Education And Income: How Learning Leads To Better Salaries - The Learning Agency (2023)

The U.S. is in the midst of aneconomic downturnresulting from COVID-19, with potential long lasting effects on workers and the American labor market.Unemploymentis at its highest point since the Great Depression with over44.2 million Americansfiling for benefits. Despite massive government assistance, fiscal recovery will be a daunting process, requiring innovative solutions.

The United States must consider new strategies to fortify its labor market. Major investments are necessary from the federal government to boost the American economy. For there to be any chance of recovery in the coming years, states and the federal government would be wise to invest funds in training and education.

More spending on schools may sound at first counterintuitive. After all, many states arecutting backon public services to balance budgets. Funding is being slashed for education in many areas. Ohio recentlyslashed fundingby $775 million, targeting education. Georgia, for instance, cut spending by 14 percent for all state agencies, including schools.Yet it cannot be understated: education and retraining in key skills areinstrumentalto a competitive labor force and national economy.

For over 60 years, economists have demonstrated how education leads directly to majoreconomic returnsin salary and GDP. Education additionally plays a vital role in many countries’economies, as well as the general health oflabor marketsand overall employment. Indeed,employmenttends to go in lock step with increasing education standards. This is true both for individuals and large economies.

In other words, budget cuts for American public schools will only deepen the economic and unemployment crisis already underway. In contrast, by investing in education outcomes for the future American workforce, there is a real possibility to reverse the negative downturn.

It is worth considering the current state of public education in 2020 thus far. In addition to skyrocketing unemployment, COVID-19 has caused school closures for 60 percent of the global student population. While young people around the globe are shifting to online learning, this unprecedented challenge has increased precarity for those living in resource-stricken areas–or for those without access to computers or Internet connections.

In the U.S., while the majority of students may have access to online learning, nearly half of middle school and high school students report not tuning in to newly web-based courses. Others may opt out of class due to obligations to instruct their younger siblings and relatives, who are also stuck at home. Negative effects have already been visible in interrupted learning, and reduced opportunities for economically disadvantaged students.

There is hope however. When a country’s education system improves, labor force skills increase and incomes rise. Boosting the American education system, then, presents a key opportunity for a robust recovery for both policymakers and individuals. To better understand the benefits of educational investments, the Learning Agency conducted a study to look at how Americans’ incomes would grow as a result of better skills and education.

The approach for this economic white paper draws from a 2015 National Bureau of Economic Research (NBER) study, “Returns to Skills around the World: Evidence from PIAAC.” In that paper, the NBER demonstrated workers could expect impressive percentage increases from relatively nominal increases in skills through education. Improved math skills, for instance, led in theory to a 28 percent increase in wages, while improved reading skills in education would produce a 27 percent improvement in wages.

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For the Learning Agency’s analysis, NBER’s percentages were translated into an exact numeric wage increase per year, based on current employment statistics, and wage estimates. That is to say, we calculated the increase in monetary gains created by developing further math and reading skills.

The study’s findings are as follows:

Better math skills can increase salary by $21,000 per year. If a student had improved reasoning ability with data, statistics, graphs, and spatial relationships — as measured by a standardized exam — the total expected increase in earnings would be an additional $21,000 per year for an 35-54 year old, full-time U.S. worker. The total accrued amount in earnings for an individual for better math skills over two decades would be $400,000.

The analysis only included careers requiring at least a high school-level of math knowledge, such as financial operations, computers, engineering, the sciences, healthcare, manufacturing, management, and administration. In California, further education in math would lead to a $25,000 yearly increase in wages, or $31,000 in Washington D.C. In New York, over a 20 year period, the increase in income would come close to $500,000.

Note that the analysis assumes a single standard deviation increase in math scores. This is the equal to a 200 point increase in SAT scores.

Improvement in reading and writing skills could spark an $11,000 increase in annual salary. This estimated and approximate $11,000 in individual gains would aggregate to a $421 billion increase in wages annually for the U.S. workforce as a whole, with a boost of $8.4 trillion over 20 years. While most workers already have basic reading and writing abilities, improved reading and writing skills lead to a substantial increase in wages.

