Center for American Progress

Better Learning Outcomes Can Help Kick-Start the Economy

Better Learning Outcomes Can Help Kick-Start the Economy

A new study finds that investing in education can increase worker salaries and gross domestic product.

A high school student follows a remote Advanced Placement calculus class while sitting in a community garden in Los Angeles, August 2020. (Getty/AFP/Robyn Beck)
A high school student follows a remote Advanced Placement calculus class while sitting in a community garden in Los Angeles, August 2020. (Getty/AFP/Robyn Beck)

The economy is facing a massive economic downturn due to COVID-19. As a result, states such as Nevada and Indiana are slashing their education budgets. But political leaders need to reinvest in education, not cut funding for schools. Indeed, as shown in a new analysis on salaries and education, better learning outcomes can kick-start the economy and lead to massive jumps in income.

This new study builds on a large body of research: Economists have clearly shown that investing in education leads to major economic returns in terms of both salaries and gross domestic product (GDP). It also contributes to an overall more successful economy and thriving labor market, as employment tends to closely track increasing educational outcomes. Indeed, one of the best predictors of economic growth is educational outcomes, and furthering education would provide a much-needed boost to the American economy—and American workers.

To better understand the exact connection between learning and economic growth, the study examined the economic benefits of additional learning. The inspiration behind the analysis came from a National Bureau of Economic Research (NBER) study, called “Returns to Skills around the World: Evidence from PIAAC,” that showed how workers could experience economic benefits from gaining more domain expertise—including math knowledge and cognitive skills such as critical thinking. The new analysis took the percentage calculations from this NBER study and turned them into a precise estimate of income growth per year. As part of the analysis, it considered all full-time workers in the United States and assumed a standard deviation increase in scores, which was equal to a 200-point jump in SAT scores.

The results showed that better math skills would increase salaries by a whopping $21,000 each year. The study looked only at U.S workers aged 35 to 54 who work full-time jobs that require some math skills. Still, the earnings increases were very large: Over two decades, an individual could earn up to $400,000 more by having more math skills. In some states, increases were even higher. For example, in California, better math outcomes would lead to a $25,000 annual increase in wages; in Washington, D.C., this figure jumped to $31,000; and in New York, over a 20 year period, the increase in income would come close to $500,000.

The study yielded similar results in writing and reading, finding that improved writing outcomes can increase salaries by as much as $11,000 per year. In fact, just having a high school diploma can deliver impressive economic results, garnering nearly $7,000 more in salaries each year for individuals.

In short, workers with more skills gain more money. This is in large part due to the fact that school gives young people the essential skills they need in life, such as how to write clearly and study effectively. However, these skills not only help students learn, they also provide them with more career and work opportunities. What’s more, individuals with such skills are more effective in their jobs, as they are better equipped to manage a range of situations in their work environment. In addition, with improved reasoning skills, employees are far more efficient and productive.

To put it differently, higher-skilled workers serve as an economic driver. They help boost GDP and improve the overall economy. Practically speaking, individuals should make sure to gain skills by setting aside time to learn and land degrees. But more broadly, education requires investment. Especially given the pandemic, policy leaders must invest—not cut—school funding. In particular, they should invest in what works, from online tutoring to proven math programs.

The new study does have a number of limitations. It doesn’t account for differences in schools’ needs, such as students with individualized education programs. What’s more, improving educational outcomes is hard, especially given COVID-19; and even before the pandemic, student outcomes had been lagging, according to the National Assessment of Educational Progress.

Still, education is the way out of the nation’s current economic downturn. Therefore, it is vital for policymakers to support improving educational outcomes. Even in this time of economic uncertainty, leaders must invest in a better education system—one that will reinvent our economy and drive the growth that the country so clearly needs.

Ulrich Boser is a senior fellow at the Center for American Progress. He is also the founder and CEO of the Learning Agency.

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Ulrich Boser

Former Senior Fellow