New Study Links Education to Economic Growth

Jan 26, 2010

The Organization for Economic Co-operation and Development (OECD) released the results of a survey exploring the performance of international education systems. Presenting a persuasive argument for prioritizing education on a policy level, the study correlates improvements in cognitive skills with a country's overall economic growth.

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In 1997, the Paris-based Organization for Economic Co-operation and Development (OECD) launched the Program for International Student Assessment (PISA). Every three years PISA tests 15-year-olds from countries around the globe, measuring the performance of their educational systems by comparing the learning outcomes achieved by students.

In a report released at the 2010 World Economic Forum in Davos, Switzerland, OECD used economic modeling to link cognitive skills with economic growth. They found that even a small improvement in citizens' academic ability can have a significant impact on the future of a nation's economy, as measured by gains in Gross Domestic Product (GDP).

The researchers' measurement of cognitive skills was based primarily on the PISA math and science scores, which OECD notes are highly correlated with PISA reading scores. They also used an aggregate of data from a variety of international assessments given to students in OECD countries over the past 45 years. The analysis relates these measures of cognitive skills with the initial level of GDP per capita and the growth rate of GDP per capita between 1960 and 2000.

Economic Growth As Dependent on Test Scores

From 'The High Cost of Low Educational Performance', Figure 6 page 17

As the graph above indicates, the researchers found a strong positive correlation between test scores and economic growth. Of course, with these disparate-seeming measures, there are many factors that could make it difficult to argue that one is causally related to the other. However, the researchers note that they applied a series of analyses to eliminate confounds that, taken together, suggest a causal link strong enough to make serious policy recommendations.

The report argues that if countries want to invest long term in economic health, they must improve the quality of their education. The current international PISA average score is 500. If all 30 industrialized OECD countries raise their average PISA scores by 25 points in the next 20 years, there would be a total gain of $115 trillion in GDP 'over the lifetime of the generation born in 2010.' (The study notes that Poland, the most rapidly improving nation on PISA, gained more than 25 points between 2000 and 2006.) This impact wouldn't be felt until today's young students become significant members of the workforce, but by 2042 GDP would be 3% higher than it would have been without improvements in human capital. That gain would rise to 5.5% in 2050 and 24.3% by 2090.

For the U.S., that would mean a growth of almost $41 trillion in GDP over the next 80 years - and that's their conservative goal. Finland currently has the highest PISA scores among OECD nations, with an average of 546 on math and science. If the U.S. could increase its score by 58 points to match Finland, the American GDP would grow by $103 trillion in the same period of time.

Given our current economic troubles, that is a very powerful argument for the social value of education.

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