The notion that education and economic growth hold a relationship with each other is not a new idea. However, what is the extent of this relationship? What role does education play in development? And finally, what are the exact economic benefits of education both in the U.S. and abroad?
The Economic Effects of Education
According to the World Bank, one of the pivotal benefits of education is labor market earnings. Workers with more education earn higher wages than employees with no post-secondary education. Those with only a high school degree are twice as susceptible to unemployment than workers with a bachelor’s degree. Median college-educated workers earn 84 percent more than those with only a high school education. Additionally, workers with some college education but no completed degree earn 16 percent more than only high school trained employees.
Education’s value in the economy is also evident in the notorious fall of manufacturing jobs. The loss of 9.3 million manufacturing jobs among non-college educated workers has been strenuous. However, workers with some college education have gained 2.5 million manufacturing jobs.
There is significant data reflecting the education of the majority of technologically-oriented job holders. In fact, 92 percent of patent inventors have a bachelor’s degree and 92 percent of high-tech companies behind the growth of GDP are college educated as well.
The economic benefits of education are undeniably important to the U.S. In the country alone, GDP has potential to increase by $32 trillion, or 14.6 percent if all students are brought up to basic mastery by the National Assessment of Educational Progress standards. Intensive efforts at test score maximization for students in a handful of states with highest economic performance in the U.S. can increase GDP by $76 trillion over approaching decades. Furthermore, improvements in education according to spending on K-12 schooling is said to reap more improvements from investment than the burden of the cost.
The Return on Investment (ROI) of Education
Above the economic benefits of education is an ROI that investors cannot overlook. The global rate of ROI in schooling is approximately 10 percent for primary education, five percent for secondary education and 16 percent for university education. Social ROI of education for the world is 18.9 percent for primary education, 13.1 percent for secondary education and 10.8 for higher education. Finally, private ROI of education for the world is 26.6 percent for primary education, 17 percent for secondary education and 19.0 for higher education.
It is worth noting that girls have higher ROI for secondary education at 18 percent while boys have 14 percent. However, boys have higher ROI for primary education than girls, 20 percent versus 13 percent. Latin America, the Caribbean and Sub-Saharan Africa have the highest ROI on both social and private education. Overall, another year of education raises earnings by 10 percent a year. The 10 percent ROI for education investments is higher than alternatives: 1.4 percent for treasury bills, 5.3 percent for treasury bonds, 4.7 percent for savings accounts, 3.8 percent for housing and 7.4 percent for physical assets.
Next Steps Forward
The economic benefits of education are clear for the entire globe. Nevertheless, there are further steps to maximizing productivity and reaping even more economic benefits of education.
- Increase investment in the quality of primary schooling, given that primary education has expanded exponentially already
- Promote educational efficiency in policy through policymakers and government
- Reform school management systems and implement more effective performance metrics
- Implement more effective and fair approaches to school funding
- Report more data on school performance
Education has the power to uplift a country and establish a healthy, efficient economy. It has also played a pivotal role in the increase of productivity and wages amongst workers and proved to be a successful endeavor for investors. Fortunately, there is much more potential within education to help the world to flourish.
– Roberto Carlos Ventura