materials Kindergarten National average Education Mother's Mother - Prim./Lower Sec. Mother - Higher Ed. Georgian Ethnicity Azerbaijani Armenian Urban Region Rural Tbilisi Mtskheta-Mtianeti Wealth Poorest quintile Richest quintile 0 10 0 20 40 60 0 20 40 60 80 100 0 20 40 60 80 100 Source: UNICEF (2018a). Note: Stunting: children under age 5 with height for age < 2 SD; Lead: percentage of chil- dren aged 2-7 years with concentration of lead per dL of blood >5 μg/dl; Learning materials: children under age 5 with 3 or more children's books at home; Kindergarten: percentage of children age 36-59 months who are attending kindergarten. Gaps are shown when sample size is insufficient for meaningful estimates. life cycle. Stunting, for instance, is more than Progress in improving education outcomes three times more prevalent in households where remains modest. Georgia managed to achieve the mother’s highest educational attainment relatively high enrollment rates: at 106 percent, is lower secondary rather than higher educa- gross primary and basic (through grades 1-9) tion. The level of lead poisoning in children may school enrolment rates are close to the EU reflect a region’s industrialization history, but average (110 percent), although participa- again children from the wealthiest quintile are tion is much lower for pre-primary education almost half as affected from it than children (Figure 8) and also drops at secondary level (85 from the poorest quintile. Children living in rural percent net enrollment at grades 10-12), indi- regions are thirty percentage points less likely to cating that some vulnerable children may not have more than three children’s book at home. benefit from comprehensive education. Never- Less than one in three Azerbaijani children theless, quality of education remains an issue. attend kindergarten, against more than eight The learning poverty rate is the proportion of in ten Georgian children. And children whose 10-year-olds who cannot read and understand caregivers have functional disabilities are less a simple text by the end of primary school: at 14 likely to achieve developmental targets even percent, the rate in Georgia is higher than the after accounting for differences in economic average for the region (11 percent). On average, and social background (wealth, education, students in Georgia achieve close to 12.9 years books) and place of residence (UNICEF 2020). of schooling, but they receive on average These early gaps affect brain development and only 8.3 years of schooling when adjusted for will prevent effective accumulation of human quality (Filmer et al. 2020). Georgia has the capital throughout people’s lifecycles, ulti- second lowest reading score in the region in mately affecting their wellbeing and impeding the 2018 Programme for International Student them from realizing their full productive poten- Assessment (PISA) test scores, which capture tial. reading and understanding ability of 15-year- 14 GEORGIA Back to table of contents Human Capital Review Figure 9: Low and unequal learning outcomes Quality and equity of learning outcomes Tertiary education 600 Quality Index of Tertiary Education 30 2018 PISA score 500 20 400 10 300 ECA* KOS GEO KAZ AZE MKD BIH ALB MNE MDA SRB TUR UKR BLR LTU RUS EU 0 Mean score (reading) Bottom quartile mean score 10 20 30 40 50 60 Top quartile mean score Population 30-34 with Tertiary Degree (%) Source: Demirgüç-Kunt and Torre (2020); OECD (2019b). Note: Averages are population weighted. ECA*: LIC & MIC ECA (excluding Russia). old students (Figure 9, left panel), and 65 Moreover, at the macroeconomic level, perva- percent of its 15-year-old students are func- sive skills gaps prevent firms from adopting tionally illiterate, meaning that they cannot new and more productive technologies, correctly process and understand a simple text. because they may not find the workers to Moreover, differences are significant between properly operate them, affecting their ability to the best and worst performers, with the bottom boost productivity. 25 percent performing 70 PISA points below the top 25 percent. Quality also continues to Gender biases also affect women’s opportuni- be an issue in higher education (Figure 9, right ties. Georgia’s gender gap in labor force partic- panel), where – despite high tertiary education ipation stands at 19 percentage points, while attainment among the population – the quality the wage gap results in men earning 16 percent of the tertiary education remains far below more than women, after controlling for differ- the average of the EU and of many other ECA ences in demographics and job characteristics. countries. In addition, women’s occupational and sectoral segregation locks them in economic activities The vocational education and training (VET) with lower earnings and tends to exclude them system is also underutilized. Historically, from science, technology, engineering, and students have a strong preference for higher math (STEM) fields. Meanwhile, limited access education, and the scale of reforms have not to finance and other barriers can limit women’s been sufficient to reverse this trend. Therefore, entrepreneurial potential (World Bank 2021a). during the last six years only up to 6 percent of school graduates have registered for VET Later in life, Georgian people face among programs, while higher educational attain- the highest incidence of non-communicable ment is above the EU average (the proportion disease (NCD) in ECA, which is affecting of people aged 30-34 with a higher education productivity, life expectancy and healthy degree is 42 percent, compared to 40 percent aging. NCDs are much more prevalent in in the EU). Georgia than the EU average and the average of its development peers (Figure 10). This high The low quality of the education delivered rate has negative effects on people and society is affecting people’s incomes and employ- throughout their life cycle. At working age, ment opportunities, and the country’s ability NCDs affect workers’ productivity, and many to boost productivity. Functionally illiterate people are obliged to work less or retire earlier workers and, more generally, workers without than they would have liked because of NCDs: the skills sought after in the labor market see this is shrinking the working population further their chances of securing quality jobs seri- in a country that is already rapidly aging. High ously affected: this will affect their incomes incidence of NCD is also one of the main causes and productivity throughout their careers. of low life expectancy, especially for men, and 15 GEORGIA Back to table of contents Human Capital Review Figure 10: Georgians face among the highest incidence of NCDs in ECA 45 000 Disability-adjusted life-years (DALY) 40 000 (NCD DALY per 100,000) 35 000 30 000 EU Average 25 000 20 000 15 000 10 000 5 000 0 KGZ TJK TUR CYP UZB ALB TKM AZE KAZ MLT SVN ARM SVK POL CZE MNE HRV BIH EST MKD MDA RUS BLR LTU SRB ROU GEO HUN LVA UKR BGR NCD DALYs Average of Development Peers Source: World Development Indicators and Global Burden of Disease, 2019. Note: Averages are population weight- ed. The average of development peers is obtained by using kernel regression. also reduces opportunities for heathy aging There are strong inequities in health outcomes, and quality of life for many elderly persons. with many poor and vulnerable households While prevention of NCDs is relatively cost facing the dire choice of falling further into effective, providing comprehensive treatment destitution to pay for health care, or being is expensive and adds an unnecessary fiscal unable to seek treatment. Inequities in health burden to the health system. outcomes start early in life (Figure 8) and accu- mulate throughout the life cycle. A significant Unhealthy behaviors are a major factor feature reflecting such inequities is the dire behind the rise of NCDs – especially for choice that many poor and vulnerable house- men. Georgia has among the highest rates holds face between falling further into destitu- of tobacco use among men in ECA, with 54 tion to pay for health care, or not being able to percent of men being smokers. Interestingly, seek treatment. Impoverishing out-of-pocket the rate for women is among the lowest in health expenditure is the highest in Europe ECA, at 5.2 percent (World Development Indi- and Central Asia, and an estimated 5.7 percent cators). Alcohol consumption is also relatively of the population is pushed below the poverty high among men: men consume 13.6 liters of line each year because of health spending alcohol per person per year, while women only (Figure 11). consume 3.6 liters. And people’s diets are also overall unhealthy: 23 percent of the adult popu- The COVID-19 pandemic affected human lation is obese, compared to an average of 15 capital both in the short and long terms. percent in the European Union. The three top Between February 2020 and January 2022 causes of death at all ages are ischemic heart there have been around 1,000,000 confirmed disease, stroke, and hypertensive heart disease, cases of COVID-19, with around 15,000 deaths. which are mainly related with the risk factors. Excess mortality rates sharply increased in November 2020, reaching a record high of 55 The country also faces high prevalence of percent and then fell to 15 percent by June respiratory diseases, in part attributable 2021. But the health impacts of the pandemic to air pollution. At 74 cases per 100,000 went beyond COVID-19: 33 percent of reha- people, tuberculosis prevalence is seven bilitation and palliative and long-term care times higher than in the European Union, and services experienced major disruptions. The among the highest in Europe and Central disruption to services was particularly prob- Asia. Overall, the country also has a high lematic for those living with NCDs who require rate of mortality attributed to air pollution: regular or long-term care (WHO 2021b). Mean- more than 100 deaths per 100,000 popula- while, Georgia was forced to close schools tion, five times the European Union average (fully or partially) for 35 weeks and transition (both from World Development Indicators). to remote teaching. While there has been 16 GEORGIA Back to table of contents Human Capital Review Figure 11: Impoverishing health expenditures are among the highest in the region 6% Share of population pushed below the poverty line (3.20$-a-day) 5% 4% 3% 2% 1% 0% BLR RUS KAZ AZE HRV BIH POL SVN SVK UKR LTU CYP EST TUR BGR SRB MKD MNE MDA ROU KOS MLT UZB LVA KGZ ALB ARM TJK GEO Source: World Bank Health Equity and Financial Protection Indicators. Averages are population weighted. The data are for the latest available year for each country. no formal assessment of the impact of the percent). Finally, the pandemic also has signif- COVID-19 imposed school closure on learning icantly affected people’s livelihoods, and this outcomes, international evidence suggests that may leave long-term scars, as more than a third the pandemic will lead to substantial learning of the employed were unable to work at the and earning losses, especially for marginalized peak of the restrictions. Poverty is estimated groups including the poor, students with special to have risen by 5.4 percentage points in 2020 needs, and ethnic minorities. As 70 percent of (using the national poverty line), and without the learning process during the whole academic the government’s sizable support package the year was conducted online, a rough estimate increase in poverty would likely have been even based on Azevedo et al. (2021) indicates that greater (World Bank 2021; October 13, 2021 the percentage of students performing below update). functional literacy may increase by up to an additional 6 percentage points (from 64 to 70 17 GEORGIA Back to table of contents Human Capital Review 18 GEORGIA Back to table of contents Human Capital Review 3. Building human capital: overview of the education, health care, and social protection systems Building quality human capital requires time and resources. Some investments rapidly bear The importance of service delivery fruits. Others – such as the building of quality for human capital human capital – can deliver much greater returns at a larger scale, but require time and Achieving good education and health out- resources. Human capital is one of the wisest comes require effective delivery of human investments a society can make to improve the development services – particularly to the economic and socioemotional wellbeing of its poor and vulnerable population. While no members. But many things can – and do – go system is perfect, compounded delivery chal- wrong in the process of building human capital, lenges reduce the timeliness and quality of the and these will ultimately affect the quality of the services that are offered and, ultimately, the education, health and jobs people can aspire to. quality of human capital. Poor quality of deliv- It is therefore important to build solid delivery ery particularly affects the poor and vulnerable systems in the social sectors that help people populations, who have limited means to com- acquire a solid education, maintain good health, plement the services received through individ- find good jobs, and secure access to compre- ual investments. hensive social protection that enables them to be resilient to shocks of various natures and Although there is no blueprint for establishing avoid poverty. an effective education system, certain charac- teristics enable and promote education tra- Overall, the Government of Georgia leads the jectories that ensure student learning. While human capital development agenda through school enrollment is a necessary condition for the relevant line ministries in close coordina- generating learning, it is not a sufficient one. tion with the Ministry of Finance. Specifically, Quality of learning is essential, and an effec- the social sectors are mostly covered by the tive education system measures, monitors and Ministry of Education and Science (MoES); and reforms learning through the design and regu- the Ministry of Internally Displaced People from lar implementation of standardized evaluations. Occupied Territories, Labor, Health, and Social Test results are needed to guide policy design Affairs (MoILHSA). and evaluate its effectiveness, align incentives among the different stakeholders, implement This chapter provides an overview of the improvement plans at school level, and hold education, health care, and social protection education providers accountable, among many sectors by reviewing the main elements, the purposes. Without measuring student learning, sectors’ governance structure, and financing. education systems navigate without a com- The next chapter will then delve into design and pass, diluting their effectiveness. implementation challenges that may prevent effective delivery. The information contained in All inputs of an effective education system, this and the subsequent chapters comes from from technology to the national curriculum, various sources, including existing reports, must be linked and aligned with student learn- administrative data, and interviews conducted ing. Three education inputs are of particular by the report team. importance, regardless of the specificities of 19 GEORGIA Back to table of contents Human Capital Review the education system: (i) students’ prepared- Social protection is a fundamental pillar of ness at the beginning of their education tra- social policies. Social protection is essential for jectories; (ii) teachers; and (iii) school directors protecting people from falling into poverty and (World Bank 2018b). Early childhood develop- destitution; helping people cope with adverse ment policies that provide nutrition, stimula- idiosyncratic or systemic shocks and smooth tion, and interaction during the first years of consumption over their lifetimes; promoting life facilitate student preparedness. Within the human capital accumulation; and ensuring education system, the quality of teaching is the access to jobs. Social protection comprises a most important determinant of student learn- variety of policy tools, ranging from cash trans- ing, and therefore effective education systems fers to the poor and people with disabilities, promote the professionalization of the teach- to social care services for vulnerable popula- ing career path with clear rules for the selec- tions, employment, labor market programs and tion, promotion, evaluation, and training of unemployment insurance, and old-age pen- teachers. Finally, school directors should have sions. the necessary managerial capacities to align all inputs and efforts to student learning, which Although the specific characteristics of social includes undertaking classroom observations protection systems vary with history and local to provide pedagogical feedback to teachers, conditions, an effective system should satisfy identifying teacher professional development a few basic principles. The first is adequacy. needs, and exercising leadership to motivate The level and generosity of support provided parental participation in the learning process. should be aligned with the level of need of poor Moreover, effective education systems should and vulnerable households. The second is effec- also have elements specifically designed to tiveness, efficiency and balance. Are the funds address the participation and learning con- allocated to each program used effectively or straints faced by girls and women, minorities are there ways to increase the impact at equal and vulnerable groups, including tailored cur- levels of spending? Also, could program design ricula, teacher training, and links with the social be improved to better promote objectives such protection system. as poverty reduction, employment and the acquisition of human capital? And is the bal- An effective health care system should ensure ance of spending across programs appropri- accessible, affordable, high-quality and safe ate given the population’s vulnerabilities and services and a network of health care facili- needs, with sufficient coverage of population ties that guarantee access regardless of geo- groups throughout the life cycle? The third ele- graphical and socioeconomic background. A ment is equity. Government social protection well-functioning health care system responds systems should invest more in the poor and in a balanced way to a population’s needs and vulnerable population than in the middle or expectations by: (i) improving the health status upper classes – and possibly significantly more. of individuals, families and communities; (ii) Unfortunately – especially when spending on defending the population against what threat- non-contributory pensions is considered – this ens its health; (iii) protecting people against is not always the case. The fourth and final ele- the financial consequences of ill-health; (iv) ment is sustainability. Is the level of spending providing equitable access to people-centered sustainable across time and can the system care; and (v) making it possible for people to honor promises made to future generations, in participate in decisions affecting their health particular in terms of pension benefits? and the health care system. Keeping health care systems on track requires a strong sense of direction, and coherent investment in the system’s various building blocks (governance, human resources, financing, technology and information systems, and service delivery), so as to provide the kind of services that produce results. 