How Education and Training Affect the Economy

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How Education and Training Affect the Economy

Suzanne is a researcher, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and has worked on print content for business owners, national brands, and major publications.

How does a nation’s education system relate to its economic performance? Why do most workers with college degrees earn so much more than those without degrees? Understanding how education and training interact with the economy can help explain why some workers, businesses, and economies flourish while others falter.

An excess supply of workers is particularly harmful to employees working in industries with low barriers to entry for new employees—that is, those with jobs that don’t require a degree or any specialized training. Conversely, industries with higher education and training requirements tend to pay workers higher wages. The increased pay is due to a smaller labor supply capable of operating in those industries, and the required education and training carrying significant costs.

Key Takeaways

How Education And Training Affect The Economy

How Job Training Influences the Economy

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. Nations may try incentivizing training through tax breaks, providing facilities to train workers, or a variety of other means designed to create a more skilled workforce. While it’s unlikely that an economy will hold a competitive advantage in all industries, it can focus on several industries in which skilled professionals are more readily trained.

Differences in training levels are a significant factor that separates developed and developing countries. Although other factors are certainly in play, such as geography and available resources, having better-trained workers creates spillovers throughout the economy and positive externalities.

An externality can have a positive effect on an economy due to a well-trained workforce. In other words, all companies benefit from the external factor of having a skilled labor pool from which to hire employees. In some cases, the highly skilled labor force might be concentrated in a specific geographic region. As a result, similar businesses may cluster in the same geographic region because of those skilled workers—an example being Silicon Valley, Calif.

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In India, Groton students embark on a journey of discovery through civilizations both ancient and contemporary, with educational, cultural, historical, and spiritual elements. Students are exposed to lives of great Indians like the Buddha, Emperor Ashoka, Mahavira, Guru Nanak, Emperor Akbar, Mahatma Gandhi, and Rabindranath Tagore. The journey begins in Delhi, moves to Agra to see the Taj Mahal, and continues to Varanasi, a great center of religion, before settling for about a week in Dehradun, where we are hosted by The Doon School and Welham Girls School.

Participants explore areas that few tourists visit and come to understand some of the structures and subtleties of India’s multi-faceted life. We visit villages and cities, take a boat ride on the Ganges, taste different cuisines, visit schools and homes, and shop in local markets. We visit museums, monuments, and shrines, and we experience Indian art through sculpture, dance, painting, and music. Students have the opportunity to meet with women and men from all walks of life, from the powerful to the dispossessed, tribal to corporate, artisan to academic. The outer journey informs the inner journey, through teachings, mindful practices, self-reflection, journaling, and discussions.

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In China, students visit the mid-sized city of Chengde, nestled in a beautiful valley a few hours northeast of Beijing. Students stay at Chengde #3 Middle School, where they visit classes, practice Chinese calligraphy and paper cutting, learn Mongolian and Manchurian dance, and hang out with their Chinese peers while exploring the neighborhood and enjoying home stays over the weekends.

During most mornings, students visit the Zhongyingzi Primary School, in an economically undeveloped area on the outskirts of Chengde, where they teach English and help with manual labor. Groton students also visit the Great Wall and spend time exploring Beijing.

What does this mean for policy?

For instance, we must improve students’ access to higher education, especially at selective schools. There are too many schools that have low-income students who achieve impressive outcomes, but who admit relatively few low-income students.

Policy must be also focused on finding ways to improve the success of students once they arrive on campus. Schools that low-income students attend too often do not support them to get the most from the opportunities available to them, leaving them without the skills they need to reach the middle class.

Studying high-mobility institutions – those schools that admit large numbers of low-income students and whose low-income students achieve economic success – in detail can help us in both of these challenges. But we must also seek to provide answers to local problems, rather than imposing “one-size-fits-all” national solutions. To bring big data to bear on these issues, we formed the CLIMB Initiative

The CLIMB Initiative is a partnership between leading higher education economists and a diverse set of U.S. colleges and universities. Through CLIMB, we seek to understand not only which colleges act as engines of intergenerational mobility, but why, and how schools and policymakers can promote opportunity and economic growth by helping larger numbers of students from disadvantaged backgrounds succeed. By harnessing the power of big data, we can not only understand what works generally, but also how to adapt policy for different types of students across a wide range of schools.

Our partner institutions enroll more than 1 million students at four-year schools and another 2.4 million students at community colleges, representing more than 15% of the entire US undergraduate populations at degree-seeking institutions.

Life-long learning trend

Each industrial revolution has changed the nature of work and jobs in astounding ways. The current 4th Industrial Revolution may impact an incredible 50 percent of jobs as tremendous technological progress leads to changes in how people do their jobs. Professionals who want to remain competitive in their environment will need to constantly re-skill themselves. They cannot assume that an education they earned in the first half of their professional career will be all they need for the rest of their working lives.

Instead, earning a degree must be followed by ongoing learning. This requires institutions to create a self-development mindset in their students as well as their faculty and staff. Classrooms must leave opportunities for teaching self-learning skills so that students can continue to learn and engage in their chosen fields.

The schools that learn how to master these skills, however, have the chance to remain connected with their alumni throughout their careers. They can offer continual learning courses that will keep their former students engaged with the new development in their fields, and ensure that they keep coming back to the school for the support and education they need.

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As technology changes society, it has also had a dramatic impact on how people earn and prepare for their professional careers. The institutions that learn how to remain on top of these changes will position themselves for growth and success. Consider how these trends may impact education and what they mean for institutions of higher learning moving forward.


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