Education Investment Said To Yield Economic Payoffs

By Michelle Galley — February 26, 2003 3 min read
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Spending on education pays off not just for individuals, but for whole nations as well, concludes a study of 19 countries issued last week.

“Financing Education—Investments and Returns: Analysis of the World Education Indicators, 2002 Edition,” is available for $20 from the OECD Online Bookshelf.

The analysis, conducted by the United Nations Educational, Scientific, and Cultural Organization and the Organization for Economic Cooperation and Development, found that the investments 16 of those countries made in education may have directly contributed to growth in their respective economies.

For example, in 1960, Malaysians completed an average of 3.22 years in school, and the country had a per capita gross domestic product of about $2,000.

By 2000, the population’s average years of education increased to 9.31, and the per capita GDP had nearly tripled.

“Education is increasingly considered an investment in the collective future of societies and nations, rather than simply in the future success of individuals,” the report asserts. “For every single year the average level of schooling of the adult population is raised, there is a corresponding increase of 3.7 percent in the long-term economic-growth rate.”

Researchers tracked the growth in the GDP and the average years of education that people received from 1970 to 2000 in Argentina, Brazil, Chile, China, Egypt, India, Indonesia, Jamaica, Jordan, Malaysia, Paraguay, Peru, the Philippines, the Russian Federation, Sri Lanka, Thailand, Tunisia, Uruguay, and Zimbabwe.

All but Egypt, India, and Tunisia—whose populations had far less schooling to begin with—showed a correlation between years of education and economic improvement. The report suggests that countries need to reach a “critical threshold” of educational attainment before it starts to pay off economically.

A major factor that contributes to economic and educational growth is a low rate of unemployment, says the study. And a well-educated populace, it found, is more likely to be employed.

In all the countries studied, “labor force participation rates increase with the level of education attained by the individual,” the report maintains.

The higher the level of education a worker attains, the more likely that he or she will be able to earn more money, it says.

“It is a real positive analysis for the value of giving your populations more education at a higher level,” said Doug Lynd, a researcher with UNESCO and one of the authors.

Equity Challenges

Researchers also looked at equal access to education and found it lacking in many of the countries studied.

Many of those countries have universal primary levels of education for their populations and are interested in providing more secondary and higher education opportunities for their people, it says.

In expanding educational opportunities, the countries’ governments looked to both private and public funds.

Private spending includes direct payments from families or individuals to schools to cover such costs as tuition, lodging, meals, or health care.

The percent of private spending on education varies widely among the countries in the study.

In Jordan, for example, only 16 percent of education spending comes from private sources, while 45 percent of Chile’s does.

Across all the countries, the average level of private financing for education was 12 percent, according to the report.

The higher levels of private financing in developing countries lead to real inequities in providing access to education, said George M. Ingram, the executive director of the Basic Education Coalition, a Washington-based association of international-aid organizations.

“Clearly, this is a function of inadequate public resolution to finance many societal needs,” he said. “It raises concerns about equitable access to education.”

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