20 GEORGIA Back to table of contents Human Capital Review Box 1: Why social protection matters for human capital Social protection plays a key role in helping households build and protect human capital. This occurs both through efficient social care services that protect the poor and vulnerable, and through an array of social programs that support human capital accumulation. Social care services, for instance, can support vulnerable households with parental advice on childbearing and raising practices, stimulate the use of health and education services, provide information on nutrition, and nudge parents to use cash transfers to investing into their children’s future. Well-designed cash transfers provide vulnerable households and people with disabilities with financial stability, but also support better early childhood and nutrition practices, greater use of health and educa- tion services and reduced reliance on child labor. Many social assistance programs also add accompanying measures to direct transfers that can enhance human capital formation, such as providing premiums to children who regularly attend school. And unemployment benefits can be linked to participation in skills development programs that equip jobseekers with newer or higher quality skills, in the best case leading to new, more productive and better paid job matches. When provided in response to economic shocks or natural disasters, social protection can also protect consumption and mitigate the need for households to engage in negative coping strategies that may affect their wellbeing and degrade their human capital. Many cash transfer programs have rules that can be modified to quickly respond to crises; and for middle class households, unemployment insurance ensures that household consump- tion and human capital are protected in crises by smoothing income during times of job loss. Social protection programs also support people’s employment and youth’s transition into the labor market, thereby ensuring that investments in human capital are fully utilized. Social protection and employment programs promote the creation of more and better jobs, and help the vulnerable population, women, youth and marginalized groups access jobs. Services include helping people finding jobs through profiling and intermediation services, and assisting people to enhance their skills to access better jobs through training programs. Overview of the education sector Government expenditure on education has COVID-related budget cuts the objective of substantially increased in the last decade, but allocating a quarter of the budget to the edu- remains below international levels. Govern- cation sector by 2022 seems a rather unachiev- ment expenditure on education increased from able task. While Georgia’s spending on public 2.8 percent of GDP to 3.6 percent between education is higher than in some neighboring 2006 and 2019. In 2019/20 the MoES has allo- countries, overall it remains below the averages cated almost 70 percent of funding to general for both the world and ECA (Figure 12). On (k-12) and preschool education, 10 percent to average, governments in ECA spend one per- higher education, 4 percent to VET and a similar centage point of GDP more than Georgia on amount for science support. The remainder has education, with some countries like Denmark been allocated to infrastructure, administra- spending twice as much. While quality of tive and other support programs. Salaries are spending is essential, without greater invest- the main cost category, comprising up to 70 ment in the education sector it will be difficult percent of total operating expenditure. In 2019 to achieve a quality and inclusive education the government declared human capital devel- system that addresses the ever more competi- opment to be a priority; however, due to the tive needs of the labor market. 21 GEORGIA Back to table of contents Human Capital Review Figure 12: Public education expenditure remain below regional and global averages 9 8 Denmark Denmark Government Expenditure on 7 Education (% of GDP) Europe & Central 6 Estonia Asia Russian 5 Federation World 4 Low & middle income 3 Romania Georgia Armenia 2 Azerbaijan 1 2011 2012 2013 2014 2015 2016 2017 2018 Source: UNESCO Institute for Statistics. Georgia’s education sector underwent impor- decentralization of ECE provides flexibility and tant systemic reforms over the last two dec- helps to tailor the response to the needs of ades. The education policies in the country have each region, there is a wide variation in financ- been mainly driven by global education trends, ing, service modalities and quality. The MoES prompting the government to introduce demo- is responsible for teacher training and certifi- cratic principles, transparent management and cation of all types of pre-schools. However, child-centered approaches at all levels of edu- the MoES only lays out educational standards, cation. The major outcomes of the first phase of which are rarely enforced due to the limited the reform process between 2004 and 2008 human and financial resources of municipalities. included the introduction of centralized uni- versity entry examinations to eliminate corrup- General education can be provided in Geor- tion; the introduction of a competency-based, gia by both public and private institutions, student-centered National Curriculum; the although enrollment remains largely concen- establishment of schools as semi-independent trated in public schools. There are slightly less legal entities of public law, run by school princi- than 2,100 public schools in Georgia, serving pals, with greater accountability for the school up to 540,000 pupils. In recent years, enroll- boards; the introduction of a per-capita fund- ment in private schools has increased, how- ing formula; and the establishment of semi-au- ever, reaching an 11 percent share. Most private tonomous institutions to enhance the quality schools are located in Tbilisi and large cities. of education, such as a National Assessment and Examination Center (NAEC), a National In the 2005/06 academic year public schools Center for Educational Quality Enhancement were re-established as semi-autonomous (NCEQE), an Education Management Informa- legal entities, in which school principals are tion System (EMIS) and a Teachers’ Professional elected and are accountable to a school board. Development Center (TPDC). The creation of the school boards has been a significant initial step towards establish dem- In 2006 the management of ECE was decen- ocratic governance practices and ensuring tralized and it is now the responsibility of local greater accountability of schools to the school governments. According to administrative community. Overall, governance of general data, 1,621 preschool education institutions are education is defined by the Law on General registered officially, serving 164,605 children. Education and the National Curriculum, which ECE is the only level of education that has been define not only learning targets, but also deliv- decentralized to local governments. While ery, assessment and management modalities. 22 GEORGIA Back to table of contents Human Capital Review The momentum of reform is, however, losing public VET institutions, with a few public-pri- pace. The next wave of reforms, from 2008 vate partnerships in the sector of hospitality onwards, has been less effective in institution- and infrastructure. Enrolment in VET remains alizing the outcomes and providing support modest, however, with annual registration to those implementing the changes on the rates of 15,000 students and considerable ground. Due to frequent changes in govern- high dropout rates (up to 30 percent annually). ment and thus in approaches to reform – as Despite improvements, public expenditure on well as the lack of a data collection and pro- VET remains low, and low geographic coverage cessing strategy to inform the decision-mak- also limits access, although the limited pres- ing process – policies were strongly influenced ence of firms for training would affect access to during this period by political and economic quality VET outside large cities: only 6 percent factors, with some notable setbacks such as of youth and 3 percent of school graduates delays in the teacher certification process. participate in VET. Also, quality remains poor overall: teacher deployment, management and To support the quality of teaching and stu- incentive policies have been lagging in VET dents’ learning, in 2018 the MoES introduced until recently, and there is a lack of practical and the third generation competence-based cur- on-the-job training; and very limited coordina- riculum and launched the so-called New School tion with the employers. Model project to provide staged support to schools in the delivery of the new curriculum. The Georgian higher education system com- As part of the project, specialized groups of prises 75 higher education institutions (in experts supported schools to develop school- 2017), comprising research universities, teach- based curriculums aligned to the individual ing universities, and colleges, distributed over schools’ context and needs and nationally a public and private higher education sector. set objectives. The project combines several Georgia has a medium-sized higher education elements: capacity building for teachers and system in international comparison, but with a school professionals to develop and implement relatively high number of institutions given the the school-based curriculum, use of technolo- size of the population. In 2017 slightly more gies to facilitate the learning process, intro- than 144,000 students were enrolled, with duction of a development-oriented evaluation about 35 percent of the student population in system, and the establishment of school man- private institutions (World Bank 2018a). agement to support the educational processes. Tertiary education relies heavily on student General education funding is (formally) per tuition fees. More than 70 percent of all public capita and is mostly based on a voucher expenditure on higher education is allocated scheme, which also covers private schools. through state grants for tuition fees (under- The voucher scheme applies to 40 percent graduate and graduate), for priority fields and of schools in Georgia, although these schools student scholarships for excellence (World enroll the vast majority of students. The Bank 2018a). The tendency of increased num- remaining 60 percent of schools have their bers of students at tertiary level is further sup- budgets assessed and determined individually: ported by the current funding mechanism, although the funding still reaches the schools which is manly student-number based, does directly, it includes per-student elements, per- not include any basic funding component and teacher elements, per-school elements, and, for lacks performance incentives for moderniza- small schools, a per-class element. Due to the tion and internationalization of the higher edu- absence of school/national level measurement cation sector. of learning outcomes the funding formula does not, however, include an equity component. Overview of the health care sector Vocational education and training (VET) is provided in around 100 public and private Georgia’s overall spending on health care is institutions. There are twice as many private as larger than that of many countries in the region, 23 GEORGIA Back to table of contents Human Capital Review although it remains below the European aver- to seek health care. After the introduction of age. In 2018 (before COVID-19) Georgia spent universal health coverage (UHC) in 2013, public a little more than 7 percent of GDP on health expenditure on health increased substantially care (Figure 13). This placed Georgia among the between 2012 and 2018, and reached 2.8 per- non-EU countries that spend most on health in cent of GDP. Growing public spending gradually the region, although spending remained below reduced dependence on private out-of-pocket the EU average (9 percent). When measured payments, which declined from 75.1 percent of in absolute terms (in $ PPP), however, spend- total health expenditure in 2010 to 60 percent ing remained relatively low compared to many in 2018. These increases notwithstanding, out- countries in the region, potentially affecting the of-pocket payments (to a large extent for out- country’s ability to purchase pharmaceuticals patient medical goods) continued, however, to or equipment that are priced in the interna- be the largest source of health financing; Gov- tional market. ernment expenditure came second, and pri- vate insurance a distant third (Figure 14). While In 2018 out-of-pocket expenditure was, how- the COVID-19 pandemic has further increased ever, the largest source of health care financing, public sector spending, high out-of-pocket affecting the ability of the poor and vulnerable payments remain a significant challenge that Figure 13: Georgia’s health care spending is larger than that of many countries in the region 12% 4500 4000 10% 3500 8% 3000 Share of GDP PPP int. $ 2500 6% 2000 4% 1500 1000 2% 500 0% 0 ECA* KAZ AZE TUR ALB UZB RUS ROU BLR LVA POL KGZ LTU MKD MDA TKM SVK EST HUN CYP HRV GEO TJK BGR CZE UKR SVN MNE SRB BIH MLT ARM EU Current health expenditures (% of GDP) Source: WHO (Global Health Observatory and Global Health Expenditure Database). Data for 2018. Averages are population weighted. ECA*: LIC & MIC ECA (excluding Russia) Figure 14: In 2018 out-of-pocket expenditure was the largest source of health financing Other Private insurance Government OOP 0 500 1000 1500 2000 Source of financing (GEL Millions) Services Inpatient curative Outpatient curative Ancillary services Outpatient medical goods Preventive and public health Health administration Source: 2017 National Health Accounts. 24 GEORGIA Back to table of contents Human Capital Review may prevent the poor and vulnerable from approximately 79 percent of the market share. seeking health care. Primary health care (PHC) services are pro- The Ministry of Internally Displaced People vided by several actors with the involvement from Occupied Territories, Labor, Health, and of numerous stakeholders in various settings Social Affairs (MoILHSA) has the oversight of and with diverse payment mechanisms. Gen- the health system. MoILHSA is responsible for eral PHC services are delivered by family prac- developing and implementing national health titioners or specialists, who trained in family care policy and strategy; drafting and enforc- medicine as a second specialty. While rural ing health care laws and regulations; setting doctors are contracted with a monthly salary up and overseeing national public health pro- by the Emergency Situation Coordination and grams; advocating for adequate allocations Urgent Assistance Center (a subordinated from the budget for health care programs; and agency under MoILHSA), urban family doctors regulating health care professions, health care are employed by private providers contracted facilities and the pharmaceutical market. by NHA and paid by capitation. Other medical specialties and diagnostics also have contrac- The National Center for Disease Control and tual arrangements with NHA (WHO 2018). Public Health (NCDC) is responsible for public health, including immunization, surveillance, Several dedicated programs are being imple- disease prevention, health promotion and the mented for health care provision. The UHC laboratory system. NCDC manages about 20 Program provides access to services for vulner- percent of budgetary funds for health care and able groups and population below an annual retains responsibility for financing preventive income threshold of GEL 40,000; disease-ori- and public health interventions, including dis- ented programs ensure either services and/ ease surveillance. The State Regulation Agency or medication for specific diseases and health for Medical and Pharmaceutical Activities is conditions (diabetes, tuberculosis, HIV, hepatitis responsible for issuing and controlling the C, mental health disorders and addiction). The licenses and permits for health care facilities, Rural Doctors Program is being implemented and for regulating medical professionals and in about 900 villages and covers around 1.1 mil- pharmaceuticals. lion people living in rural areas. Locations range from state-owned or municipality-owned A National Health Agency (NHA) was estab- health facilities to private hospitals, where lished in 2020 to facilitate implementation of doctors work side by side with specialists. Each the state health care programs. The NHA is program has its own scope of services, access now responsible for administering and man- criteria and reimbursement volume limits, but aging health care programs, including UHC. the services they provide are usually free at The NHA manages about 80 percent of public the point of use. A new program for manage- funds for personal health care services and ment of COVID-19 was launched in May 2020. some vertical health programs, and oversees purchasing of services from public and private The UHC Program expanded the breadth of providers according to a fixed price list. state-funded benefits and increased popu- lation coverage to almost 82 percent of the The vast majority of provision of health care population by 2017. The UHC Program pri- services at all levels is private. Most health care marily focuses on protecting poor households providers are private, for-profit entities, some with an expanded benefits package, and the owned by private insurance companies and rest of the population with a basic set of pub- medical corporations. The market is relatively licly funded benefits. Private health insurance fragmented, with the six largest competitors plays a minor role in the health system, cover- (all of which are private) accounting for only ing only around 8 percent of the population, 35 percent of the total number of beds in the mostly through group coverage of employees country. The pharmaceutical market is highly and their families, and accounting for 6 percent concentrated, with three major players holding of current spending in health in 2017. 