Economists all over the world, both of the West and the East, hold that education is a vital instrument of economic development. V.K.R.V.Rao, one of the well-known economists of modern India, gives a” big place” to education as a” residual factor” in economic growth. John K Norton, one of the leading educationists of America, maintained that, “highly productive economy of the United States would be impossible without the contribution of education”. A critical examination of the issue of the contribution of education to economic growth generates a plethora of questions.
- What does economic growth exactly mean?
- What is the place of education in economic development?
- What does education exactly contribute to economic growth
Economic growth refers to the rate of increase in national income during a specified period of time, which in another way known as the Gross National Income. The gross national income is the sum of the earned and unearned income of all in the country. Gross national income in other words is the aggregate of labour and property earnings, which arise in the current production of goods and services by the nation’s economy. Education contributes to economic development in two ways – directly and indirectly.
Direct contributions
The economy of a country is constituted by a number of sectors; and among them, agriculture and industry are predominantly more important than others. The growth of economy of any country is determined by productivity in various sectors in general, and in agriculture and industry in particular. Productivity in a sector depends to a large extent upon the quality of education and training. Thus, ultimately, education determines the economic growth through the supply of trained work force. General education supplies administrative, managerial, and executive staff; and technical and professional education supplies productive workers ranging from semi-skilled to highly trained professional and technical staff. In order to accelerate productivity and to promote rapid growth, economy should caste away it’s cobwebs of traditional means, methods, and materials of production, and adopt innovations contributed by the latest discoveries and inventions of high technology, by professional disciplines, and by managerial and administrative sciences. Needless to say, the institutions of scientific, technological and managerial research supply innovations in basic, applied, and professional areas.
Bowman and Anderson made a comparative analysis of the literacy rate of (the percentage of adults who have achieved the elementary literacy) and the per capita gross national product. From eighty-three countries, they collected the data on the literacy rate in 1950, and the per capita gross national product in1955. They found that,
- In thirty-two poor countries, the literacy rate was below forty percent, and per capita gross national product exceeded 300 dollars.
- In twenty – four rich countries, the literacy rate was above seventy per cent, and the per capita gross national product exceeded 500 dollars.
- In the remaining twenty- seven mixed countries, the literacy varied from thirty percent to seventy percent; and the income was little associated with literacy. In a few mixed countries, higher literacy rate coexisted with low income; and in a few others, low literacy rate coexisted with higher income.
Bowman and Anderson concluded that, in order to increase the per capita gross national product above the world mean of 200 dollars, a country should increase literacy rate above forty percent. Reviewing the history of a number of developed countries (U.K, U.S.A, U.S.S.R, and France), Anderson confirmed that, forty percent literacy level was the minimum required for ‘take off ‘ to economic development. However, this literacy level is only necessary, but not the sufficient condition for economic growth.
Indirect contributions
Indirect contribution of education to economic growth can be identified in three well-defined areas,
- Literacy(in literal and economic sense)
- Labour dynamics and
- Removal of obstacles to economic growth.
Literacy is a basic factor, which indirectly contributes to economic growth. Education liquidates illiteracy in both literal and economic sense; and thus, makes two-fold contributions: The first, literacy in the literal sense develops a scientific outlook and “open mindedness” in people in all matters of daily life. Educated people receive new ideas irrespective of their nature and source, evaluate them critically, and reason objectively.
The second, literacy in the economic sense, enables people to understand the intricacies of all economic activities of production, distribution, and consumption and also promotes people – involvement in all economic endeavours by participation and leadership. In other words, it increases the response – ratio of the human factor to facilities created for economic development. Above all literacy teaches the rights and responsibilities of a citizen, and helps to create a social climate congenial for economic activities. An understanding of the rights and responsibilities helps the maintenance of law and order, which is imperative for running the production machinery, developing high human entrepreneurship, and encouraging people to save more and more and to invest in costly economic enterprises. In fact, a ‘Survey on Household Income, Saving and Consumption, Expenditure in India’ has revealed that, in towns, saving – income ratio was minus 5.8% for the ‘non-formal group’, whereas it was 28% for postgraduates, and above 40.4% for the professional and technical degree holders. In the rural areas, the corresponding figures were 1.7%, 33%, and 30% respectively. Thus, the study shows that propensity to save increased with every level of education.
Labour is an important factor in economic growth, and education makes it dynamic in nature. Education develops the productive capacity of individuals as well as accelerates the rates of production in agriculture, industry etc. Further, the in-service training enables the labour to accept the latest techniques of production and distribution, and division of labour according to specialization, and finally, mobility of labour within a sector and between sectors, and even between locations.
A socio – economic survey conducted by Ladawala and V.K.R.V.Rao reveals that better educated persons have more personal earnings than uneducated and very well educated persons. These studies explained that, education develops the reasoning power, – the ability to analyze, to relate facts and events in proper sequence, to draw inferences and to apply conclusions in new situations; and these mental abilities along with technical skills indirectly contributed to productivity. Thus, earnings rise with every successive level of education. Education is the most important factor explaining a greater part of wage differences.
Population explosion and corruption in public services are the two major obstacles to economic development. Family planning is the only solution to the former, just as originality and self-confidence are the solution to the latter. Education teaches the impact of population growth on economic development as well as the benefits of small family so also education teaches the need and importance of integrity and self- respect.
The ultimate question is can only a highly educated workforce increase economic growth. The answer is that more educated can learn new tasks and new skills easily and are more acquainted with sophisticated and latest equipments and wide range of technologies, which help them to use in a better way and think creatively, and innovate new technologies. All these qualities help the skilled labourers to be more productive and adaptable to the situation necessary for worldwide competition and changes in consumer demand.
An economy with skilled and educated labourers can perform better and increase the income of the individual and of the economy by individual production and thereby the economy as a whole. Thus, the benefits of more educated work force accrue not only to the individual but also to the nation as well. Moreover, educated workforces create less crime and create a healthier environment.
The influence of education to economic growth is not as simple or direct as that of heat on matter. In fact, a variety of factors interacts with economy, and among themselves; and to mention a few factors, they are, – the investment in respect of physical inputs like raw materials, energy, machinery, transportation and so on, as well as science and technology, innovations, organizations, and finally, certain qualities of entrepreneurship and risk taking. The interactions as specified cause the growth of economy. Nevertheless, education is a vital factor in economic development; because all the above-mentioned factors emerge, or become productive, only under the influence of the human factor.
References
Rao .V.K.R.V., Education and Human Resources Development. New Delhi, Allied Publishers, 1966.
John K Norton, Education And Economic Development, Indian Journal of Educational Administration And Research,vol.1.1961.
M.J.Bowman and C.A.Anderson, “Concerning the role of Education in Development”, Readings in the Economics of Education, Paris, UNESCO, 1968.
Vaizey,John, The Economics of Education. London: Faber and Faber,1968.