There were over 400,000 distrains recorded in Slovakia in 2017. New websites and organizations have emerged to help people in debt. A vast majority of people do not know how much taxes they pay or how much public services cost.
We know when historical battles took place, we memorize capital cities, we are capable of reciting poems, and all of this despite the fact that Google will provide us with this information in a matter of seconds.
We hear about deficits and debts in the news, yet we have no clue what these terms mean for our day-to-day lives. We cannot distinguish between an ordinary interest and a compound interest in a bank, and on the other hand we are surrounded by offers to take super-convenient loans.
Although we have heard a lot about the necessity of better financial and economic literacy, not much has been done in this regard. Especially in the case of grammar schools, the time frame for economic education is regretfully short – usually one or two lessons of civics per week is dedicated to philosophy, political science, psychology, sociology, law, and economics.
Yet, the very first challenges in life are linked with economic issues which have existential importance for all of us. This is not a Slovak-only issue – a few years ago a German student managed to convince the Minister of education through a twitter status to express herself about the quality of school education:
“I am almost 18 and I do not know how to pay taxes, rent or insurance. But I know how to analyze poems. In four languages.”
INESS organized the very first Economics Olympiad in Slovakia this year. Astonishing 4,000 high school students participated in the first school round. The tests scrutinized their knowledge about financial literacy or international economics.
The students were supposed to prove whether they keep track of the current course of events, that they understand basic economic terms and principles. There was a number of interesting conclusions drawn from these answers.
For instance, many students are capable of defining correctly what the GDP is but they fail at its calculations.
70% of Slovak high school students were able to properly define the GDP in theory but 82% did not manage to calculate the contribution to the GDP correctly
High school students also find it problematic to understand basic terms in economics.
Mere 41% of the students could properly define the task of the antitrust policy and 34% knew what exactly fiscal policy is. Even though we hear about these concepts in media every day, only a few Slovaks actually grasp what do those ideas imply.
66% of the students do not know what fiscal policy is
In order to prevent citizens from falling prey to myths and airy promises of politicians, which have a direct impact on their livelihood, they should see the big picture to know how much taxes they pay and where exactly this money is headed. They should also bear in mind that excessive public debt might threaten their own wallets in the future.
The participants were supposed to identify the acceptable level of the public finance deficit compared with the nation’s GDP according to the EU rules. Only a one third of them was able to get this answer right.
We often ignore side effects of political measures while evaluating them. It is, however, very useful not only for economists, but also for ordinary citizens, to be aware of the overall impact of price regulations or new duties and taxes.
As much as 75% of the students did not know that import quotas lead to lower supply and higher prices on the domestic market. Only 18% of the students asked managed to point out that the minimum wage introduction may cause an increase in unemployment.
82% of the high school students do not know that out-of-control hikes of minimum wage might increase the unemployment rate
Central banks’ monetary policy plays an important role not only during economic crises, but is also decisive in the cases of common loans and mortgages. Striking 82% of the students did not know that monetary policy in Slovakia is in the hands of the European central bank.
High school students also had trouble in determining the impact of increased money volumes in the economy. Only 31% of the participants knew that the increased volume of money in the economy causes lower interest rates, perhaps even higher investments.
Approximately a half of all the students failed to gauge the impact of import restrictions and tariffs. Many populist parties campaign against foreign goods or services and if we do not respond with fact-based knowledge, these assumptions may find a fertile soil.
In the cases of sample questions focused on financial literacy, in which students were asked to pick the lowest interest out of five options, the average success rate was 44%. The most promising interest is a key factor while choosing a saving product or a loan.
With a sample of 4,000 Slovak students, the Economics Olympiad revealed the most serious weaknesses in economic education of young people.
Memorizing is believed to be a long-term problem, but knowledge useful only as a part of quiz shows remains a crucial element of the Slovak education system. The success of regional rounds and the national finals of the Economics Olympiad proved that there are in fact exceptionally talented economists among these high school students.
Nevertheless, one question remains: are Slovak universities attractive enough for these young people?