World Development Report 2024: The Middle-Income Trap

Although norms, networks, and neighborhoods contribute to preserving the status quo, policy can disrupt them and unleash creation and social mobility. A critical policy is expanding quality education, as it represents for many the best—and perhaps the only—hope to climb the social ladder. Education systems that promote human capital accumulation are therefore key to disrupting the status quo, and yet middle-income countries have largely failed at building those systems.

Learning poverty is alarmingly high in middle-income countries. In the median lower-middle-income country and upper-middle-income country, only 31 and 63 percent of children ages 10 or younger, respectively, are able to understand a text relative to 94 percent in the median high-income country. Among 15-year-olds, only half of high school students are proficient in math, reading, and science in the median upper-middle-income country and 30 percent in the median lower-middle-income country, relative to 80 percent in the median high-income country. Low shares of young people are enrolled in higher education (18 percent and 45 percent in the median lower-middle-income country and upper-middle-income country, respectively, relative to 70 percent in the median high-income country). And even lower shares have graduated from higher education: 12 percent in the median lower-middle-income country, 28 percent in the median upper-middle-income country, and 43 percent in the median high-income country.

The education system failures are particularly acute for disadvantaged students. Gender, location, and wealth create large and worrisome access and completion gaps in elementary and secondary education. In higher education, the poorest students and those in rural areas are much less likely than others to complete at least two years of higher education. These gaps are so large that the percentage of individuals who have completed at least two years would rise by about 30–40 percent if location gaps were eliminated and would double if wealth-related gaps were eliminated.

Furthermore, higher education contributes to social mobility only if it provides skills that are effectively rewarded in the labor market. Educational institutions can identify and fulfill the skill needs of the economy by connecting with enterprises and the labor market, and yet this link is often broken in middle-income countries. In a World Economic Forum executive survey, when companies are asked to rank the skills of higher education graduates relative to their needs (on a scale of 1–7), the average score is 4.13 in the median middle-income country, well below 5.03 in the median high-income country. Moreover, higher education in middle-income countries produces relatively few graduates in fields typically supportive of infusion and innovation—engineering, information and communication technology, science, and health. Similarly, a low share of higher education students (15 percent in the median middle-income country) are enrolled in short-cycle programs (two or three years long), which provide the technical skills needed to engage in midlevel knowledge-intensive occupations.

Patriarchal gender norms hold back a large proportion of the population

Norms are the unwritten rules and shared expectations that govern human behavior within societies. Patriarchal social norms perpetuate gender inequality. They hold back women—out of the labor force, out of education, out of skills, out of luck, and out of hope. Men, who benefit from more access to resources and opportunities, have the most incentives to protect the status quo. Other norms keep marginalized groups down—and are shaped by the social elite.

These unequal norms and beliefs can be deeply ingrained in a nation’s social fabric and exert a powerful influence on individual actions. Norms can strongly influence the behaviors and choices of caregivers and parents—often not treating their daughters on a par with their sons. These norms define a child’s access to education, liberty, employment, and entrepreneurship. Furthermore, parents pass on cultural norms to their children, perpetuating and reinforcing inequality, whether based on gender, race, ethnicity, or religion. These norms hold back a country’s growth and development.

Girls: Starting to show up in school

Improving women’s educational attainment ensures that economies can expand their talent pool. Therefore, expanding the middle class requires providing the needed skills and competencies to all members of society.

In the area of ensuring access to basic education, remarkable progress across the world during the past two decades has reduced (and in some countries, even eliminated) gender gaps in enrollment and educational attainment. In some countries, the higher educational attainment of women has resulted in an improvement in mobility from one generation to the next (intergenerational mobility)—that is, daughters can move up the educational ladder even if their mothers or parents were lower down that ladder. Despite this improvement, in many countries higher educational attainment for successive generations is still lower for women and disadvantaged groups (figure 5.7), although not in Sub-Saharan Africa and Latin America and the Caribbean.

Women: Missing at work

Female labor force participation is low in several middle-income countries, particularly in the Middle East and North Africa and in South Asia (figure 5.8). By contrast, female labor force participation has increased in many countries over the last decades (figure 5.9). In 1990, the Republic of Korea had the same level of GDP per capita (in terms of purchasing power parity, PPP) as India in 2020. However, the female labor force participation rate in Korea was about 51 percent in 1990, while India’s was 30 percent in 2020 but has improved in recent years. In the Arab Republic of Egypt, India, and Türkiye, female labor force participation is well below what would be expected given their levels of income per capita, whereas the rates are much higher in Indonesia and Malaysia.

Even when women are employed, they are more likely to work in lower-paid jobs or be self-employed (and thus have unpredictable incomes) than men in these types of jobs. They are much less likely than men to work in higher-paid jobs such as professional, managerial, and technical positions, which have high returns to talent, education, and experience. Compounding the problem, fewer higher-skilled jobs are available in middle-income countries—for men and for women—than in high-income countries, and women in middle-income countries have relatively less access to them than women in high-income countries. However, in some middle-income countries such as Indonesia, the share of women in professional occupations has grown rapidly in recent decades (figure 5.10). In some lower-middle-income countries, such as Egypt, the share has grown as well but remains low, indicating a large talent misallocation.

In high-income countries and middle-income countries alike, women are less likely than men to enroll in science, technology, engineering, and mathematics (STEM) fields. The share of women among STEM graduates is on average higher in India compared with even developed countries, and yet women’s representation in prestigious colleges lags behind. In 2016, for example, only about 8 percent of students admitted to India’s prestigious Indian Institutes of Technology (IITs) were women, compared to 46 percent admitted to the Massachusetts Institute of Technology (MIT) in the United States. The IITs went on to establish a female enrollment target of 20 percent, which was achieved in the 2023 cohort.

Some middle-income countries educate relatively more females in STEM fields than high-income countries, and yet they employ relatively fewer. Why would women pursue STEM fields but not work in them? Recent evidence suggests a possible driver: higher returns to a STEM education in the marriage market. In Pakistan, female physicians are considered “trophy brides” in the marriage market. More than 70 percent of graduates of medical school are women in Pakistan, and yet only 23 percent of them practice their profession after they graduate. Similarly, in Egypt returns to higher education—not just in STEM fields—are much higher in marriage markets than in labor markets.