25 GEORGIA Back to table of contents Human Capital Review The Health Management Information System developing the use of telemedicine and other (HMIS) captures and manages information on digital technologies across both urban and rural aspects of health care in Georgia. The HMIS areas, to improve patient access to high-qual- provides connection among the key players in ity care. Progress on these reforms was, the health care sector to enable MoILHSA to however, stalled by the COVID-19 pandemic. make informed decisions in critical domains, establish standards for reporting and real- time information exchange, and ensure a high Overview of the social protection level of security and confidentiality of sen- sector sitive and patient proprietary information. A new Information Technology Agency was also In 2018 Georgia spent around 6 percent of established in 2021 to be the legal successor GDP on social protection, remaining below of MoILHSA and its legal entities in the field of what most countries in Europe and Central information technology support activities: this Asia are spending (Figure 15). The relatively low will enable further development of the HMIS. spending levels are mainly driven by modest spending on pensions relative to other coun- The government is also envisaging service tries. Social assistance spending is in line with delivery reforms to further strengthen quality ECA averages, but spending on unemploy- and efficiency. These include: (i) digitalizing and ment and labor market programs is extremely better connecting primary care and secondary limited. It should be noted that social protection care providers, so that patient-level informa- spending jumped to almost 10 percent of GDP tion can be shared more easily and securely; (ii) in 2020 because of the COVID-19 pandemic. develop further the health care management Programs were expanded, and some new ones information system to connect data between were created (see below), but it is still unclear PHC providers, NHA and MoILHSA and allow how much of the higher spending will remain efficiency gains, including detection of ineffi- in the medium to long-term. As this report cient (inappropriate) claims; (iii) revising referral focuses to a large extent on structural, medium mechanisms, to ensure that more health care is to long-term factors affecting the quality of delivered at the primary care level (with hospi- delivery we shall, therefore, base most of the tals reserved for the most complex cases); (iv) analysis on pre-pandemic spending levels. encouraging the formation of group practices in urban and semi-urban areas and practice Georgia’s social protection system is fairly networks in rural areas, to optimize efficiencies comprehensive, although spending remains (particularly of administrative functions); and (v) heavily tilted towards pensions and social Figure 15: Social protection spending remains below the ECA average 20% 15% 10% 5% 0% UKR - 2017 MNE - 2012 ROU - 2017 POL - 2012 SRB - 2019 UZB - 2017 BGR - 2017 HRV - 2014 MKD - 2019 BLR - 2017 HUN - 2016 KGZ - 2017 EST - 2017 LVA - 2017 CZE - 2017 ALB - 2019 RUS - 2016 TUR - 2016 MDA - 2017 LTU - 2016 GEO - 2018 GEO - 2020 KSV - 2017 ARM - 2017 AZE - 2014 KAZ - 2017 TJK - 2017 SVK - 2017 BIH - 2017 Social Insurance Social Assistance Labor Market Programs Social Care Services General Subsidies Source: World Bank SPEED (Social Protection Expenditure and Evaluation Database). 26 GEORGIA Back to table of contents Human Capital Review assistance, and the system lacks an unem- In 2020 SESA’s activities were almost com- ployment insurance scheme (Figure 16). In pletely redirected towards administration of recent years the government has embarked on COVID-19 emergency measures for the newly significant social protection reforms. Among unemployed and the self-employed: of the other measures, the government introduced planned GEL 2,790,000 allocated to active the Targeted Social Assistance (TSA) Program labor market programs (ALMPs) in the 2020 in 2006 and targeted child allowances in 2015. budget, only GEL 448,600 was actually spent More recently there has been a new indexa- for these purposes. In addition to SESA pro- tion of the universal basic pension, a contrib- grams, municipalities also offer their own train- utory pension scheme in 2019, and in 2020 ing and employment programs. the creation of an agency specifically devoted to employment services. Most government Social assistance comprises a variety of pro- expenditure on social protection at central grams. Poverty targeted programs include the level remains, however, concentrated on social TSA (the country’s flagship social assistance assistance and non-contributory pensions, program), child benefits introduced in 2015, with little spending on active labor market pro- health exemptions and a multitude of social grams and social care services, and little social benefits administered at local level (including insurance other than the contributory pension health exemptions, exemptions from tuition system first rolled out in 2019. Moreover, the fees, housing benefits, and energy and trans- social insurance component of the social pro- portation subsidies). Categorial social benefits tection system lacks unemployment insurance. include the internally displaced person allow- ance (benefit for those from the occupied ter- Active labor market programs in Georgia are ritories with internally displaced status), social the responsibility of the newly established rehabilitation for persons with disabilities, ben- State Employment Support Agency (SESA). efits and services for war veterans, and benefits SESA has been operational since 2020, but and services for the protection of vulnerable currently has rather limited geographical out- children. The social assistance targeting system reach and is still in a nascent stage of devel- is used to target the TSA, the basic health care opment of human resources and programs. package for the poor under the UHC Program, Figure 16: Structure of the centrally administered social protection system in Georgia Labor market Pensions and social Social assistance benefits and services Social care services programs insurance • Job matching - • TSA, including child benefit introduced in • Social rehabilitation • Universal old-age Worknet portal, job 2015 for persons with social pension (wom- fairs, government disabilities en 60 years and • Benefits for the protection of vulnerable job openings, private older and men 65 children • Housing services and portals years and older) benefits • Locally administered benefits (such as • On the job programs • Contributory retire- health exemptions, exemptions from • Services for the pro- ment pension intro- • Soft skills training tuition fees, housing benefits, and energy tection of vulnerable duced in 2019 and transportation subsidies) • Vocational training • Maternity benefits • Benefits or exemptions for mountainous • Wage subsidies areas • No unemployment insurance • Benefits and services for internally dis- placed persons from occupied territories • Health care coverage for the poor • Disability benefits • Survivors’ pensions (children only) • Work injury benefits • War veteran pensions 27 GEORGIA Back to table of contents Human Capital Review Figure 17: The TSA is the largest social assistance program Maternity and childcare Others Benefits for residents of high mountain areas 5% 2% 5% Targeted Social Assistance Benefits for refugees and internally 30% displaced persons 15% 3% 17% Survivors Pension 23% Targeted health care Disability Pension Note: Central government spending only. and a variety of municipal programs. Total social versal pension system. While this expenditure assistance spending by the central government is far lower than what other countries in Europe in 2018 amounted to approximately 2 percent and Central Asia spend on pensions, it is com- of GDP: the TSA was the largest program and parable to what other countries spend from accounted for 30 percent of social assistance the budget to cover the deficit in their con- spending (Figure 17). tributory systems. Eligibility is attained at age 60 for women and age 65 for men. In 2020 Several government agencies provide some there were 772,000 pensioners: this number forms of social care services, including those is expected to grow by 149,000 over the next from MoHILSA, the MoES, the Ministry of thirty years due to increasing life expectancy. Justice, and the Ministry of Corrections and Probations (in charge of penitentiary insti- Municipalities also implement several social tutions). The social services administered at protection programs. Some gaps in the cen- central level include housing support for vulner- trally administered social protection programs able groups, support for the elderly and foster are filled by the local authorities, which spend children, rehabilitation programs for former about 14 percent of their budgets on social inmates, and services and reimbursement for protection and health care programs (UNICEF services for people with disabilities. In addition, 2017). This is because of the historically decen- municipalities also provide a variety of services. tralized nature of the Georgian state, and the The government is also working to deinstitu- presence of remote areas in the Caucasus. tionalize services for children and persons with Decentralization enables local levels of gov- disabilities, moving towards a community-and ernment to adapt their programs to the pref- family-based approach, although low overall erences and needs of local communities, but spending levels in social care services are also leads to financing and delivery challenges, affecting the reform. especially for the poorer municipalities. The 2019-2025 Decentralization Strategy is also A universal state pension is the only current intended to delegate social service provision pension benefit for retired people. The intro- for children and other vulnerable groups to the duction of a contributory funded pension in local authorities. 2019 did not change this situation, and the new system will not be able to generate regular benefits any time soon. The universal pension is funded from the State budget. In 2018, Georgia spent 3.6 percent of its GDP on its uni- 28 GEORGIA Back to table of contents Human Capital Review 4. Maintaining the reform momentum to deliver better and more equitable services Substantial reforms were initiated in the human cation, health, and social protection) in three development sectors in the early 2000s. At the dimensions: quality and effectiveness; equity; beginning of the millennium the government and the level efficiency and sustainability of enacted several important reforms in the human spending. Under quality and effectiveness, we development sectors. In the education sector, investigate the extent to which human devel- Georgia introduced a competency-based, stu- opment systems can deliver quality services to dent-centered National Curriculum; central- boost human capital and identify delivery chal- ized university entry examinations to eliminate lenges that may prevent effective delivery and corruption; established schools as semi-inde- lead to gaps in human capital. Under equity we pendent legal entities of public law; introduced describe the extent to which service delivery is a per-capita funding formula; and established inequitably distributed across the territory and semi-autonomous institutions to enhance the population, and fails to address the needs the quality of education.4 It also implemented of specific groups, including ethnic minorities, large-scale state-funded programs, such as special needs students and the poor and vul- free textbooks and transportation services for nerable population. Finally, under the level, all public school students, promotion of inclu- efficiency, and sustainability of spending we sive education, school-based development look at the extent to which delivery challenges opportunities and professional support for may stem from low spending levels; whether teachers. In the health sector, the introduction it could be possible to improve the quality of of UHC in 2013 provided a benefit package delivery given the current spending levels; and covering a range of primary and secondary care the extent to which how selected programs are services, including planned ambulatory care, designed may lead to unsustainable spending emergency outpatient and inpatient services, levels in the medium to long term. elective surgery, oncological services, obstet- ric care, and some essential drugs. And in the social protection sector, Georgia now pro- Improving the quality and vides a variety of benefits, including a universal effectiveness of delivery old-age social pension; the TSA; benefits and services for internally displaced persons from Implementation challenges are affecting the occupied territories; social rehabilitation for Georgia’s ability to deliver quality human persons with disabilities; benefits and services development services. Lack of capacity at the for war veterans; and benefits and services for local level, overworked or poorly qualified staff, the protection of vulnerable children. and poor-quality control mechanisms are all affecting the ability of social sectors to deliver It will be important to maintain the momentum quality services. We review the main constraints of reform, which has slowed in recent years. below. Many recent reforms, while often designed according to international best practice, have Education been slowed by implementation challenges and, more recently, by the ongoing COVID-19 The quality of early childhood education (ECE) pandemic. is hampered by insufficient numbers of class- rooms, pedagogical approaches that are not In what follows we identify challenges to the child-centered, poorly prepared teachers delivery of human development services (edu- and the lack of support and career paths for 29 NCEQE, TPDC, NAEC, EMIS. 4 GEORGIA Back to table of contents Human Capital Review teachers (UNICEF 2018b). While Georgia has Poor individualized teacher support and a made a significant step forward by approving monolithic teachers’ professional develop- education standards for ECE in 2017 that ment system are hindering the implementa- define the desirable cognitive and emotional tion of the new curricular reforms. Eighty-one targets for child development and adopted percent of teachers in Georgia are instructed a new Law on Preschool Education in 2018, on subject content, pedagogy and classroom implementation of the new approach has practice – a share that is close to the average been lagging due to various factors, including of countries participating in the Teaching and the limited capacity of local governments and Learning International Survey (79 percent; limited qualifications of ECE staff. Before 2016, OECD, 2019). Nevertheless, teachers in rural pre-primary institutions only provided child- settings have received insufficient support to care services – and thus employed a workforce implement student-centered curricula since that may not have the necessary pedagogical their early adoption in 2005. The monolithic, qualifications. Data gathered from 57 munici- centralized professional development system palities find that 44 percent of ECE teachers/ also fails to meet individual teachers’ profes- care givers are unqualified, and that 50 percent sional needs and – without proper school- of managers lack either pre-service or in-ser- based professional support – teachers find it vice training on ECE and mentoring (UNICEF almost impossible to transfer the knowledge 2018a). Many municipalities also provide gained through the training into the classroom limited continuous education and support to environment. Georgia introduced the first ever teachers due to budgetary restrictions and a online professional development opportunity lack of training providers. for STEM teachers between 2016 and 2019, and an electronic platform was established in Poorly prepared teachers and lack of teach- 2019/20 that has widely been recognized as a ers’ support are also affecting the quality of major step forward. Nevertheless, in order to general education. Quality teaching is critical to further develop and sustain both initiatives, the holistic development of students. However, content development needs constant and weak governance, poorly qualified teachers, high-quality support. underdeveloped teacher career paths and systems for principals’ deployment and pro- The selection and recruitment process for fessional development, as well as insufficient school principals does not build on candidates’ funding of the general education system, are strengths in instructional leadership. Poorly undermining quality. Georgia recognized the qualified principals are affecting the quality of importance of teacher quality and appraisal teaching. Effective school leadership has signif- systems during the early stage of education icant effects on student learning outcomes reforms. However, due to the lack of financ- (Bloom et al. 2015), and in most OECD coun- ing and strong political will, proper incentive tries school leaders have higher educational mechanisms and support, historically there has attainment than teachers; they also undergo been much opposition to certification policies dedicated training. In Georgia, however, only and few teachers have been willing to partici- 28 percent of school leaders have completed pate. Moreover, due to low qualifications, only a program or course in school administration or 27 percent of all active teachers passed certifi- training for principals (against an OECD average cation examinations in their subject areas and of 54 percent), and at least a third have not yet professional skills between 2010 and 2014. As completed an instructional leadership training a result, nearly 60 percent of teachers were still program or course (OECD 2019a); moreover, uncertified by 2018. Additional certification many school principals lack prior teaching training and examinations have been organ- experience. The government revised the prin- ized since 2019 for “practitioner” (uncertified) cipals’ standards in 2020 to place greater teachers to obtain the status of “senior” (cer- emphasis on supporting a student-centered tified) teachers. Practitioner teachers above learning environment; however, because of the 60 years (female) or 65 years (male) were also pandemic and scarce resources the new stand- offered severance packages. ards have not yet been implemented. 