how does education affect economic growth

How Education Affects the Economy?

If you pay attention, you’ll quickly notice that most college graduates earn way much more than those who don’t own a diploma. That makes us wonder…how exactly does the system work? How do our nationals educational systems impact their economic performance and growth or how education affects the economy?

Well, acknowledging and fully understanding the way education impacts the economy is crucial for a better understanding of why some economies, companies, or individuals prevail, while many others lose momentum.

Generally, markets and industries that present higher requirements will usually compensate their workers to a higher degree. Why? Well, when the labor force is limited and the demand for educated and specialized graduates improves, most nations, organizations, or professionals will not have to think for long. You either pay or you’re left behind.

Why is Education Critically Important for Any State (EduBlogger opinion)?

Since the beginning of time, there were different degrees of competition between countries. Back then, the world was full of wars that involved physical force. Nowadays, many countries are already fighting cold wars, which means that the battlefield’s nature is economical.

Simply put, the countries that hold the most economic resources will develop competitive advantages over other countries. Each country presents certainly improved its interests in specific industries. For example, Spain imports a lot of seafood as well as olive. The US is both an industrial, economic, and military power, among others.

In this age, every technological breakthrough leads to money. When there’s money, there’s interest. Therefore, as you can guess, growth cannot arise simply from anything. Education and training are key to prosperous economic growth for not just countries but also for private businesses and for individuals like you and me.
Now let’s have a closer look at how education affects the economy, our employers, and our employees.

It Affects the Employers

how does education affects the employers

For employers to thrive, their businesses must produce results. Therefore, in this age and time, most employers are looking for experienced, skilled, and knowledgeable employees who can successfully bear with the company’s expectations and standards.

In many cases, companies must train and specialize the fresh employees because some of these companies hold unique strategies, algorithms, or knowledge. Now, before an employer decides to offer educational help through training, he must consider the following aspects:

  • To what degree will the training program affect the participants’ efficiency and productivity?
  • Is the increase in efficiency/productivity covering the costs of the training program?
  • If the employees are asked to pay for training, will they leave for another competitor after they “get what they need”?
  • After the training session, will the employee come with higher compensation expectations?

It Affects the Employees

how does education affects the employees

The employee’s earning potential is mostly influenced by his knowledge, skills, experience, certifications, and so on. Simply put, employees who pursue higher educational goals will usually be rewarded with higher stakes and pays.
If an employee fully understands the job, the industry, and the marketplace, he will be greatly appreciated by not only his employer but also by other competitors. Therefore, for employees, a higher degree of education and training provides higher benefits in the workplace. This includes more respect, a probably higher authority within the team, perhaps a leadership position, or maybe simply a better wage or compensation plan.

There are a lot of employees who now try to develop and perfect their aptitudes, looking for advanced and unique ways that’ll help them improve their performance and productivity. The employee should consider several aspects whenever he decides whether to engage (or not) in advanced studies or provided training:

  • How much increase in productivity will this course/college/training yield?
  • Will the new knowledge/skills/resources compensate for the cost of the education?
  • Is the labor marketplace extremely competitive in such a way that it’ll represent problems after the educational course is finished? Is there a significant “room for growth”?

It Affects the Economy

Every country looks to be extremely interested in the future of its generations. A country that has professional workers who are knowledgeable and competent enough to engage in newer industries such as science and technology will reap huge economic benefits.

Therefore, it’s in each country’s interest to start an educational movement that is supposed to lead to growth and prosperity. Now that every person has the right to a basic education started (in most countries), competition has quickly made its way in.
Education doesn’t refer only to college graduates who want to get a job or workers who wish to improve their careers by enrolling in college. In fact, economists categorize education in the following way:

  • Primary – elementary school
  • Secondary – this refers to the “middle” school, the high school, and the preparatory school
  • Post-secondary – vocational schools, community college, university

education high school post secondary education - university education school

When there are more educated individuals who work for a country, the country’s economy will immediately increase due to the competency of the workers.

Nevertheless, not every country can provide extensive and comprehensive training for free, just like many businesses. Even so, the majority of nations and states provide funding for the basic educational stage, which is represented by a primary and secondary school.

Whenever a country invests in education, it basically invests in human capital. When you invest in tools and resources, you invest to receive something back later. It goes exactly the same as the educational system.

Every country, business, or individual who realizes this aspect will surely thrive in the long-term. Why’s that? Because we’re moving forward and there’s no way to stay on the top of the ladder without constantly improving your personal and professional knowledge, skills, and mindset!


In essence, the more knowledgeable and skilled an employee is, the better results he will usually generate. The higher the results of an employee the higher the results of that company. Follow me.

When a company grows in performance, it’ll automatically improve its countries’ economy due to various reasons. It’s all cause-and-effect.

Therefore, I believe it is crucial for every country to truly acknowledge the importance of a knowledgeable and skilled labor force, for that is the foundation of a potentially thriving long-term economic growth.

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