Though the numbers for gains from reading skills were not as impressive in total as those from increasing math skills, the foreseeable impact would be wider, since more Americans work in fields where reading and writing are a necessity, and a wider variety of professions stand to benefit.

As part of the analysis, we considered all full-time workers in the U.S. Again, the analysis assumes a single standard deviation increase in reading and writing scores. This is the equal to a 200 point increase in SAT scores.

Graduating with a high school diploma is equivalent to an additional almost $7,000 in annual salary. In the final component of this analysis, we found similarly impressive wage increases for the value of completing a high school diploma. The basis of this calculation was Census Bureau’s 2018 American Community Survey data. According to the data, workers currently without high school diplomas stand to earn an additional $6,700 per year if they completed their degree, as compared to the earnings of non-high school graduates.

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The takeaway is that workers without degrees who currently earn on average $24,500 per year, would increase their salaries to $31,300 annually. If half of all adults 25 and over, who did not graduate from high school, finished their degrees, the earnings would accrue to $88 billion in increased annual income nationally. Over 20 years, this increase would be a boost of $1.8 trillion in wages for the American economy.

National and state-level economic impact of more education is more than $200 billion. It is clear that not only workers stand to benefit economically from a boost in educational outcomes since wages form the basis of the economy, and so we analyzed the overall impact of salary increases.

According to our estimates, about 11 million workers in the U.S. would benefit from improved math skills, and their additional earnings would total $235 billion annually. Ultimately, the U.S. could expect a $235 billion increase for the national economy per year, by only improving math education. During a 20 year period that amount would amass to $4.7 trillion. Keep in mind, this analysis was relatively conservative, examining only the case of full-time adult workers, in the midst of their careers.

Methodology
The original study undertaken by the NBER assumed a single standard deviation in test performance. A single standard deviation is equal to a 200 point increase in SAT scores.

In the context of the study, we made the further necessary assumption that all current wages for the American workforce would increase in exact proportion to increases in level of education.

This assumption does not account for the likelihood of diminishing returns, even in the case that the population’s level of education magically increased. The improvement of education outcomes would likely not affect all salaries at the same level.

Economic returns for a completed high school diploma were calculated with a straightforward model: by estimating the boost non-high school graduates would receiveif paid according to the earnings of workers who graduated high school, compared to current income. For this analysis, we looked at workers aged 25 years and over.

We looked at full-time workers aged 35 to 54 for the cognitive skills analysis since NBER generated their findings with this population. For the purposes of the study, 83 percent of the workforce were estimated to have full-time jobs, and 31 percent of that number are expected to be between 35 and 54.

Approximately 3 in 10 U.S. workers have a profession in the STEM (Science, Technology, Engineering and Mathematics) fields, where workers earn on average $36,000 more, on a yearly basis, than their counterparts in non-STEM professions. In certain states, gains in wages according to improved math skills were more noteworthy. Nonetheless the implications of this study are optimistic for the American economy caught in the midst of a downturn from the global pandemic.

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Discussion
Simply put, more education leads to much more income. What’s more, an improvement in education would help kickstart the American economy. Schools are the primary environments in which people develop cognitive skills, and research shows countries with improved cognitive skills over time experience faster rates of economic growth. This boost is due to the impact of cognitive skills on an individual’s earnings.

To put it more exactly, better-skilled workers are more equipped to manage a range of situations in their work environment, improve their technical and domain expertise, and strive for higher positions within their current place of employment and elsewhere. Cognitive skills also improve a worker’s efficiency and productivity, making them more attractive to employers.

More educated workers can also compete more effectively for high-paying and high-skilled jobs. In other words, the more knowledge someone has, the more effective they are finding work. The nation currently faces a shortage of skilled labor in a number of technical areas including machine learning and data science.