30 GEORGIA Back to table of contents Human Capital Review Although Georgia has made progress in supply of higher education graduates (Kriechel harmonizing the VET framework to EU stand- and Vetter 2019; MoESD 2018). ards, access to, quality of and relevance of VET remain a challenge. Georgia began reforming Improved quality assurance mechanisms and the VET system in 2014. Although a new legis- funding formulas could boost the quality of lative framework has enabled greater collabora- higher education. The introduction of author- tion with the private sector, interactions are still ization and accreditation mechanisms has limited because of low interest from the private helped to improve the quality of higher educa- sector and lack of funding and capacity to tion institutions: the authorization and accred- manage the coordination. The quality and rele- itation requirements for private institutions in vance of the VET programs therefore remains 2010, for instance, led to the closure of more fragile: employment among VET graduates than 100 private institutions (Bochorishvili and of 2018 is only 63 percent, and declines to 50 Peranidze 2020). Nevertheless, until recently percent for 2019 VET graduates, although the authorization and accreditation requirements COVID-19 pandemic may be responsible for focused on inputs, not on outputs such as some of the low employment rate. The private learning outcomes, employability or research sector needs to be incentivized to offer oppor- outputs. This has now changed with a new tunities for on-the-job training and participa- quality assurance framework, which follows tion in the decision-making process. Taking into European standards. Introducing performance account rapid technological changes and the elements into the higher education financing importance of acquiring transversal skills, VET system and institutional research could further education in Georgia also needs to be deliv- support national strategic priorities, such as ered in a more flexible, efficient and modernized (early) graduation, labor market orientation, way, enabling the sharing of resources across resource diversification, internationalization, programs and schools and using ICT in teaching research performance and flexibilization. and learning. Health The quality of VET is also hindered by non-sys- In spite of universal health coverage, out-of- tematic recruitment and management of pocket health expenditures remain high, teachers and inability to monitor their perfor- mostly because of lack of dental care coverage mance. The continuous professional devel- and limited coverage of outpatient medicines. opment of a vocational education teacher is UHC Program benefits are subject to a compli- directly linked to improving vocational educa- cated system of user charges, with co-pay- tion and promoting recognition of the voca- ments varying based on the type of health tional education teaching profession. Attracting service and beneficiary category. For planned and retaining teachers in the field of vocational inpatient services, most co-payments are in education is a vital and attractive element the form of percentage co-payments, where of career development. It is critical that VET the user pays a share of the UHC Program teachers are provided with opportunities to maximum tariff, while if the price of the service improve their professional skills and knowledge exceeds the maximum tariff the patient pays in close collaboration with the private sector. the difference. Although people living below the poverty line and veterans are exempt from In higher education, limited attention to co-payments for most health services, they are quality is producing graduates who may not not exempt from paying the difference, and be able to meet labor market needs. Labor there is no cap on how much people must pay. market studies point towards a skills mismatch As a result of limited coverage of outpatient resulting in a high unemployment rate among medicines, weaknesses in the design of co-pay- Georgian youth, particularly higher education ment policy and providers being allowed to bill graduates. The skills mismatch has partly been patients for the balance, even poor households explained by the poor quality and relevance and people with chronic conditions are exposed of vocational and higher education programs, to high out-of-pocket payments when using though studies also point towards an over- publicly financed health services. 31 GEORGIA Back to table of contents Human Capital Review Integration and accountability issues lead to tice guidelines and protocols, the guidelines excessive reliance on hospital care services. only set recommended standards of care Rural doctors are poorly coordinating with against which patients’ complaints are judged, other providers and work without supervision and there are no regulations to appraise service or feedback. Urban family doctors are mainly providers’ clinical practice. A notable exception accountable to their organizations, and they do is the instrument for health personnel per- not usually manage people with high-risk dis- formance appraisal developed by the Family eases. Doctors are incentivized to push high- Medicine Association in 2006; however, this risk patients or those with multiple chronic has not been institutionalized in the system conditions towards hospital care, and hospitals because of the absence of a body to assume are incentivized to pull patients towards inpa- this responsibility. To cope with the lack of tient care. As a result, specialists reportedly treat regulations, private medical corporations and many cases that family doctors could manage. service providers have attempted to introduce The scope of services that family doctors and their own quality appraisal methods in their narrow specialists should deliver have not been facilities, with varying results (Chikovani and defined, and there is no mechanism for assess- Sulaberidze 2017). ing the appropriateness of referral to special- ists (WHO 2018). Georgia lacks a continuous system to report on population health outcomes. MoILHSA is There is also lack of trust in primary care pro- mandated to produce a national health report viders and the quality of care they provide, every year, and a health system performance although to best meet the needs of the popu- assessment every two years, but publication lation most care should be provided at primary has not occurred on a regular basis. Currently, level (Richardson and Berdzuli 2017). There is no the National Center for Disease Control and comprehensive health literacy program to build Public Health measures population health as trust in PHC. Low health literacy is a primary part of its population health surveillance, but contributing factor to health disparities, and this reporting is primarily of rates of communi- patients with low health literacy understand cable diseases. The findings of this surveillance less about their medical conditions and treat- are published in an annual health statistics ments and report worse health status overall yearbook. (Sumer, Shear, and Yener 2019). Lack of trust in primary care also increases out-of-pocket pay- While Georgia has established a comprehen- ments as people self-treat or bypass referral sive HMIS, it still uses paper-based reporting. systems to visit specialists directly (Goginash- E-health is mainly used to control programs vili, Nadareishvili, and Habicht 2021). from a financial perspective, and there is limited use of the data for service volume or quality Prices of health care services are not tightly monitoring purposes. While strategy docu- regulated and mechanisms to control service ment “Healthy Georgia, Connected to You” was volume are missing. When combined with developed in 2011 to provide a holistic view activity-based payment for hospitals, this of necessary e-health activities, there is still encourages over-treatment and the use of no approved strategy for digital health. Until more expensive services: this both increases recently there has been no dedicated institution the burden on publicly funded services and to strategically ensure successful operations shifts costs on to households. There are also and development of the Digital Health domain. strong incentives for private service provid- ers to increase revenue by prescribing brand- Pharmaceutical prices are high compared name medicines and services not covered by to neighboring countries and the cost-plus the UHC Program. margin for pharmacies significantly exceeds the margins established in EU countries (Rich- There are no regulations for the appraisal of ardson and Berdzuli 2017). Prices for medi- service providers’ clinical practices. Though cines are not regulated, apart from the vertical medical practice is regulated by national prac- and additional drug benefit programs under 32 GEORGIA Back to table of contents Human Capital Review which the NHA buys medicines on a tender social agents and beneficiaries to submit a basis. Innovative purchasing instruments, such large amount of information, even when this as managed entry agreements or reference could be retrieved directly by the SSA through pricing are also not used. the Civil Registry, as is the case for example with birth certificates. Moreover, while efforts High out-of-pocket spending on pharmaceu- have been made to ensure that TSA does not ticals is also linked to the frequent prescrip- provide disincentives to work (income disre- tion of brand-name medicines by physicians, gards have been introduced in 2019 and and the limited availability of low-cost generic mandatory registration with Worknet of TSA medicines in retail pharmacies (World Bank work-able members in 2017), activation of 2017). Locally produced generic pharma- social assistance beneficiaries needs to be ceuticals are not well-trusted by patients actively encouraged through changes in the or professionals; and overall cost-effective- incentives structure and by strengthening the ness guidelines are not used. Brand name quality of employment services provided to and generic pharmaceuticals that have been those who graduate. accepted by an approved pharmaceutical regulatory body can be registered automati- Social care is fragmented across multiple cally without any additional quality certificates government agencies and various levels of from the producers. Although simplified regis- government. The menu of social services tration increases access to cheaper medicines, administered at central level includes housing it has raised concerns about the removal of support to vulnerable groups, support for requirements for traceability and quality stand- the elderly and foster children, rehabilitation ards for importers (Tokhadze 2016). programs for former inmates, and services and reimbursement of services for people Social protection with disabilities. Functional disability assess- ments are currently being piloted, based on a The TSA program has been successful in person’s ability for self-care, movement, orien- reducing poverty, though its performance tation, relationships, self-control, studying and has deteriorated in recent years and imple- carrying out labor activities. While SSA social mentation issues persist that may reduce its agents are not social workers, they are a poten- effectiveness. Central government social assis- tially effective point of linkage between house- tance mostly comprises proxy means-tested holds in need and social services though this social assistance, geographically targeted potential is only exploited concerning referrals assistance, disability pensions, assistance for for domestic violence cases. Referral proto- internally displaced persons and refugees, cols are also lacking. Even taking into account and health care subsidies, and has an esti- the functions of the Agency of State Care and mated 6-percentage-point impact on poverty. Assistance for the (Statutory) Victims of Human Nevertheless, both coverage and implementa- Trafficking under the MoILHSA, social care tion issues persist. The TSA program, based on services outreach is not centrally codified and a proxy means test, has successfully reached it is thus not clear what points of access exist poor households, though its performance for vulnerable people to be redirected to the has deteriorated in recent years due to both relevant services. There are needs to strengthen design and implementation aspects (Honorati, social care services and social workers’ training, Sormani, and Carraro 2020). Its registration, to coordinate case management under a eligibility verification and payment procedures specific central agency and to strengthen the are lengthy, and the targeting is not sufficiently capacity of SSA social agents to provide refer- adaptive to changes in the income of regis- rals to people in need. In the face of evidence trants. The application process, for instance, of high workload, high turnover and insuffi- has to be initiated by an in-person visit from cient professional development, a revision of the household to the nearest Social Service SSA’s mandate and its human resources policy Agency (SSA) office (of which there are 69 in would be helpful to improve the SSA’s ability to the country), and requires three meetings of support the outreach of social services. 