The benefits of a better education are most often discussed in terms of personal gain: higher wages, greater economic mobility, and generally, a better life. But not all the benefits are private: Local economies flourish when there are more skilled and productive workers.
That’s the conclusion of the economists Eric A. Hanushek of Stanford, and Ludger Woessmann and Jens Ruhose of the University of Munich, whose new paper from the National Bureau of Economic Research takes a look at the financial return for states who invest in improving the quality of K-12 education. They find that the payoff can be significant.
In order to figure out the economic impact of improving primary and secondary education, the economists look at the relationship between school quality (in the form of academic achievement and test scores) and human capital, which is the economic measure of workers’ total abilities, skill sets, and work quality. They argue that other measures, such as average years of schooling and educational attainment, are inadequate, largely because such assessments don’t take into account the quality of schools and thus are blind to the actual quality of skills and competencies learned there.
Using data from other countries and from the National Assessment of Educational Progress, the authors built a model that predicts the economic effects of improving education. According to their model, if all students in the U.S. could be brought up to basic mastery as defined by NAEP, the U.S. GDP would increase by $32 trillion, or 14.6 percent. A more aggressive approach that brings all students up to the average test scores of the highest-achieving states could boost GDP by $76 trillion over the next several decades. The authors note that in 2010, spending on K-12 education by states and localities amounted to only about 4 percent of the total GDP, suggesting that the economic growth afforded by improvements in education would certainly outweigh the cost.