ECONOMICS OF EDUCATION: What direct contribution does Education bring towards Economic development? How does it increase reproductivity in the workforce?



3a ii). Analyze the direct contribution of education to economic growth


  1. The Economic Payoff to education: Cost-benefit and rate of return analysis for a large number of countries suggest that economic payoff to education Is high and remains so with economic growth. As countries industrialize and invest more in education rates of return tend to fall overall especially at lower educational level. Despite this, the economic development rates stay high compared to all alternative investments.
  2. Educational and Poverty: Education cannot in itself eliminate poverty but can help in developing skills that individuals can use for increasing their income (either through self-employment or increased productivity in wage labour) especially when combined with investments in other factors of production can lead to an increased % of labour force with better paying work and an increased standard of living.
  3. Increased Labour Productivity: Education directly impacts on labor productivity when workers acquire skills which improve their productivity. When productivity increases economic growth is realized. An increase in worker’s productivity benefits both the individual and society at large. At the individual level, the worker is rewarded by the employer with a higher wage for the increase in productivity. At the society level, an increase in increase in productivity means more revenue for the government in the form of taxes.


  • Quantity of product: Workers with higher levels of education produce more goods and services in a given period because of their greater skills, dexterity, and knowledge.
  • Quality of products: The more educated produce better goods and render services with greater skill and/or sensitivity to human conditions.
  • Product Mix: Educated workers may be able to produce goods and services which are more highly prized by society than those produced by workers with less education.
  • Participation in labor force: Educated workers are less susceptible to lost time from unemployment and illness and are usually characterized by higher aspirations.
  • Allocative ability: Education enables workers to assess their own talents; to achieve greater skills; and to be more receptive to new technologies, new products, and new ideas.
  • Job satisfaction: the educated may have greater job satisfaction because they tend to acquire jobs with greater psychic rewards.  




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