33 GEORGIA Back to table of contents Human Capital Review SESA, the agency responsible for implement- often leaves the most vulnerable deprived of ing employment and labor programs, faces the support they really need. Moving from sta- multiple challenges that may hamper its tus-based assistance to needs-based social ability to deliver more and higher quality ser- protection for IDPs would, however, require vices, especially for vulnerable jobseekers. In a strong integrated social protection system 2020 SESA’s activities were almost completely able to respond to IDPs’ vulnerabilities through redirected towards administering emergency existing forms of social protection, such as TSA measures for the newly unemployed and the for IDPs in extreme poverty, employment and self-employed: it is thus too early to assess livelihood support services targeted to the the quality and results of the ALMP programs. needs of IDPs, housing assistance for IDPs, and A few issues, however, stand out that suggest health and disability services. that SESA may be facing significant implemen- tation challenges. First, given the magnitude of Social insurance needs to be further developed the unemployment challenge, SESA is strongly or strengthened. Among other challenges, underfunded; it is also understaffed, and does there is no unemployment insurance scheme, not fully cover poorer and remote regions. leaving those who are temporarily unemployed Efforts also need to be made to increase the at risk of poverty; maternity benefits do not number of private employers posting vacan- cover the self-employed, a sector where many cies on the SESA website and to automatically poor women are active; there is insufficient retrieve postings of public administration job protection against work-related injuries, which opportunities, as well as on grants and other only covers high-risk, heavy, hazardous and types of financial support provided by other dangerous workplaces; and employers bear ministries. Outreach to employers also needs the whole burden for sickness benefits. to be increased: in 2020 only 253 employers took part in SESA’s activities (registration on While pension spending is sustainable, ade- worknet.gov.ge, internships, and wage subsi- quacy will decline until people will have con- dies). The scope and scale of ALMPs is still very tributed sufficiently into the new contributory small, the provision is not equally distributed scheme. The universal old age pension provides across regions, the design is not aligned with relatively small benefits, equal to 17 percent of the needs of the population and evidence is the average wage. Projections suggest that scant on the effectiveness of existing employ- universal pension expenditure will be sustain- ment programs. Programs supporting youth’s able over time, but this comes at the cost of transition to work are few and small, and there gradually decreasing adequacy of benefits, in are no active measures, including self-employ- particular for beneficiaries aged less than 70, ment support, specifically targeted to vulnera- whose benefits will likely fall to 6 percent of ble and poor jobseekers in rural areas. There is the average wage by 2050. Contributory pen- also a need to foster the provision of job-rele- sions are still at their onset and it will be at least vant skills by upscaling and diversifying voca- one or two decades before they have an effect. tional training among public providers and to They are expected to improve consumption stimulate provision of private training (with smoothing by enabling workers to accrue ben- a focus on job creating sectors) closely with efits as a constant share of their income; never- sectoral employer organizations; this includes theless, adequacy will fall until the contributory a need to upgrade the selection, delivery system is sufficiently funded. methods and curricula of short term training and to tailor them to the needs of vulnerable groups. While the Government of Georgia has made considerable progress in providing better socio-economic integration of internally dis- placed persons (IDPs), a number of challenges still remain. The categorical IDP allowance 34 GEORGIA Back to table of contents Human Capital Review and socioeconomic groups. Putting greater focus on equitable delivery and the needs Differences in quality of and access to ECE services relate to a large extent to the unequal of vulnerable population groups distribution of funding and weak management Inclusive access to quality health, education, of early childhood services. While decentraliza- social and employment services is central to tion of ECE provides the flexibility to adapt to the “European State” vision driving Georgia’s the needs of each region, municipalities bear development strategy. The 20 principles of the responsibility for financing ECE services, the European Pillar of Social Rights are the and coverage and financing varies significantly beacon guiding the European Union towards a across the country, directly impacting quality. strong social Europe that is fair, inclusive and A quarter of Georgian children still lack access full of opportunity (European Union 2021). to kindergarten, with coverage gaps larger for Georgia shares a similar vision, and seeks to poor and vulnerable households, posing chal- translate that vision into collaborative policies, lenges both to children’s development, and programs, and actions to ensure quality and to women’s ability to participate in the labor inclusive access to human capital services for market. Capacity and financing constraints people living in rural or geographically remote across municipalities also affect the quality of areas, socially vulnerable groups, internally dis- service delivery across the country. For instance, placed persons, and people with disabilities while the full-time salary of a preschool teacher and migrants, among others. Effective inclusion can reach GEL 660 ($200), in some munic- also requires particular attention to be paid ipalities it may only be GEL 130 ($40); and and dedicated programs to be implemented there is also a large variance in access to edu- for poor and vulnerable households, who may cational and developmental resources (toys, require more support and greater investment children’s books, stationery and art supplies) to acquire quality human capital. across Georgia. No extra funding is provided to ECD institutions to identify developmental Several design and implementation challenges or special needs and provide personalized ser- prevent effective delivery of human develop- vices to children. ment services to remote, poor and vulnerable populations. To be sure, delivery of services Lack of central monitoring and unified stand- for remote, poor and vulnerable populations ards also affect the quality of ECE across suffers from the same implementation flaws as municipalities. While the central government delivery for the general population; but addi- maintains responsibility for monitoring, it has tional and specific design and implementation been difficult to enforce quality standards issues affect their ability to receive quality ser- across the territory: monitoring is fragmented, vices, as reviewed below. mostly within the context of various projects and stakeholder initiatives (UNICEF 2018b). The Education absence of infrastructure standards also hinders While overall enrollment has substantially the development of modern, child-friendly kin- increased, Georgia’s education system still dergartens. Overall, ECE services suffer from faces unbalanced representation of the vul- several flaws, including lack of accountabil- nerable population in access to ECE and sec- ity mechanisms at the municipal level; limited ondary schooling. There is quite significant municipal budgets, which are not supple- variation in access to ECE services at regional mented from the central budget; poor coordi- level: the attendance rate in Tbilisi, for instance, nation among line ministries and local govern- is 88 percent, compared to 41 percent in Kvemo ments; lack of competences at local level; and, in Kartli, which has a high minority ethnic popula- many municipalities, poor quality infrastructure. tion; and strong disparities in access are also present across socio-economic groups (Figure Weak monitoring procedures make it impossi- 8). Similarly, dropout rates from secondary ble to track individual children’s learning path- education also vary significantly across regions ways throughout ECE, general education and 35 GEORGIA Back to table of contents Human Capital Review beyond. Early tracking of learning gaps would 2014). Several factors are behind these dif- help to identify children at risk of underper- ferences, but two stand out. First the Unified forming or dropping out, paving the way for National Exams – while improving the quality interventions to keep children in schools and of the students at entry – may limit access from improve their learning. During 2020/21 MoES students who did not have the opportunity to initiated a new program to track children left receive quality general education or resort to out of general education; nevertheless, this is quality private tutoring, which is widespread in still at pilot level, and the program only tracks Georgia at this level of education. Second is the quantitative data on participation in ECE and high cost of higher education for households: general education. The absence of early assess- given the low public funding available for higher ments makes it impossible to provide person- education, universities rely heavily on students’ alized support to children across the system. fees while providing very limited scholarships and loans opportunities, making higher edu- The varying quality of school boards and Edu- cation unaffordable for many students from cation Resource Centers (ERC) at local level disadvantaged socioeconomic backgrounds substantially affects the quality and effective- (World Bank 2018a; Bochorishvili and Pera- ness of the schools. During 2005/06 public nidze 2020). On average, 75 percent of appli- schools were re-established as semi-autono- cants are admitted to higher education institu- mous legal entities of public law, with school tions and slightly more than 35 percent benefit principals elected by and accountable to the from state funding to some extent (state grants school board (though many are currently are distributed among admitted students serving as “acting principals” and appointed based on merit and socioeconomic status). by MoES). In addition, ERCs have been created in every municipality, under the supervision of Health MoES, to assist and sustain implementation of Quality of care varies substantially across reforms at local level. Unfortunately, these initi- the territory and socioeconomic groups, and atives and reforms have not resulted in stronger, this affects children’s health outcomes. While more transparent, and more democratic gov- health outcomes for children under five have ernance of schools. School boards and ERCs significantly improved with major reductions in remain weak and formal, dealing mostly with mortality, Georgia still has a sizable number of formal approval of documents and exchanging left-behind children, mainly from socio-econom- information between the school and the minis- ically deprived households and from rural areas. try. To some extent, the ERCs have also become a political instrument: although officially school Despite the positive developments at earlier principals are elected by school boards based stages of UHC Program implementation, on qualifications, in some cases ERCs recom- a sizable share of households continue to mend candidates without taking into account face catastrophic spending on health. Since their qualifications. Attracting professionals 2015, household spending on health has been into school management is also hindered by growing steadily and in 2017 it returned to delays to the certification process for candi- almost pre-UHC Program levels, mainly due to dates willing to become school principals. price increases for medicines. The prevalence of catastrophic health expenditure in this period Access to higher education also differs sub- increased from 29.8 percent to 34.2 percent in stantially across territories and socioeconomic 2017 (UNICEF 2017). The proportion of house- groups. Tertiary education enrollment is higher holds financially challenged with drug pur- for students from the capital/urban areas and chases increased from 17.5 percent in 2009 to for students from advantaged socio-economic 27.8 percent in 2017. An additional 6.6 percent backgrounds. Enrolment is nearly eight times of Georgian households were estimated to be lower from the poorest quintile of students poor because of out-of-pocket payments for than from the wealthiest quintile; and ethnic health, slightly higher than the 2010 figure (6 Azerbaijanis are three times less likely to enroll percent). This implies that the risk of impover- in higher than ethnic Georgians (World Bank ishment due to out-of-pocket payments has 36 GEORGIA Back to table of contents Human Capital Review remained substantial following the introduc- poorer regions, but they do not fully compen- tion of the UHC Program (World Bank 2017). sate for the disparities generated by municipal programs. Moreover, lack of service standards Vulnerable socio-economic groups have been and monitoring by the central agencies, lack of more affected by increased household spend- qualified personnel at local levels, and coordi- ing on health. Annual spending levels in current nation challenges are also affecting delivery. GEL surpassed pre-UHC Program levels by almost 66 percent for the four lower quintile SESA employment programs tend to cover groups, but for the richest, it only increased the most affluent regions. The COVID-19 crisis by 6 percent compared to 2011. It appears, shifted human and financial resources away therefore, that the UHC Program has afforded from active labor market programs exactly greater financial benefits to the better off rather at the time when SESA began operating. than equally protecting all households from Even before COVID-19, however, the activi- the financial hardships caused by ill-health. ties planned by SESA were small in scale, due to insufficient human and financial resources While the burden of disease is significant despite a broad mandate covering vocational among the elderly, the government only pays training, socio-emotional skills training, on the for curative services, with no long-term care job training, wage subsidies, and job matching being offered. State-funded long-term care services. The geographical outreach of SESA services are not envisaged in the government is also rather limited, with 12 centers covering program, despite the high number of individ- Tbilisi, the Adjara Autonomous Region and uals in need of daily care (JAM News 2020). seven of nine regions of Georgia, as opposed to Therefore, most of them are cared for by family the 69 SSA centers that delivered employment members, imposing a heavy financial and eco- services until 2019. Moreover, the SESA centers nomic toll on the households. are currently concentrated in the most well-off and economically active areas of the country. Social Protection The high degree of decentralization in the While well-targeted, the adequacy of social administration of some social assistance ben- assistance benefits remains relatively low and efits generates large disparities across munic- TSA coverage of the poor and vulnerable pop- ipalities, with poorer municipalities facing ulation is far from universal. Average social capacity constraints and spending less on assistance spending per beneficiary per annum social assistance. Municipalities spend about amounted to GEL 572 in 2018, roughly less 14 percent of their budgets on social protection than a quarter of the subsistence minimum. and health care programs. Decentralization of A compounding cause for concern is also that spending enables local levels of government TSA beneficiaries are expected to consume 65 to adapt their programs to the preferences percent of the subsistence minimum at most, and needs of local communities. It generates, by the very construction of the TSA score. More- however, sizeable disparities in the generosity over, while the TSA is well targeted and min- and extension of coverage of social assistance imizes inclusion errors, it excludes one in four measures, due to differences in the budgets people in the bottom decile (overall it covered that municipalities are able to allocate to social 13 percent of all households in October 2020). protection – with poorer municipalities facing higher poverty rates less able to support their Georgia is currently reforming disability ben- poor and vulnerable populations. Different efits and social care services for persons with municipalities also have different eligibility disabilities. A new version of the Law on the rules for similar types of benefits and services, Rights of Persons with Disabilities, approved accentuating disparities across the territory. To by parliament in July 2020, stipulates the obli- cope with these disparities some central pro- gation from 2023 to base disability assess- grams, such as those targeting high moun- ments on bio-psycho-social models (instead tainous settlements or internally displaced of medical models). Pilots of the disability persons, are specifically designed to cover evaluation have been implemented in Adjara, 37 GEORGIA Back to table of contents Human Capital Review Samske-Javakheti and Tbilissi. However, the Low spending also limits the remuneration detailed implementation plan for this impor- of teachers and principals, affecting the gov- tant reform is still being drafted. Furthermore, ernment’s ability to recruit qualified staff, and assessments related to different options of staff ability to fully dedicate themselves to benefit packages, procedures, scope of ser- teaching. The low salaries of teachers, as well as vices and so on are still under preparation. the absence of full-time teaching hours, have historically discouraged high-quality school graduates from applying to teaching prepa- Increasing spending levels and ration programs; therefore most of the admit- making spending more efficient ted applicants score poorly at the National Entrance Examination tests. Moreover, remu- The government’s programs oriented towards neration policies do not provide incentives to human capital (comprising education, health teachers to spend extra time in schools for and social protection) command the largest their own professional development or stu- share of government expenditures. In the dents’ learning: only 45 percent of teachers are 2021 budget, the three human capital sectors employed full-time, compared to 77 percent together accounted for about GEL 7.3 billion in the Organisation for Economic Co-oper- (US$2.3 billion equivalent) out of a total budget ation and Development (OECD) countries of GEL 18.4 billion (nearly US$6 billion equiva- (OECD 2019a). Rather, many seem to engage lent). in private tutoring: 89 percent of private tutors in Georgia are school teachers, and roughly half Nevertheless, spending levels remain low by of all teachers offer private-tutoring services international standards, and there is room for (OECD 2019a). Similarly, the low salaries of prin- improving use of existing resources. In some cipals are also affecting the quality of school social areas – such as ECE or employment pro- management. The minimum monthly wage of grams – low spending levels make it difficult to a principal is GEL 480 ($150) and the maximum achieve higher impacts. But overall improve- is GEL 2,500 ($780), which can however only ments in the governance of each sector, as well be given to principals who run schools with as better-quality control mechanisms could more than 