To be sure, improvements in education are not easy. In fact, the dropout rate between grades 10 and 12 even increased from 2007 (3.5 percent) to 2017 (5.4 percent). Similarly, math and reading performance have also declined in recent years among fourth- and eighth-grade students, according to the latest data from the National Assessment of Educational Progress, also known as the “Nation’s Report Card.” Not surprisingly, this means that U.S. education achievement generally has lagged behindthat of other countries, coming in 30th in global comparative math assessment.

Recommendations
Our analysis leads us to the following recommendations:

Boost funding for education. Budget cuts are undermining public education. Too many states and local agencies are cutting funds for schools, and today most states are spending less on education than they did a decade prior.

This is short sighted. Lower spending levels lead to lower results. After the Great Recession, a 10 percent cut in school spending was shown to reduce NAEP test scores by 7.8 percent, and graduation rates by 2.6 percent. Similarly, greater spending leads to greater results. Court orders for increased per pupil spending have been proven to produce higher graduation rates, as just one example.

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The issue goes beyond overall spending. The nation’s education system is marred by extreme inequities, and the wealthiest districts in America spend 10 times more on education than the poorest. Students in Mississippi for instance generally have 40 percent of the per-pupil funding available for school kids in New Jersey, while Alabama students get about 50 percent of the funding available to students in Connecticut. Increased spending means not only a better academic environment but also often improved health, nutrition and emotional support –which in turn affect students’ ability to succeed.

The point is education requires investment. Improved funding will improve outcomes, and given the pandemic, policy leaders should invest — not cut — school funding.

Invest in what works to boost outcomes for students. School funding efforts are not all equal. Some expenditures improve education more than others. This leads to our next recommendation: Policymakers should invest in programs that work and raise outcomes for children as well as create systems to further understand what works.

Randomized control trials have demonstrated that early childhood education produces real results. Research has also shown that investments in thoughtful ed tech programs like ASSISTments can make a difference. There’s also a wealth of evidence around focused school reform programs like Success for All. These are the types of programs that require additional investments and scale.

One of the most promising and evidence-based reforms is tutoring. Online tutoring can help low-performing students catch up, according to several studies. What’s more, tutoring programs can also put people back to work. In this case, tutoring programs can employ twenty-somethings who are not returning to college or the many people who have been laid off from work due to the pandemic.

Policymakers should also look to support programs that create a “virtuous cycle” of evidence, creating infrastructure that allows for richer research. The ASSISTments program, for instance, has opened up its backend to allow for additional research. This “instrumentation” approach could lay the groundwork for major improvements in students’ learning and should be expanded.​

Conclusion
Education plays a decisive role in economic performance. Those in society with more education earn higher salaries over their lifetime as well as contribute more in taxes. An educated population also leads to economic growth at a national level. Better education has even been shown to create more cohesion in democratic countries and a heightened sense of trust between citizens.

In this regard, increased funds for public education generate a positive feedback loop for the economy. As education improves the economy improves, and as the economy improves education improves even more. In some countries, education has become the driving force of the economy.

In the coming years, there is a threat not only of COVID-19 but a high likelihood that what’s known as “Industry 4.0” will make many jobs obsolete through automation. Improving skills through education will be key for the U.S. workforce to survive despite these dramatic trends.

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This analysis is a call to individuals, who should continue to focus on improving their knowledge and skills. It’s just as important a call to policymakers to improve U.S. education in order to rebuild the economy. The study shows that every state would see a dramatic increase in outcomes due to more education. Similarly, virtually every area of economic activity in America stands to benefit from greater investment in education. The nation must act now and reinvest in its future.

FAQs

What is the relationship between income and education training? ›

The relationship between education and income is strong. Education is often referred to as an investment in human capital. People invest in human capital for similar reasons people invest in financial assets, including to make money. In general, those with more education earn higher incomes (see the table).

Why do people with higher levels of education tend to make more money? ›

An economy's productivity rises as the number of educated workers increases since skilled workers can perform tasks more efficiently. An economy is more valuable when equal education and labor opportunities are available across gender, race, age, and ethnicities.

