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The Advantages of Education to a Nation
Globalization and international trade requires countries and their economies to compete with each other. Economically successful countries will hold competitive and comparative advantages over other economies, though a single country rarely specializes in a particular industry. This means that the country's economy will be made of various industries that will have different advantages and disadvantages in the global marketplace. The education and training of a country's workers is a major factor in determining just how well the country's economy will do.
The study of the economics of training and education involves an analysis of the economy as a whole, of employers and of workers. Two major concepts that influence the wage rate are training and education. In general, well-trained workers tend to be more productive and earn more money than workers with poorer training.
Training A successful economy has a workforce capable of operating industries at a level where it holds a competitive advantage over the economies of other countries. To achieve this, nations may try incentivizing training through tax breaks and write offs, providing facilities to train workers, or a variety of other means designed to create a more skilled workforce. While it is unlikely that an economy will hold a competitive advantage in all industries, it can focus on a number of industries in which skilled professionals are more readily trained.
Differences in training levels have been cited as a significant factor that separates rich and poor countries. Although other factors are certainly in play, such as geography and available resources, having better-trained workers creates spillovers and externalities. For example, similar businesses may cluster in the same geographic region because of an availability of skilled workers (e.g. Silicon Valley).
For EmployersEmployers want workers who are productive and require less management. Employers must consider a number of factors when deciding on whether to pay for employee training.
While employers should be wary about newly trained workers leaving, many employers require workers to continue with the firm for a certain amount of time in exchange for the company paying for training.
Businesses may also face employees who are unwilling to accept training. This can happen in industries dominated by unions, since increased job security could make it more difficult to hire trained professionals or fire less-trained employees. However, unions may also negotiate with employers to ensure that its members are better trained and thus more productive, which reduces the likelihood of jobs being shifted overseas.
For the Economy
Many countries have placed greater emphasis on developing an education system that can produce workers able to function in new industries, such as those in the fields of technology and science. This is partly because older industries in developed economies were becoming less competitive, and thus were less likely to continue dominating the industrial landscape. In addition, a movement to improve the basic education of the population emerged, with a growing belief that all people had the right to an education.
When economists speak of "education," the focus is not strictly on workers obtaining college degrees. Education is often broken into specific levels:
A country's economy becomes more productive as the proportion of educated workers increases, since educated workers are able to more efficiently carry out tasks that require literacy and critical thinking. As stated earlier, better-educated workers tend to be more productive than less educated ones. However, obtaining a higher level of education also carries a cost. A country doesn't have to provide an extensive network of colleges or universities in order to benefit from education, it can provide basic literacy programs and still see economic improvements.
Countries with a greater portion of their population attending and graduating from schools see faster economic growth than countries with less-educated workers. As a result, many countries provide funding for primary and secondary education in order to improve economic performance. In this sense, education is an investment in human capital, similar to investment in better equipment. According to UNESCO and the United Nations Human Development Programme, the ratio of the number of children of official secondary school age enrolled in school, to the number of children of official secondary school age in the population (referred to as the enrollment ratio), is higher in developed nations than it is in developing ones. This differs from education spending as a percentage of GDP, which does not always correlate strongly with how educated a country's population is. Therefore, a country spending a high proportion of its GDP on education does not necessarily make the country's population more educated.
For businesses, an employee's intellectual ability can be treated as an asset. This asset can be used to create products and services which can then be sold. The more well-trained workers employed by a firm, the more that firm can theoretically produce. An economy in which employers treat education as an asset in this manner is often referred to as a knowledge-based economy.
Like any decision, investing in education involves an opportunity cost for the worker. Hours spent in the classroom cannot also be spent working for a wage. Employers, however, pay more wages when the tasks required to complete a job require a higher level of education. Thus, while wage earning might be lowered in the short-term as an opportunity cost to becoming educated, wages will likely be higher in the future, once the training is complete.
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