1,801 pupils. For most principals, also improve use of existing resources. remuneration therefore remains lower than average monthly nominal earnings in Georgia, Education which amount to GEL 1,256 ($390). To supple- ment their low salaries, principals engage in Compared to countries with similar per-capita additional educational activities – as teachers, incomes and relative to the shortage of human trainers and private tutors – and are unable to capital, government spending on education is devote considerable time and energy to create low. Government expenditure on education has a school climate conducive to quality learning. increased substantially as a percentage of GDP in the last decade, from 2.8 percent in 2006 to Ongoing reforms are addressing some of the 3.6 percent in 2019, and in 2020 Georgia spent shortfalls in current remuneration policies, 14 percent of GDP per capita on each student. and it will be important to keep the momen- Spending remains however far behind coun- tum. In May 2019 MoES announced a phased tries with similar economic development and teacher pay increase for certified teachers, up well below Western European countries, where from the current GEL 800 to GEL 1,800 by spending is often above 5 percent of GDP. 2023, as well as monetary incentives for uncer- Spending constraints make it challenging to tified teachers already receiving a pension to deliver quality education. Most of the spending retire. As a result, up to 70 percent of uncer- goes to salaries (up to 70 percent for general tified pension-age teachers left schools, with education), leaving little room for providing nearly 50 percent of vacant teaching posi- student, teacher and school support, proper tions being distributed to certified teachers monitoring, quality infrastructure and teaching and given to more than 4,000 newly recruited materials. young teachers. Similarly, principals’ standards 38 GEORGIA Back to table of contents Human Capital Review were revised and adopted in February 2020, VET education in Georgia also needs to be giving more emphasis to their role in creating delivered in a more flexible, efficient and mod- a student-centered environment and a learn- ernized way, enabling the sharing of resources ing-prone school climate, and ensuring coher- across programs and schools and using ICT in ence in teaching and learning. Nevertheless, teaching and learning. due to the pandemic and upcoming elections implementation has been stalled and the certi- Weak or absent quality control mecha- fication process rescheduled. nisms at all levels are affecting the quality of learning and the efficiency of spending. Evi- It is also critical to create further teacher career dence-based quality control mechanisms (such advancement paths focusing on: (i) providing as regular student assessments) are missing, high-quality professional development based although they are essential to ensure quality on the individual needs of teachers, school- teaching across institutions and the territory. based professional development support, and Effective quality control requires proper and diversification of teacher training; (ii) offering regular monitoring of institutions’ performance, diverse career growth opportunities and tracks but also support mechanisms to help institu- based on demonstrated evidence of teaching tions to address the challenges they are facing, practice (as opposed to paperwork and collec- and, ultimately, effective legislation that enable tion of credits); and (iii) generating high stand- action when institutions keep underperform- ards for entry into the profession along with ing. While recent initiatives have improved practical support in the initial years (induction quality control mechanisms, much remains to and probation). be done. In early childhood and general educa- tion, monitoring and data collection is sporadic Although Georgia has made progress in har- and does not enable tracking of the individ- monizing its VET framework to EU standards, ual children’s learning path through preschool quality and relevance remain a challenge and to general education and beyond (although participation of the private sector limited. a new program has just begun to track chil- Between 2014 and 2017 the VET system in dren left out of general education); teacher Georgia switched from a subject-based to performance evaluation needs to be linked a work-based curriculum, and MoES imple- to classroom practice and student outcomes; mented numerous public-private partnership school authorization standards are based on initiatives. However, private sector participa- inputs, as opposed to evaluating quality; and tion remains challenging and formal, while enforcement of quality assurance mecha- the private sector needs to be incentivized to nisms for public schools has been postponed offer opportunities for on-the-job training and several times since its official adoption, due to participate in the decision-making process. high political sensitivity and the absence of the Accordingly, the recent partnership initiative levels of funding needed for schools to meet of MoES and the Chamber of Commerce and the quality standards. Industry to establish the Skills Agency may provide an opportunity to engage the private Diversified and clustered school management sector in teacher recruitment, professional in general education could increase the effi- development, student assessments and build- ciency of use of limited resources. Georgia has ing the institutional capacity of VET colleges. many small schools and low student-teacher The new Teacher Management and Develop- ratios, especially in rural areas, with 65 percent ment System for VET teachers also sets clear of all schools enrolling less than 25 percent of expectations for teacher performance through the country’s students. This disparity in school the introduction of VET teacher professional sizes means that the ratio of students to teach- standards to guide teachers’ daily work and ers also varies greatly throughout the country. align necessary resources to ensure that teach- By 2018, Georgia had an average 9:1 student- ers can constantly improve instructional prac- to-teacher ratio at national level, whereas for tice. Given the rapid technological changes and rural settings it was nearly 5:1. In addition to the importance of acquiring transversal skills, inefficient – and expensive – use of teachers, 39 GEORGIA Back to table of contents Human Capital Review the ineffective distribution of school building inpatient services and emergency services space (most of which would require substan- comprises a major part of the UHC Program tial refurbishment) necessitates overspending budget, while outpatient services have limited on infrastructure. While school consolidation is coverage. The remaining 30 percent of the extremely sensitive from a political perspective, state health care budget was allocated to ver- differentiated approaches to school manage- tical health care programs. For 2021, however, ment could be an opportunity for more effec- the share of total state health care expenditure tive use of existing infrastructure, especially spent on the UHC Program was due to fall to in rural settings, by expanding access to ECE 50 percent due to the increased cost of verti- programs, creating informal education centers, cal programs, which since 2020 have included and introducing VET and other skill acceler- expenditure on managing and treating patients ation programs for vulnerable communities. with COVID-19 (GHG 2021). However, the lack of school mapping policies makes it impossible to plan efficiently for school In the state-funded benefits package, most infrastructure development. funds are spent on costly inpatient services while primary care services remain under- The higher education sector suffers from funded. Of 53 European countries, Georgia similar flaws – low and inefficient spend- spends on PHC the least as a share of public ing, absence of solid monitoring and quality spending on health – 12 percent (WHO 2021a); control mechanisms, and the small size of many on the other hand the hospital bed utilization private institutions. Georgia spends 1 percent rate, at 49 percent, is also low (WHO Health of GDP on higher education and 0.6 percent on for All Database). Despite growing incidence research and development, lower than in most of NCDs, the country spends only 2 percent of peer and Western European countries (World total health expenditure in 2018 on preventive Bank 2018a). In addition, implementation of care, revealing a misalignment between the quality assurance mechanisms needs to be population's health needs and spending priori- strengthened; and many institutions – in par- ties (Sulaberidze and Gotsadze 2019). ticular private ones – remain small in size: 63 percent of private higher education institutions The oligopolistic behavior of private hospi- have less than 1,000 students (Bochorishvili tals and the pharmaceutical sector increase and Peranidze 2020). prices and “client capture” through contracts with the NHA. The high bed capacity in private Health hospitals, together with low occupancy rates, has resulted in high administrative costs. Despite the introduction of the UHC Program, Complex payment systems for hospitals also government spending on health remains low. create opportunities for these institutions In 2018, Georgia spent 2.8 percent of its GDP to charge higher prices, and the underuse of on public spending on health. This is lower generic drugs and overpricing of pharmaceu- than both the regional average (4.9 percent) ticals make retail prices in Georgia among the and the average for its income group of upper highest in Europe. The government’s agenda middle-income countries (4 percent). While includes re-regulating the pharmaceuticals Georgia’s government health expenditure as a market by controlling prices and implementing proportion of general government expenditure strict prescription of pharmaceuticals but this is the highest in the South Caucasus region, it has not yet been implemented. is significantly below the levels of comparator countries and the European Union. Human resource management in the health sector is also inefficient. The health care system Since the introduction of the UHC Program, is characterized by an excess of doctors, a lack its budget has more than doubled from GEL of nurses and uneven geographical distribution 338 million in 2014 to GEL 754 million in 2019, of the health care workforce. While the number and that year it accounted for 70 percent of of professionally active physicians per 100,000 all state health care expenditure. Elective population doubled from 2006 to 2019, the 40 GEORGIA Back to table of contents Human Capital Review number of professionally active nurses remained Part of the challenge is the low wages and almost the same. (NCDC, 2020, Health Care excess workload faced by social agents and Statistical Yearbook 2019). In 2019, Georgia had social workers. Relatively low wages and the one of the lowest “nurses to doctors” ratios in excessive workload faced by social agents and the whole WHO European region - 0.62 nurses social workers affect their morale and ability to for every doctor. A further issue is regional dedicate enough time and attention to house- disparities, with three times as many doctors holds in need. It also generates high turnover in Tbilisi as in other regions (WHO 2017). and may affect the ability to hire staff with solid qualifications. At the SSA, for instance, the av- Social protection erage number of social agents over a year is about 338. Each of them oversees the com- Transferring more resources to targeted social pletion of comprehensive declaration forms for assistance and social care services, improving applicant households and recertification of ex- coordination across programs by making better isting TSA households. A back-of-the-envelope use of the Social Registry and improving case calculation suggests that no less than 20,000 management practices could improve program cases are open at a given time and 6,800 new coordination and the allocation of benefits to cases are opened every month. This implies the neediest population. The Social Registry – that each social agent needs to assess about covering 30 percent of the population – serves 20 new cases each month, implying that 20 to as a gateway for households to apply to mul- 60 household visits should be run each month. tiple programs managed by both the central Their remuneration is also not adequate to at- administration (Targeted Social Assistance, and tract, retain and engage a pool of highly mo- Medical Insurance Program for the Poor) and by tivated social agents with adequate technical municipalities (local benefits targeted to poor and socio-emotional skills. Pay is GEL 6 per unit and vulnerable households including exemp- of work, with a fixed top-up of GEL 250 (GEL tions from tuition fees, free meals and energy 550 for senior social agents) at the achievement bill discounts). Nevertheless, it does not auto- of the minimum requirement of 60 units of matically update important information about work. And work-related expenses are not fully beneficiaries; and it is also not connected with reimbursed, implying large travel costs (up to local information systems, which makes it dif- half of net earnings according to some reports). ficult to form a comprehensive picture of who receives what benefit, and to identify possible Spending on employment and active labor exclusion gaps and overlaps. For instance, there market programs remains extremely low, and is little coordination between TSA and internally employment support to the poor and vulner- displaced person programs, generating poten- able population is extremely limited. Georgia tial duplications. Transferring more resourc- does not have unemployment insurance, and es to social assistance and social care servic- the state budgetary allocation to ALMPs is ex- es, boosting the Social Registry’s coverage, tremely low (GEL 2,790,000). As a comparison, automatizing updating of information, allowing several middle-income countries spend around trained social workers to see a full list of pro- 0.5 percent of GDP on ALMPs, which is also the gram beneficiaries who are or could be enrolled, average spent by OECD countries. Low spend- and developing effective case management ing on employment programs and ALMPs af- and referral protocols would enable better fects employment prospects across the pop- use of existing resources by avoiding overlaps, ulation spectrum, but particularly affects the identifying exclusion errors and ensuring that poor and vulnerable population as it prevents support is tailored to beneficiaries’ needs. The support for their integration into the labor Proxy Means Test (PMT) and Needs Index used market and raising the quality of their employ- to determine eligibility for the TSA and other ment, thus perpetuating a vicious cycle of pov- poverty-targeted benefits are also currently erty and joblessness. Some wealthier munici- being updated to improve capacity to identi- palities, such as Tbilisi, do invest in ALMPs, but fy the poor and to respond to income volatility overall this is not sufficient given the significant and sudden changes in verifiable expenditures. needs for better employment. 