What benefits can we get from learning? ›

Reasons to learn a new skill
  • It gives you motivation. ...
  • It helps beat boredom. ...
  • It boosts confidence. ...
  • It keeps you healthy. ...
  • It helps you be flexible. ...
  • It can benefit others. ...
  • It can boost your happiness. ...
  • Consider your “why.” It doesn't matter if a new skill is for work or play – you'll get benefits either way.

How important is education for the economic development of a country? ›

The Relationship Between Education and Economic Growth. Decades of research confirm that increased investment in education leads to increased economic growth. This includes higher salaries for individuals, greater workforce effectiveness, and higher gross domestic product.

Does having more education always lead to a higher salary? ›

Getting a college degree typically pays, but it's not a guarantee. Although workers with more education generally earn more, a good number of those without a college diploma are making more than college graduates.

Does education make a difference in salary? ›

Of course, no degree program can guarantee a higher salary. However, the degrees you earn can open up the possibility for new careers as you upgrade your skills, update your knowledge, and get the latest training in your chosen field. Think of the earnings data above as goals to aim for as you climb the career ladder.

How does education impact your future and income? ›

Men with bachelor's degrees earn approximately $900,000 more in median lifetime earnings than high school graduates. Women with bachelor's degrees earn $630,000 more. Men with graduate degrees earn $1.5 million more in median lifetime earnings than high school graduates.

What makes the most money in education? ›

20 Highest Paying Jobs in Education — What Degrees Make the Most Money?
  1. Superintendents. ...
  2. School Principals. ...
  3. Chief Academic Officers. ...
  4. Assistant Principal. ...
  5. Academic Deans or Post-secondary Education Administrators. ...
  6. High School Teachers. ...
  7. Elementary School Teachers. ...
  8. Middle School Teachers.

Why should students get paid more? ›

Studies have shown that paying students for achievement on a specific test can increase scores. Researchers propose that incentivizing scores on one exam helps make kids more alert and motivates them to work hard to the last question.

What is the best benefit of education? ›

10 Benefits Showing Why Education Is Important to Our Society
  • Creating More Employment Opportunities. ...
  • Securing a Higher Income. ...
  • Developing Problem-solving Skills. ...
  • Providing a Prosperous and Happy Life. ...
  • Giving Back to the Community. ...
  • Creating Modern Society. ...
  • Bridging the Borders. ...
  • Introducing Empowerment.

Why is education the key to success? ›

Education is the key factor for success. Education gives us knowledge of skills and ethics that has been there in the world which we learn as it helps us to progress further. Nowadays, education is thought of as a way of life where one can not only learn but also share their knowledge with others.

Why is education important for success? ›

Education lessens the challenges you will face in life. The more knowledge you gain the more opportunities will open up to allow individuals to achieve better possibilities in career and personal growth. Education has played an important role in the career world of the twenty-first century.

What is the role of education? ›

Education gives everyone a chance to acquire new knowledge and learn soft skills that will help them improve their life. Education also helps children to appreciate themselves, their ambitions and knowledge from an early age, and to understand that they have been given a once-in-a-lifetime opportunity.

Why education is the most important factor in the development of a country? ›

Learning is the major factor which is related to education if you learn new things, then you will educate more and more. Without the education you will not explore the new ideas it means you will not able to develop the world because without ideas there is no creativity and without creativity, there is no development.

What is the importance of education? ›

Education provides stability in life, and it's something that no one can ever take away from you. By being well-educated and holding a college degree, you increase your chances for better career opportunities and open up new doors for yourself.

What is true about education and its effect on income? ›

The earnings gap between better- and lesser- educated workers has held steady. Even if, on average, better-educated individuals can earn more money, all persons with more schooling will not necessarily have higher incomes. The income distribution of college graduates overlaps that of high school dropouts.

Does education get you a better job? ›

You gain knowledge, skills and experience to help you both in your career and in life in general. On top of that, by gaining additional skills in communication and problem solving and achieving your goals, you can also increase your confidence.

Does education make a difference in salary for entrepreneurs? ›

The results indicate that during the entrepreneurship experience, highly educated individuals earn on average 5.4% less than those in wage employment.

