Why education matters for economic development

The World Bank will be discussing Shanghai’s eminence at the Global Conference on Equity and Excellence in Basic Education in Shanghai, China, May 17-19, 2016. The conference will cover Shanghai’s ranking in international achievement tests as well as the role of good policies in improving education quality in other countries. Click the slideshow or press release to learn more.

“To teach a man to fish, expecting any fish that come out of the effort as his own,” Laozi argued. The quote is most commonly translated as “to give someone a fish and you feed them for a day; but to teach someone to fish and you give them something that lasts for a lifetime.”

There are a lot more children in school today than there were back then. For example, the level of schooling per population in Africa was about less than two years. Now, it’s about five years. The average level of education for the population in East Asia and the Pacific went from about two to seven years within a period of fifty-six years, which is a 200% increase! Globally, the average number of schooling per person is projected at 10 years by 2050—a 500% increase.

Despite the progress of schools in educating most children, 124 million are still not in school. This includes 250 million children who can’t read after several years of schooling.

Educating the next generation of workers has a powerful effect on the economy. Here are five points to keep in mind about how it can help your community:

Education is an investment

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Knowledge and learning have been valued since the start of time. Plato wrote, “If a man neglects education, he walks lame to the end of his life.”

But it was two Nobel-winning economists who really put the argument of education as an investment. T.W. Schultz argued that investment in education correlates with growth, and Gary Becker gave us the Human Capital Theory.

The Human Capital Theory states that investing in education is crucial for economic growth. For instance, the theory and empirical estimates are backed up by two of modern economists: James Heckman and Gary Becker.

Neurogenesis reveals that learning can continue into advanced ages. The relative cost and benefits of investing in older persons compared to younger ones differs. Investing in capable workers at any age generates higher returns than investing in less-capable ones. Ability is developed at early ages.

Education pays

In the end, another year of schooling can raise earnings by 10% a year. This is more than any other investment a person could make.

Human capital is more valuable than any other form of capital. Globally, we spend $5.6 trillion per year on education and training, or 15% of our national budget. We spend 5% of GDP to fund the education system  or 20% of our total budget. About five percent of the world’s workforce is employed in the education sector.

Moreover, private returns to schooling – what individuals receive at work – have been on the rise. Returns are rising by more than 20 percent in Africa and more than 14 percent in East Asia and the Pacific. Now, a college degree is worth more than ever before.

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Skills demanded by the labor market are changing

The returns to education and skills are declining, while skill acquisition is becoming more important. The reason for the change in the pattern of wages (i.e., a decline in wage levels), is partly due to the race between technology and education, as labor markets adjust to automation.

In this new world, the ability of workers to compete is handicapped by the poor performance of education systems in developing countries. Global competition and technological change demand that individuals master competencies and acquire necessary skills for their careers–a necessity that our education systems have so far failed to meet for most of those trying to advance through it.

Countries can compete- and succeed

Today’s labor market is marked by high levels of unemployment. One way to promote success and skillfulness is to invest in the early years of a child’s life with good education. The 3 A’s – Autonomy, Accountability, and Assessment – need to be promoted by countries around the world.

It’s important to focus on results

At its core, education is an accountability system: it’s a system that requires children to take responsibility for their learning. That being said, there are many different ways for education to be accountable. Whether you’re looking for high-stakes assessments or low-stakes assessments, test-based accountability is the right option. Testing can range in difficulty and intricacy, but either way, it’s cost-effective. High-stakes tests can be used to assess results and inform future instruction while low-stakes testing may target areas of need without heavily burdening students or teachers with extra work. Regardless of the type of assessment you want to use, there’s a way for education to measure student performance at the end of the day.

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Expand your opportunities, but don’t forget about equity.

Countries should improve the quality of their education, seek to excel, and increase opportunities for disadvantaged youth. This means ensuring that you have access to an excellent education so that you can thrive.

In general, an education yields high returns on average, though results vary. There need to be better information for students who don’t perform well and access to greater support networks that can help them take on the challenges of completing their tertiary level education. But more importantly, students and families from disadvantaged backgrounds need greater transparency when it comes to the cost of a college degree and better information on the merits of opting out of higher education entirely.

Education is one of the best ways to eliminate poverty, inequality and to grow the economy. We’re investing in it more and need your help too.

You can find more information about the World Bank Group’s education initiatives by following them on Twitter and Flipboard.

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