41 GEORGIA Back to table of contents Human Capital Review arrangements that clearly spell out the roles Boosting cross-sectoral and responsibilities of each sector in coordinat- collaboration ing and implementing cross-sectoral activities. Working effectively across sectors and levels It will be important to maintain the reform of government is essential for supporting the momentum built around early childhood poor and vulnerable population to acquire development. As very few services are available quality human capital. The challenges faced by to identify and serve young children at high risk many poor and vulnerable households tend to of developmental delays, malnutrition, disabil- cumulate and reinforce one another. Poor-qual- ities, chronic illnesses, and atypical behaviors, ity jobs that may require leaving the household civil society organizations have worked with the for long hours – or even daily worry about being government to develop and expand early child- able to feed the family – affect parents’ ability hood intervention (ECI) services in Georgia for to care for and stimulate young children. And children from birth to seven years of age, with mothers who are subject to regular episodes specific focus on the birth to three years old age of domestic violence may lack the necessary group. The government has strengthened and physical and emotional resources required institutionalized these efforts through policies to follow up on children who perform poorly such as the Early Childhood Intervention State in school, and eventually drop out. Effective Action Plan (2018-2020). Coordination around social policies require an integrated approach early childhood development appears to be that spans across sectors, with workers in the well established, with an interagency group social sectors (health professionals, teachers, on early childhood development as well as a and social workers) working together to iden- coalition of early intervention service providers tify vulnerabilities, and providing comprehen- (WHO 2020). While recent policy changes indi- sive support to households in need (Camacho cate commitment to improving outreach on, et al. 2014). This, in turns, requires providing access to and quality of ECI service provision, workers with the tools needed for them to work there is still a shortage of workers in services together, such as social registries, cross-sec- supporting children under three years of age toral protocols, proper training and clear insti- with developmental delays and disabilities. tutional arrangements that favor coordination. Addressing gender disparities in education Georgia still needs to build and reinforce the and labor markets will also require a multi-sec- elements that allow effective cross-sectoral toral approach. Actions to promote the acqui- collaboration. While there are clear division of sition of relevant and highly rewarded skills, as responsibilities on paper between the central well as to improve the ability of women to tran- and local governments on social policy imple- sition into labor markets and entrepreneurial mentation, the supporting role of the central activities, should be undertaken as first-order government remains limited. Similarly, while priorities in the economic and gender agendas. many programs – even at local level – do make These include developing skills among girls use of the Social Registry to assess eligibility, the that are relevant for the labor market; ending registry is not used to build a comprehensive occupational segregation and promoting list of support received by households, nor to STEM; providing formal care for children and allow social agents to explore all programs that the elderly; assisting women to transition into households may be eligible to. Cross-sectoral labor markets; fighting discrimination in labor referral protocols are almost inexistent (except markets; widening opportunities for female for domestic violence), and social workers and workers and entrepreneurs; and changing social agents have not been trained to work beliefs, social norms and biases (World Bank with health sector and education professionals 2021a). to identify as early as possible sources of vul- nerabilities and children’s’ developmental gaps and provide tailored support. Finally, at the min- isterial level there are not yet clear institutional 42 GEORGIA Back to table of contents Human Capital Review 5. Learning from the COVID-19 response: improving the effectiveness and resilience of human development systems The COVID-19 pandemic put substantial strain to respond to the pandemic included free on the human development sectors, and high- access to Microsoft office 365 to all schools; lighted the importance for effective response the launching of television school on March 30, of solid planning and preparation ahead of with televised lessons for all age group children crises. The pandemic caught the education broadcast on a daily basis; the enhancement and social protection sectors by surprise, and of the EL.ge electronic platform with educa- both sectors had to rapidly change the design tional digital resources; the launching of the and delivery modalities of programs that were “I-school” project that provides teachers and already under strain from the health crisis. In all primary, basic and high school students with sectors, existing delivery challenges have been homework projects (so called “complex assign- worsened by the pandemic, but programs and ments”) of tools and supporting material; and elements where delivery was solid were able to the introduction of the E-assessment journal, respond better to the pandemic. For instance, that was being piloted prior to the pandemic. the health sector had pandemic preparedness plans and appropriate legal and policy frame- While IT penetration is good in Georgia, issues work and emergency funding mechanisms in related to learning environment at home, place to respond to biological incidents, which quality of internet and lack of training on how to enabled a swifter response. The experiences use IT technologies have limited the effective- across human development sectors highlight ness of distance learning – especially for rural the importance of crisis management planning, and poor households. Georgia has been pro- and of building solid delivery systems for both viding every first grader with a laptop for more normal and crisis times. than 10 years. However, a survey by the National Examination and Assessment Center found that Education5 in rural areas less than 40 percent of teachers found the quality of the internet suitable for To increase social distancing and prevent the teaching, compared to 67 percent of teachers spread of the disease, in March 2020 almost in Tbilisi and private school teachers. Moreover, all countries in the region closed their entire in rural areas children were accessing distance education systems, including Georgia. Schools learning mostly through mobile phones, lim- in Georgia terminated face-to-face education iting their ability to learn; and the government immediately after the beginning of the pan- started providing subsidized internet access demic (on February 27, 2020), and went online to children in need only in January 2021. Many after one month’s break. The entire remainder teachers were also not familiar with using IT for of the spring semester (March- June 2020) teaching, as technology was mostly used to was delivered online, while the whole of 2021 gather knowledge from the internet to prepare academic year was in a hybrid regime. Overall, teaching materials. Finally, online teaching time Georgia’s schools closed (fully or partially) for was reduced (in part because of the need to 35 weeks. resolve IT-related issues), and focus groups with teachers and principals reported that the 20-30 The government took swift measures to help minutes of effective teaching time available students move towards distance learning would only enable teachers to briefly explain the modality. The steps taken by the government new topic and provide homework to pupils. 43 5 Findings from this session are in part informed by the qualitative focus groups that the team conducted with teachers and principals. GEORGIA Back to table of contents Human Capital Review Decentralization of online teaching arrange- response, along with proper plans and legally ments and lack of regular monitoring of stu- defined governance and coordination arrange- dents and school performance affected the ments for the emergency periods. effectiveness of distance learning. Teaching and learning in Georgia have historically been There would have been insufficient technical centrally planned, with autonomy given to readiness and availability of resources without schools. Full responsibility for managing the adequate governance arrangements. In prepa- hybrid format during the second wave of the ration for the outbreak and following the require- pandemic turned out to be difficult for many ments set out in the national biological incidence schools. Management of distance learning response and management plan, an Intera- during both waves was relatively more suc- gency Coordination Council (ICC) was estab- cessful in private schools and in schools whose lished in early 2020. The ICC was instrumental principals were bolder in decision-making and in recognizing the threat and taking immedi- had better channels of communication with ate actions and, equally importantly, in estab- the parents, and where individual teachers had lishing a vertical decision-making process that better ICT skills prior to the pandemic. More- supported coordinated actions by all agencies. over, the absence of monitoring mechanisms for school and student performance in public The excess bed capacity at hospitals helped schools affected the government’s ability to to meet the demand for medical care during assess the effectiveness of distance learning and the COVID-19 pandemic. Georgia ranks among make rapid adjustments to improve the process. the top five countries in the WHO European Region by the number of acute hospital beds Dropout rates fell significantly during the pan- and physicians per 100,000 population, which demic. Data from the Education Management is a sign of inefficiency during normal times. Information System show that in Grade 10 (the While excess bed capacity helped the pan- grade with the highest dropout rate during demic response, it should not be seen as the the last decade) only 833 boys and 479 girls best solution to build resilience. dropped out in 2021, compared to 3,095 and 1,830 respectively in 2019. While this may look Continuing effective management of poten- like good news, it is most likely a consequence tial future waves will be essential for avoiding of more limited outside options in the labor further measures that would affect social and market, and the low efforts required from stu- economic activities. The government demon- dents during distance learning: this negatively strated good stewardship and coordination at affected the learning of all students as docu- the beginning of the pandemic. However, the mented by the lower scores achieved by stu- easing of restrictions and increased mobil- dents at the 2020 NAEC examinations. ity have coincided with a significant increase in COVID-19 infections in summer 2021. The Health new variants also increased the number of new cases. The average number of daily infections Georgia had pandemic influenza prepared- exceeded 5,000 in August 2021 and 15,000 in ness plans and appropriate legal and policy January 2022, as compared to 1,500 at the end framework and emergency funding mech- of June 2021. The test positivity rate exceeded anisms to respond to biological incidents, 8 percent in August 2021 and 20 percent in which supported a prompt response (WHO January 2022, compared to less than 5 percent 2019). The key outbreak response capabilities at the end of June 2021. By the end of January included NCDC’s G. Lugar Center for Public 2022, Georgia had administered around Health Research, NCDC’s surveillance network, 2,700,000 doses of COVID-19 vaccines, and and laboratory capacities with a trained public fully vaccinated over 70 percent of the target health workforce who stood on the frontline in population with two doses. Continuing effec- the battle against COVID-19. The availability tive management of potential future waves of critical and capable human resources that will be essential to avoid further measures that could swiftly be deployed enabled a prompt would affect social and economic activities. 44 GEORGIA Back to table of contents Human Capital Review Social protection The solidity of existing beneficiary, tax and The only program designed to compensate payment mechanisms helped to enable the against losses in income is the TSA, which is not, fast roll-out of the emergency measures. however, designed to rapidly expand support These mechanisms included a well-developed during crises. Coverage of TSA increased from IT infrastructure, especially an advanced social 11.6 percent of the population in February 2020 registry covering nearly 30 percent of the pop- to 14.2 percent in March 2021. The expansion of ulation and assigning them with a proxy means the TSA only partially met the increased needs tested welfare score; high capacity of the Rev- of the population, both because by design it enues Service to verify the employment status only is tailored to the poorest of the poor, and of formal wage workers and formally registered because of its lengthy and complex registra- self-employed persons; the capacity to quickly tion procedures. Labor income losses need develop an ad hoc portal for the self-em- to be documented for three months in order ployed; and well-developed payment systems to significantly affect a household’s eligibility; for social assistance (through Liberty Bank) and the procedures for registration are also very for the delivery of electricity subsidies. slow, requiring a multitude of documents and three in-person visits by social agents; and TSA Developing emergency response social protec- payments only accrue to a household as late tion measures and passing the required legis- as two months after a household’s PMT score lation ahead of future crises would improve has been determined. Apart from the TSA, the further the quality of response. With a few government has no mechanism to compensate design and legislative modifications to allow against sudden losses in labor income. more flexible expansion and swifter enrolment, the TSA could be effectively used during crises As a result, the government has had to imple- to avoid households falling into destitution, ment a series of emergency programs. The and avoid the need to design programs from government promptly introduced several scratch. Similarly, developing legislation, moni- emergency social assistance programs through toring tools and financing modalities to support Resolution 286. This Resolution introduced the formal sector ahead of crises would help to temporary benefits for formal workers who ensure that support is provided promptly to had been furloughed or laid off, and a one-off the right beneficiaries. Designing a solid moni- benefit for self-employed people who lost labor toring and evaluation system in advance would income because of the lockdown restrictions to also enable the assessment of program per- contain the virus. A purpose-built online portal formance in real time and the making of swift was developed to collect and verify applica- adjustments where needed. tions for the one-off benefit. The emergency measures cost GEL 918 million in 2020, or 1.7 percent of that year’s GDP (Table 1). Table 1: COVID-19 emergency-related social protection budget Type of social protection transfer GEL million Utility cost subsidies 382.7 Compensation for socially vulnerable households 64.7 Assistance to persons with disabilities, including children with disabilities 26.0 Unemployment assistance for the employed 131.2 One-off assistance for children under 18 187.8 Compensation for the self-employed 110.8 One-time coverage of tuition fees for higher education students from 14.8 socially vulnerable households. Total in 2020 918.1 45 GEORGIA Back to table of contents Human Capital Review 46 GEORGIA Back to table of contents Human Capital Review 6. Conclusions and recommendations Georgia’s human capital needs a quality boost, may help improve the effectiveness of social and while substantial reforms have taken place spending through stronger intersectoral dia- in the past two decades it will be important logue and an improved institutional frame- to maintain the reform momentum. Overall, work. Nevertheless, because of the pandemic spending in the human development sectors and other factors some reforms are stalling, remains low and inefficient; most workers in and some crucial aspects such as investing in the social sectors are poorly remunerated, and regular monitoring and evaluation may still be many lack the necessary qualifications and missing in some sectors. To improve further support mechanisms; monitoring and quality human capital, the government (specifically the control mechanisms are insufficient; and while Ministry of Finance, MoILHSA, and MoES, and decentralization of service provision brings affiliated institutions) should keep the reform accountability at local level, poor municipal- momentum going as part of a broader reform ities lack the financial and technical support agenda. Important cross-sectoral areas for needed to deliver quality services. To cope reform are discussed next, and more detailed with these pitfalls the government has initi- reform areas for each sector are presented in ated several important reforms: the ongoing the subsequent tables. development of a social code, for instance, • Increase the level and efficiency of social sector spending. Despite the social sectors making up a large share of the government’s budget, spending remains low by international stand- ards. Efficiency gains can also be achieved through better use of existing resources; but without increasing spending it will be difficult to implement effective and impactful reforms. • Make social spending more equitable. Inequalities in education learning outcomes across socioeconomic groups remain high, as students from disadvantaged backgrounds receive poorer quality education and little additional support to help them improving learning outcomes; and gender disparities in the labor market remain substantial. High catastrophic health expenditure also confronts poor households facing health shocks with the dire choice of further impoverishment, or forsaking treatment. It is therefore important to make spending more pro-poor across the social sectors, facilitating the access of the poor and vulnerable to quality education – including at tertiary level – and ensuring that catastrophic health expenditure does not push people further into poverty. To promote more equitable labor market outcomes across gender groups it is also important to promote among girls skills that are relevant for the labor market; end occupational segregation and promote STEM; provide formal care for children and the elderly; and proactively assist women to transition into labor markets. • Revisit the decentralization process. Decentralization brings many benefits – but to be effec- tive, it requires strong oversight and substantial support for financially vulnerable municipal- ities that have capacity issues. Too many responsibilities are given to municipalities without adequate monitoring and accountability mechanisms, technical support, and adequate mechanisms to compensate for substantial differences in their wealth and incomes. • Boost monitoring, evaluation and feedback loop mechanisms, making use of new oppor- 47 GEORGIA Back to table of contents Human Capital Review tunities offered by digitalization. In the field of education, regular student assessments and links to school performance are missing, and it is not possible to follow students’ performance through the years. In the health sector paper-based reporting is still common, and collected data are rarely used for monitoring quality and service volumes. And despite the existence of a Social Registry for the social protection sector, it is still not possible to have a holistic vision of all the central and municipal programs accessed by households, and “one-stop shops” have not been