Do people with better education get better jobs? ›

– In general, people with higher levels of education have better job prospects; the difference is particularly marked between those who have attained upper secondary education and those who have not. – In all OECD countries, tertiary graduates are more likely to be in work than non-graduates.

What impact can education have on your income? ›

Those in society with more education earn higher salaries over their lifetime as well as contribute more in taxes. An educated population also leads to economic growth at a national level.

How an education will benefit you in the future? ›

Those who get an education have higher incomes, have more opportunities in their lives, and tend to be healthier. Societies benefit as well. Societies with high rates of education completion have lower crime, better overall health, and civic involvement.

How does education benefit workers and the economy? ›

Workers with more education earn higher wages than employees with no post-secondary education. Those with only a high school degree are twice as susceptible to unemployment than workers with a bachelor's degree. Median college-educated workers earn 84 percent more than those with only a high school education.

How do you make money in education? ›

How to make more money as a teacher
  1. Find opportunities to earn supplemental money at your school. ...
  2. Do research on your location's pay rates. ...
  3. Earn an advanced degree. ...
  4. Take advantage of professional development opportunities. ...
  5. Transition to an administrative career. ...
  6. Offer tutoring options.
8 Mar 2021

Which education system is the most successful? ›

  1. The United States of America. The American education system is known for its practical learning and offers a wide array of educational choices to international students. ...
  2. The United Kingdom. ...
  3. Australia. ...
  4. The Netherlands. ...
  5. Sweden. ...
  6. France. ...
  7. Denmark. ...
  8. Canada.
12 Jul 2022

Why salary is better than wages? ›

A salary may be considered better than a wage for career development and job security. So if that's a priority for you, then a salary position may be better than a wage. However, wages offer other benefits that suit some people better.

Why do people get paid more than others? ›

Why do some jobs pay more than others? Pay is just the price of labor, so like all prices, it's determined by demand and supply forces. Employer demand depends on how much value the job creates. Supply depends mainly on skill: how many other people can do the job.

Why do students do better when teachers are paid more? ›

Prior research has shown that increased teacher salaries prompt higher quality students to seek careers in education. Additional pay also lowers teacher turnover, keeping talented, experienced teachers in their jobs and resulting in more educator continuity for students, which builds trust between teacher and pupil.

How do you value education in your life as a student? ›

Answer 1: Having an education in a particular area helps people think, feel, and behave in a way that contributes to their success, and improves not only their personal satisfaction but also enhances their community. In addition, education develops the human personality and prepares people for life experiences.

How can education improve your life? ›

Education can also lead to more accurate health beliefs and knowledge, and thus to better lifestyle choices, but also to better skills and greater self-advocacy. Education improves skills such as literacy, develops effective habits, and may improve cognitive ability.

Why education is important in our life essay? ›

Education certainly determines the quality of an individual's life. Education improves one's knowledge, skills and develops the personality and attitude. Most noteworthy, Education affects the chances of employment for people. A highly educated individual is probably very likely to get a good job.

Does education always lead to success? ›

Education is the key to success, and pursuing education is the best option to achieve one's goals in life. Education plays a significant role to plan your future as a successful person in life and as a useful citizen in society. I believe no one can neglect the importance of it.

Which is the most important factor of education answer? ›

The most important factor in a child's education is the extent to which we teach him to enjoy learning! Teaching a child to take pleasure in study is the greatest guarantor of his intellectual success!

Why is education the most important factor? ›

Education develops critical thinking. This is vital in teaching a person how to use logic when making decisions and interacting with people (e.g., boosting creativity, enhancing time management). Education helps an individual meet basic job qualifications and makes them more likely to secure better jobs.

What are the aims of education in developing countries? ›

A quality basic education gives children and youth the knowledge and skills they need to face daily life challenges, and take advantage of economic and lifelong learning opportunities. It is also a key driver for reducing poverty, fostering economic growth, achieving gender equality, and social development.

What is the importance of education essay 100 words? ›

Importance of Education Essay 1 (100 words)

It develops confidence and helps building personality of a person. School education plays a great role in everyone's life. The whole education has been divided into three divisions such as the primary education, secondary education and Higher Secondary education.

