Education Can Boost GDP Even More Than We Thought

Policymakers and the public often talk about how important education is for the economy, saying that schooling promotes higher incomes, better jobs, and more growth.

Last month, for instance, Vice President Joe Biden argued that college degrees are crucial to national prosperity. “Six in 10 jobs will require some kind of education beyond high school,” Biden said at an event in Denver. “Twelve years is not enough.”

But how much does education really matter when it comes to the economy? A new research paper gives some key insight into this question, and it turns out schooling might have a bigger impact than even some of the staunchest education advocates have argued.

“Empirical research has shown that education is indeed one – if not the most – important determinant of economic growth in the long run,” Ludger Wössmann 

The paper, published in Education Economics last month, argues that education might actually be the biggest single driver of economic development. What’s more, robust skills and knowledge turn out to be critical, underscoring once again that the country needs to a lot more to improve its school system.

In other words, if there’s one investment that policymakers should make to boost the country’s GDP, it’s investing in schools.

University of Munich’s Ludger Wössmann wrote the paper as a way to convince policymakers of the strong connection between education and the economy. I first came across the study in the Twitter stream of former teacher Paul Bruno, and it turned out that Wössmann had looked at a wide variety of indicators, such as unemployment rates and income levels, showing that they’re all deeply linked to higher levels of schooling.

But the strongest connection might be between student achievement and economic development. Using a host of international exams, such as TIMSS, Wössmann found that student outcomes explained some 75 percent of recent economic development. Or as Wössmann writes in the paper, “empirical research has shown that education is indeed one – if not the most – important determinant of economic growth in the long run.”

When I reached Wössmann in his office in Germany to discuss his findings, he told me that “again and again, I am surprised at how robust and consistent the evidence is for education as a determinate of economic growth.”

For Wössmann, the key driver isn’t paper credentials like a high school or college diploma. Those matter, of course. What made a bigger economic difference was strong skills and knowledge. “It’s really about achievement levels,” Wössmann told me. “Not how long you went to school.”

While Wössmann wrote an early draft of the paper for policymakers in the European Union, the analysis arrives at a key moment for the education debate in the United States. In the short-term, negotiators in Congress are working to hammer out a reauthorized version of the Elementary and Secondary Schools Act. And, given the results of Wössmann’s study, congressional leaders should emphasize reforms that promote student learning. In the short term, that includes high standards for students and equitable funding so that all children have the opportunity to thrive in the classroom.

In the longer term, the nation needs to do far more to upgrade its education system. That means pushing forward on thoughtful initiatives that promote deeper knowledge and skills like implementing the new Common Core standards and boosting the quality of the teacher workforce.

When it comes to education, it’s easy to forget that we’re in a high-stakes race with other nations, many of which are dramatically turning around their schools. China’s high school graduation rate has skyrocketed in recent years, while other nations like Peru have “improved the equivalent of almost two grades in math and one grade in reading and science” on international exams.

Almost no one argues that education plays no role in economic development. Even skeptics like economist Edward Wolff believe that schooling has an important role in creating robust economies. But Wössmann’s research underscores just how important education is for the nation’s future, and if our country does not do more to improve its schools now, it’s undoubtedly going to lose its economic edge later.

Image courtesy of Didier Weemaels

This blog item first appeared at US News and World Report.