implemented, under which centralized management of social programs would help vulnerable households to more easily access the programs they would qualify for. Employ- ment programs are also not rigorously evaluated. While the management of the social sectors is being progressively digitalized, it is also important to ensure that more and better data are used to improve performance through feedback loop mechanisms and building the capacity of workers to make use of these digital platforms. • Improve the social sectors’ workforce management and support. The quality of medical and pedagogical education, both undergraduate and graduate, needs improving. In all human development sectors it is difficult to attract and maintain qualified professionals due to low salaries and poor working environments. The low salaries of doctors, for instance, lay them open to accepting in-cash or in-kind gifts from the pharmaceutical sector. But low pay is only one element of a bigger workforce management challenge. Staffing is often insufficient, or poorly distributed: there are not enough social agents and social workers, there are too many teachers in rural areas but still a shortage of qualified teachers in certain areas (particularly in STEM subjects), and there are not enough nurses. Hiring and promotions are not always based on merit or, at least, on candidates having achieved some minimal qualifications. And support, continuous education and training opportunities provided to many workers in the social sectors are limited, making it difficult for people to grow professionally. In some instances, such as with social workers, there is also a need to boost workers’ qualifications by improving training and limiting the entry of unqualified staff. • Boost cross-sectoral coordination and collaboration. Better cross-sectoral coordination will be essential for addressing challenges such as ECD, nutrition, school dropouts, youth employment and aging: many of these challenges have multiple roots, and only a compre- hensive approach tailored to the needs and vulnerabilities of each individual will be able to effectively address them. Effective coordination will require putting in place institutional arrangements with clear roles and responsibilities for each institution and the development of referral protocols and cross-sectoral monitoring tools. Equally important, it will also require the provision of financial and other incentives for institutions to work effectively with one another – often arrangements that look sound on paper do not function well because of institutions’ lack of incentives. • Prepare and invest in crisis response plans. Overall, Georgia’s response to the pandemic appears to have been relatively efficient given the need to act quickly. Nevertheless, there was a clear relationship between sectors’ preparedness for crisis, and their ability to respond quickly and effectively. To be sure, one is never prepared for a crisis; but one can learn from the past and be better prepared to address future crises. Ensuring that the TSA is flexible enough to be used as a crisis response program or boosting online teachers’ support, for instance, may help the response to future crises, including rising food and commodity prices and future COVID-19 waves. 48 GEORGIA Back to table of contents Human Capital Review Sector-specific reform areas Table 2: Reform areas - Education Education - Quality Short term Medium/Long term Introduce a regulatory framework Establish teacher’s certification and Develop effective teachers’ support system and support system for ECE professional development system at ECE for ECE and boost teachers’ professional teachers level, ensuring linkages to general education qualifications, strengthen local governments capacity in management and monitoring of ECE quality and delivery Improve system for teacher Revise the existing “Teacher Scheme” Develop flexible teacher career pathways management and development with greater focus on evaluation of actual including possibilities for promotion both teaching practice, tailored school based in leadership and teaching tracks, based on professional support, and diversified interest and ability, as well as school needs provision of teacher training Increase attractiveness of pre-service teacher training programs; emphasize support during initial years of practice including mandatory induction Establish regulatory framework for Introduce VET teacher management and Introduce effective system for VET teacher VET teachers development system with clear expectations management and development with and greater engagement of the private flexible pathways, diverse professional and sector career growth opportunities, and greater engagement of the private sector, as well as progressive salaries with salary increments Improve principals’ qualifications Introduce minimum qualification levels for Develop solid training and performance and meritocracy of appointments in principals related to instructional leadership evaluation system for principals linked to ECE and general education school quality improvements Certify existing principals and introduce bonus pay for certified school principals Strengthen quality assurance Implement new Quality Assurance Introduce performance elements in funding mechanisms in higher Framework formula education, with greater focus on internationalization of higher Build capacity of higher education Increase visibility of the Georgian higher education institutions to develop international education system among advanced standard curriculum and services systems and boost international standard accreditation, as well as dual degree and exchange programs Improve learning environment Develop short-, medium-, and long-term Implement the action plans public school infrastructure development strategies and action plans Develop unified school design, rehabilitation and construction criteria Education – Inclusion Short term Medium/Long term Address decentralized funding of Establish effective funding mechanism for Introduce compensation mechanism to ECE ECE, with equity considerations help boost access to and quality of ECE in municipalities with lower participation of vulnerable groups Address heterogeneous ECE Develop unified quality standards for ECE, Develop accountability and support outcomes ensuring smooth transition to general system to improve quality of ECE in education level underperforming municipalities Develop central monitoring system for quality of ECE with engagement of local governments Improve access to ECE Establish ECE centers in all municipalities/ Develop solid system for tracking ECE villages with diversified approaches to participation and achieving universal management and delivery of ECE participation in school readiness programs among 5-6-year-old population Introduce parent education programs at municipal level 49 GEORGIA Back to table of contents Human Capital Review Improve quality of School Boards Invest in Education Resource Centers and Strengthen ERCs’ capacity to plan and and Education Resource Centers provide adequate support for monitoring monitor ECE and supporting school quality Rethink unified approach to School Boards and ERCs to increase quality participation and reduce political influence Improve equity of general education Revise general education per capita formula funding and increase equity component, to ensure individualized support Increase access to VET Diversify VET delivery through increased Introduce compensation/ incentive policies private sector participation and increased to increase private sector participation in curriculum flexibility VET delivery and reduce dropout rates among students Improve access to higher education Develop dedicated support to poor Improve access to and reduce cost of for students from disadvantaged and vulnerable students at the general higher education for students from poor socioeconomic backgrounds education (secondary) level to improve their and vulnerable backgrounds through learning outcomes reform of the university entry examinations, scholarships, alternative funding of tuition fees and other means Education - Spending and efficiency Short term Medium/Long term Improve monitoring and quality Develop regular student assessments Link quality assessment system with funding control mechanisms at ECE and to assess school readiness and student and support mechanisms general education level performance Develop tracking system for poorly performing students and individualized support system Improve school performance Develop regular school performance Develop financing and support system to monitoring and support assessment and school support mechanisms improve school performance and quality of mechanisms infrastructure and materials Introduce diversified institutional Update education infrastructure census and Introduce flexible curriculum and management opportunities at ECE, develop effective delivery plan, ensuring management at all levels, based on general education and VET levels quality and relevance the needs of the students (in full-time/ community schools, learning hubs, after Introduce effective system of institutional school programs, apprenticeships, etc.) empowerment and accountability at all levels Develop effective mechanisms for Revise VET funding formula, linking to Introduce incentive policies for greater funding VET institutional performance private sector participation (including PPP) and increased participation of youth and Introduce mechanisms to support income adults in VET generating activities of VET institutions Improve spending on higher Invest in capacity building of professionals Link higher spending to selected outcomes education and research and in R&D and higher education infrastructure, and meeting defined quality standards development, while strengthening particularly in computer and science labs accountability mechanisms Introduce well-phased, merit- Introduce teacher practice evaluation Approve well-phased teacher salary increase based salary increase based on system at all levels, through creating teacher scheme, along with accompanying measures demonstrated evidence of teaching career advancement paths in both teaching of quality assurance and improved working practice at all levels and management areas conditions Education – Crisis preparedness Short term Medium/Long term Expand support for and usage of Expand internet and IT support to Mainstream digital resource utilization in online learning vulnerable population and remote schools teaching and learning at all levels Develop further online teaching materials Train teachers in use of online materials and and support, boost digital content and online teaching techniques integration in the teaching process at all levels 50 GEORGIA Back to table of contents Human Capital Review Table 3: Reform areas - Health Health - Quality Short term Medium/Long term Improve human resources Improve salaries and public image of nurses Increase the number of nurses management to attract more applicants to training programs Provide continuous education and training opportunities for health care professionals Revisit hiring and promotion mechanisms to base them on merit Boost primary care services Revise referral mechanisms to ensure that Scale up payment model to achieve a more health care is delivered at primary nationwide PHC model health care level Disseminate the health literacy program Develop a comprehensive health literacy nationwide program to build trust in primary health care services Health – Inclusion Short term Medium/Long term Ensure provision of quality of Revise primary health care benefits package Ensure adequate geographical distribution care across the territory and and payment model of health care professionals socioeconomic groups Incorporate NCD prevention and control into Use telemedicine to offer consultations in the workload of rural doctors remote areas Incorporate long-term care arrangements into the benefit scheme Increase the affordability of Develop innovative purchasing instruments Establish stronger price regulation medicines and expand the coverage such as managed entry agreements (MEAs) of drug benefits under the UHC and reference pricing Program Health - Spending and efficiency Short term Medium/Long term Reorient health care system Change treatment incentives towards Revise guidelines to expand scope of towards primary care primary and preventive care primary health care services Improve efficiency through the Introduce a unified fee policy for all health Pilot and scale up diagnosis-related group introduction of provider contracting services, informed by a comprehensive (DRG) payments for hospital care reforms costing exercise Introduce selective contracting for quality Improve efficiency by enhancing Develop a comprehensive digital health Improve the digital system by including monitoring, connectivity and strategy provider payment mechanisms, digitalization standardization, and unification of medical Improve monitoring through data collection, information disease surveillance, and management of beneficiary records Health – Crisis preparedness Short term Medium/Long term Improve the resilience and Expand the scope of pandemic influenza Establish necessary infrastructure and train preparedness of the health system preparedness plans and appropriate legal adequate human resources to deal with and policy framework to cover additional future crisis threats Create additional emergency funding mechanisms to respond to biological incidents Table 4: Reform areas – Social Protection Social Protection - Quality Short term Medium/Long term Improve the effectiveness of the Ease registration procedures to reduce Introduce design features to promote TSA burden on households and social agents; activation of social assistance beneficiaries automate and digitalize eligibility verification processes 51 GEORGIA Back to table of contents Human Capital Review Improve the effectiveness of Develop tools to better tailor employment Increase number, qualifications and salaries employment services services and programs to vulnerable groups of SESA staff to improve quality and reduce (TSA work-able beneficiaries, internally turnover displaced persons, youth, persons with disabilities) Tailor the programs’ offer to regional labor market needs Pilot and evaluate effective measures to activate hard-to-employ groups Strengthen the partnership with employers to expand the provision of work-based youth employment programs Develop evaluation and tracking systems to assess the quality of the programs delivered Social Protection - Inclusion Short term Medium/Long term Improve the coverage of the poor of Pilot the updated eligibility rules for TSA to Roll out the updated targeting formula the TSA and the adequacy of basic better cover the poor population and adapt nationally pensions to sudden changes in income and other vulnerabilities Reform the status-based internally displaced person allowance to make it Improve the adequacy of the universal basic needs-based pension (now being just above the poverty line) Support poor municipalities to Map the provision of social protection Develop financing and support mechanisms deliver local social protection services delivered at the local level and to help poor municipalities design and services identify needs deliver local social protection services Expand SESA’s coverage and offer Expand SESA coverage in less affluent Tailor the programs’ offer and scale to in less affluent regions regions regional labor market needs Expand SESA staff/capacity and programs offered across the territory Social Protection - Spending and Short term Medium/Long term efficiency Consolidate and coordinate social Map social care services across ministries Develop an integrated Case Management care across ministries and levels of system that allows the provision of government Develop clear Terms of Reference for each individualized and coordinated support service, as well as referral protocols Make human capital policies more Develop a social code based on best Monitor progress in implementation of the coherent through the development practices, broad-based consultations and social code of social code financial considerations Improve coverage and usage of Expand number of households covered by Develop a data warehouse to record all Social Registry the Social Registry, beyond beneficiaries of programs received by specific households, social programs and identify gaps and overlaps in human capital services Enhance the Social Registry’s inter- operability with local information systems Develop a case management methodology, and other government databases practices and tools to optimize the information in the Social Registry to deliver better tailored benefits Improve effectiveness of social Increase number and decrease workload of Develop professional development and workers and social agents social workers and social agents support system for social workers and social agents and training on improved case Improve qualifications but also remuneration management practices of social workers and social agents Strengthen social insurance Strengthen and expand the role of contributory social insurance Manage transition between pension Monitor elderly poverty until contributory Design support schemes for the elderly poor systems system becomes fully effective to the extent required Social Protection – Crisis Short term Medium/Long term preparedness Improve the crisis responsiveness of Implement legislation to allow TSA to rapidly Design emergency programs for middle existing social protection programs expand and modify eligibility and generosity class and formal sector workers to be during crises financed and implemented during crises Conduct crisis response assessment to Improve coverage of Social Registry and understand potential gaps in 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