What are the 10 benefits of education? ›

10 Reasons Why Education is Important
  • Stable Life. You need to be educated to get a good job so that you can be financially stable in your life. ...
  • Teaches Values. ...
  • Builds Confidence. ...
  • Creates Opportunities. ...
  • Fosters Critical Thinking. ...
  • Interpersonal Skills. ...
  • Builds Character. ...
  • Fulfill Basic Needs.

What is the correlation between education training and potential lifetime income? ›

Research, Statistics & Policy Analysis

Men with bachelor's degrees earn approximately $900,000 more in median lifetime earnings than high school graduates. Women with bachelor's degrees earn $630,000 more. Men with graduate degrees earn $1.5 million more in median lifetime earnings than high school graduates.

What is the general correlation between education training and potential lifetime income? ›

Individuals with more educational training have higher estimated lifetime earnings. The more education one has, the higher the average income they will receive.

What is the relationship between education and income college success? ›

College-educated workers enjoy a substantial earnings premium. On an annual basis, median earnings for bachelor's degree holders are $36,000 or 84 percent higher than those whose highest degree is a high school diploma. The earnings gap between college graduates and those with less education continues to widen.

What is the relationship between education learning and training? ›

Training refers to an act of inculcating specific skills in a person. Education is all about gaining theoretical knowledge in the classroom or any institution. Training is a way to develop specific skills, whereas education is a typical system of learning.

How does education impact your income and job opportunities? ›

The evidence that a college degree significantly improves one's employment prospects and earnings potential is overwhelming. Bachelor's degree holders are half as likely to be unemployed as their peers who only have a high school degree and they make $1.2 million in additional earnings on average over their lifetime.

What are the benefits of more education training for workers? ›

Aside from the positive impact on diversity, equity, and inclusion (DEI) goals, there are additional social and economic benefits of employee education. These include higher earnings, increased social mobility and stronger health outcomes for staff members.

Does education really have an impact on my future earnings? ›

For over 60 years, economists have demonstrated how education leads directly to major economic returns in salary and GDP. Education additionally plays a vital role in many countries' economies, as well as the general health of labor markets and overall employment.

Why is education and training important for economic growth? ›

For the economy

A country's economy becomes more productive as the proportion of educated workers increases since educated workers are able to carry out tasks more efficiently that require literacy and critical thinking.

How does education and training lead to economic growth? ›

For an economy, education can increase the human capital in the labour force, which increases labour productivity and thus leads to a higher level of output. Education facilitates the transmission of knowledge needed to understand and process new information and to implement new technologies.

Why is it important to be an a life long learner in relation to employment? ›

Lifelong learning can improve your employability and can help you stand out when it comes to job searching, changing career, or making progress in your existing profession. A commitment to learning and professional development is also a quality that is highly sought-after by employers.

Is education and income a positive correlation? ›

As education increases the salary of a person also increases. Therefore it is a positive correlation.

How does education improve income distribution? ›

Education makes it easier to acquire new skills, increase individual productivity, and promote career change toward well-paid jobs. However, un- equal access to education and unequal post-graduation opportunity could adversely impact Page 5 income inequality and increase it.

How does education affect income distribution? ›

Education is arguably one of the primary factors that cause income inequality. Recent studies show that the earnings gap between workers with a Bachelor's or more advanced degree and workers with a high school diploma has been widening.

What is the relationship among education training and employment? ›

The relationships between education and employment are determined not only by the function of education to prepare learning for subsequent work tasks and other life spheres, but also by the fact that education selects: in an educational meritocracy, the monetary resources and the social recognitions are largely ...

Why is education and training important? ›

Education and training are pivotal to ensuring that employees possess the knowledge necessary to effectively carry out their job duties. Because employers know of this importance, they often seek candidates who are educated, and plan training to ensure that their workers remain up-to-date.

What is the purpose of education and training? ›

What is the main purpose of education? The main purpose of education is to provide the opportunity for acquiring knowledge and skills that will enable people to develop their full potential, and become successful members of society.

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