The global economy has undergone significant changes over the past four decades. During this time, global GDP per capita doubled, largely due to the rapid economic rise of China and India. Many of these benefits reached the global poor. The percentage of people living below the international poverty line of $2.15 per day dropped from 44% in 1981 to 9% in 2022, according to the World Bank.
Education and Economic Growth
Recent research highlights education as a primary factor in inclusive growth. Over the past 50 years, both high-income and low-income countries have expanded access to schooling. This increase in education levels has significantly boosted productivity, particularly among impoverished populations. A study by Gethin (2023) found that education contributed to half of global economic growth and accounted for two-thirds of income gains among the world’s poorest 20% since 1980.
To sustain this progress, governments must continue to expand educational opportunities. Technological advancements, including artificial intelligence, present new possibilities for innovation. However, maximizing these benefits requires a well-educated workforce. While many developing nations have prioritized universal basic education, there is now an urgent need to improve access to secondary and postsecondary education. This expansion will enhance economic efficiency and ensure that technological advancements benefit a broader population.
Education’s Role in Reducing Poverty
Economists have long debated the impact of human capital on economic development. However, little research has quantified how education directly improves living standards for poor individuals. A recent study analyzed microdata from surveys conducted in 150 countries, covering labor forces and income levels. By combining this data with historical records on education attainment since 1980, researchers assessed the direct link between education and income growth.
Findings revealed that without advancements in education, global income per capita would have increased by only half its actual growth rate between 1980 and 2019. Education accounted for 60–70% of real income growth among the world’s poorest individuals. Without widespread access to schooling, global poverty and inequality would be significantly worse today.
Surprisingly, basic education alone does not fully explain these results. Higher education plays a crucial role in reducing poverty. A broader pool of educated individuals allows for a more even distribution of high-skill job opportunities, freeing up positions for lower-skilled workers.
For example, in countries like India and many sub-Saharan African nations, a large portion of the workforce is employed in low-productivity agricultural jobs. As more individuals gain higher education, they can transition into skilled professions, increasing their income. At the same time, those remaining in agriculture benefit as overall productivity rises and wages improve due to reduced labor competition.
The Link Between Education and Technological Advancement
The economic impact of education is closely tied to technological progress. In recent decades, technological advancements have favored highly skilled workers, contributing to income inequality in countries like the United States. In contrast, nations that expanded educational access have been able to leverage technological progress more effectively, resulting in broader economic benefits.
Without technological progress, education would have had a smaller impact on growth. Conversely, without educational expansion, technological change would have benefited only a narrow group of skilled workers. This interdependence underscores the importance of aligning education policy with innovation strategies. Economic growth is not driven solely by education but by a combination of schooling, technology, and other economic transformations.
The Need for Higher Education Expansion
Many international organizations and governments have focused on universal basic education as a strategy for poverty reduction. The assumption has been that basic education yields the highest returns, benefiting low-income populations the most. However, new research challenges this view.
In some countries, such as India, a year of primary education increases earnings by 2–3%, while a year of secondary education raises earnings by 6–8%. Postsecondary education yields even higher returns, increasing income by over 13%. These differences suggest that higher education plays a vital role in economic growth.
Moreover, expanding higher education has indirect benefits for less-educated workers. Studies show that economies with a larger pool of college-educated workers experience greater productivity and wage improvements across all sectors. The high demand for skilled labor in developing nations suggests that investing in higher education could reduce inequality while accelerating economic growth.
Balancing Quality and Access
A key debate in education policy is whether to focus on expanding access or improving quality. International test scores indicate that education quality in many developing nations remains low. This has led some policymakers to prioritize quality improvements.
However, historical trends suggest that education quantity has been more influential in reducing global poverty. Between 1980 and 2019, the percentage of people with no schooling fell from 35% to 15%, while the share of adults with secondary education increased from 25% to 60%. Despite stagnant test scores, expanded access to education has contributed significantly to economic development.
For instance, India’s District Primary Education Program, launched in 1994, expanded primary schooling without improving quality. Yet, it still led to a 13% increase in earnings per year of schooling. These findings suggest that increasing access remains a critical driver of inclusive growth.
Conclusion
Education remains a cornerstone of economic development. While technological progress and globalization have also contributed to growth, the expansion of schooling has played a crucial role in reducing poverty and improving living standards worldwide.
Governments must prioritize policies that support educational access at all levels, particularly in higher education. As artificial intelligence and other innovations continue to reshape industries, a well-educated workforce will be essential to ensuring that economic gains are widely shared. Investing in education is not just a social imperative—it is an economic necessity.
