Education is considered to be of key importance to economic performance. Whether it is as a defining aspect of human capital and thus a pivotal factor in economic production (Barro 2001) and social well-being (Desjardins 2008), or as a fundamental entitlement in itself for the emancipation and betterment of mankind (Nussbaum 2003), no definition of progress can or should be separated from a call for better education. We do not contest the emphasis put on education in either view. However, we believe there is much more to say about education in relation to growth, jobs, and development.
In a nutshell, the received wisdom on education holds that increasing education levels is good for economic growth, jobs, and development at large. The more we invest in moving people into higher levels of education, the better off people will be. Indeed, as shown in Figure 1, when we relate the investments in higher education to any measure of economic performance, we see that those who invest more are also those who perform best. Of course, few people would make causal inferences from these correlations. Nevertheless the image that arises is staggering and, at least, appealing to many, which is that investments in education pay off. In light of this received wisdom, it should come as no surprise that a prime target of the European Commission’s Horizon 2020 strategy is to increase the share of people having attained higher education up to 40% or more. In terms of education policy, then, more investments should be made to move ever more people from lower to higher levels of education.
Figure 1. Relation between expenditures on education and education attainment and income
Source: own elaboration based on Eurostat (% of population 30-34 years old with tertiary education attainment; total public expenditure on education as a % of GDP for all levels of education combined); United Nations Development Programme, 2014 (Income)
At least two issues can be raised with respect to this received wisdom. First, education is not a univariate phenomenon. What goes into and comes out of the education process is by no means the same across different countries. Second, focusing on educational attainment alone says little to nothing about the knowledge and skills that people actually obtain throughout their education. Here, participating in education need not be the same as learning important knowledge and skills from education. In this column we intend to address both issues. Our main message is clear:
- Higher education alone is not a deterministic factor driving economic performance per se.
We need to take a closer look at what it is about education that generates appropriate skills for people in some countries but not in others. As it turns out, not just education itself but also the skills acquired through education drive economic development. It follows that just focusing on more investments in education alone is not enough. On the contrary, it might only be a waste of money if what and how we teach our children does not change in line with future demands.
Revisiting the received wisdom on education
The received wisdom can be countered on at least three grounds.
- Education attainment levels only tell us part of the story.
As an example, a recent study investigating the relationship between formal education, skill levels, and interpersonal trust (Costa et al. 2014) shows that skills contribute less to social outcomes in southern and eastern EU countries than they do in northern and western ones (see Figure 2). These results reveal that the potential to shape social outcomes is not limited to attending formal education and gaining a qualification. Other important factors are those affecting skills acquisition, such as the quality of education received, on-the-job training, and ageing.
Figure 2. Average predicted probabilities for level of trust accounting for educational attainment and numeracy skills
Source: Authors’ calculation based on PIAAC, 2012.
Note: Predicted probabilities are adjusted for socio-economic and demographic characteristics. Full information in other countries’ outcomes is reported in Costa et al. (2014). Average predicted probabilities showing the likelihood of adults reporting higher levels of trust, by level of education and level of skills in numeracy.
- Education is by no means a secure ticket to jobs everywhere.
On the contrary, Garrouste and Rodrigues (2012) showed that for many southern and eastern EU member states, being a university graduate offers little opportunities on the labour market. Indeed, university graduates in these countries might still be better off than their less educated fellows but, despite the fact that they are highly educated, their prospects of finding a job now and in the future are nevertheless low; especially compared to their colleagues in northern and western EU member states.
- Investment does not translate unambiguously into high skill levels.
This is so for three reasons. First, it is hard to make causal inferences from the correlations between investment in education, educational attainment, and overall economic performance. There might be confounding variables that correlate both with investments and performance that render these correlations spurious. Second, measuring investment in education itself is not as straightforward as it may seem. In particular, linking investment to students at different levels of education is not straightforward, as these data are not readily available. Third, and most importantly, although investment in education might be good for raising educational attainment levels, this relationship says little to nothing about its relationship with skill performance. It is shown in Figure 3 that the relationships between student-teacher ratios and skill performance are neither significant nor positive; meaning that no unambiguous relationship exists between the number of teachers per student and their skill performance. Also, although the relationships between investment per student and their skill performance are mostly positive, these are never significant.
Figure 3. Linking investment in education to skill performance
Source: Own elaborations based on Eurostat data.
Rethinking the lessons from the received wisdom on education
The qualifying remarks seriously put into question the policy messages derived from the received wisdom. Instead, they call for a set of alternative policy lessons.
- Apart from increasing education attainment across countries, policymakers should increase skills accordingly.
To illustrate this, Figure 4 compares the skill levels of Spanish graduates with those of their Dutch counterparts. These countries share, on average, a similar proportion of young graduates with tertiary education attainment. However, Dutch graduates with only medium education outperform Spanish university graduates in terms of skills. Even more striking, the best university graduates in Spain (95th percentile) are no better than the best Dutch high school graduates. If Spain is to catch up with the Netherlands, focusing on increasing attainment levels in higher education alone will not do the job. Instead, one should focus on increasing the level of skills across all education levels.
Figure 4. Distribution of literacy proficiency scores and education level in Spain and the Netherlands
Source: PIAAC, 2012 (Survey of Adult Skills).
Note: percentiles in literacy proficiency, by educational attainment. Mean and 0.95 confidence interval around the mean (grey bars). Percentiles: 25th and 75th (dark blue) and 5th and 95th (light blue).
- Policymakers are urged to increase skills of the young today, as to reap the benefits in terms of job prospects tomorrow.
Figure 5 shows how, on average, skill performance at an early age corresponds with skill performance at a later age. Figure 6 further shows that those countries that on average report higher skill levels display lower unemployment and higher employment levels. While claiming no causality, the results provide a rough indication of how performance at an early age serves as a pre-condition of success later on.
Figure 5. PISA mathematics performance (2006) versus PIAAC numeracy achievement (2012)
Source: Own elaboration based on OECD data.
Figure 6. The relation between skill performance and unemployment and employment
Source: PIAAC, 2012 (Survey of Adult Skills).
Lastly, underperformance in skills is not just due to a lack of investment in education. Rather, some education systems exhibit systemic features that need to be addressed if their performance is to improve. Many educational scholars agree that the most important thing a school can do is to provide its students with good teachers (Hanushek 2011). But it is also proven that differences in school systems and institutional characteristics play an important role in explaining cross-country differences in students’ performances (Hanushek and Woessman 2011).
- The overall point, then, is that if we are to improve the skills of students early on, we should improve the learning environments in which they are raised.
The received wisdom on education emphasises the importance of higher levels of education as a solution to solving both economic and social problems. The policy implication that follows from such a view stresses making investments in moving people from lower to higher education levels accordingly. This column has made some qualifying remarks questioning both the received wisdom on education itself as well as the policy implications that are derived from it. Sure, higher education attainment levels go hand in hand with various economic performance indicators. However, these indicators typically hide the differences that exist among countries; both in terms of job prospects of highly educated people, and skill differences among those with the same level of education attained. Taking such differences into account, we have shown that the policy implications that follow from the received wisdom on education are questionable.
Overall, what we stress is that beyond formal education attainment levels, policymakers should take into account the skills that people have obtained through education. Here, we are not suggesting that the range of skills that have been actually measured and how they are measured is the best way to monitor skill performance now and in the future. In fact, the use of student assessments in measuring their skills has been seriously questioned (Andrews et al. 2014). No single indicator offers the ‘new holy grail’ on measuring and monitoring education. Instead, policymakers should take into account and weigh a range of different indicators if one is to make a proper judgement about where education is heading and what to do about it in order to improve it.
Andrews, P, L Atkinson, S J Ball et al. (2014), “OECD and Pisa tests are damaging education worldwide”, The Guardian, May 6 2014.
Barro, R J (2001), “Human capital and growth” American Economic Review, 91(2): 12-17.
Costa, P, M Rodrigues, E Vera-Toscano, A Weber (2014), “Education, Adult Skills and Social Outcomes. Empirical evidence from the Survey on Adult Skills (PIAAC 2013)”, JRC Science and Policy Reports (JRC8959), Luxembourg: Publications Office of the European Union. doi: 10.2788/66192.
Desjardins, R (2008), “Researching the links between education and well‐being”, European Journal of Education, 43(1): 23-35.
Garrouste, C, and M Rodrigues (2012), “The employability of young graduates in Europe Analysis of the ET2020 benchmark”, JRC Science and Policy Reports (JRC77179), Luxembourg: Publications Office of the European Union. doi: 10.2788/69842.
Hanushek, E A (2011), “The economic value of higher teacher quality”, Economics of Education Review, 30(3): 466-479.
Hanushek, E A and L Woessmann (2011), “How much do educational outcomes matter in OECD countries?” Economic Policy, 26(67): 427-491.
Nussbaum, M (2003), “Capabilities as fundamental entitlements: Sen and social justice”, Feminist Economics, 9(2-3): 33-59.