The Importance of Quality Education
A new National Bureau of Economic Research (NBER) working paper by Eric A. Hanushek (Stanford University), Jens Ruhose (University of Munich), and Ludger Woessmann (University of Munich) shows that differences in the quality of education among states account for 20 percent to 35 percent of the state-level variation in per person GDP. The economists defined education, or human capital, as it is known, in terms of average years of schooling and average test scores.
It is critical to emphasize the “quality” of human capital. While the number of years of schooling is important, so is the cognitive ability (measured by test scores) gained from those years. Even if students spend over twelve years in a school system, they may not gain significant improvements in productivity if the quality of their education was poor.
The new study highlights the importance of improving the quality of education, not just increasing the number of years students spend in school, in order to promote economic development. Most legislators recognize the connection between education and economic growth, but they often ignore the distinction between the quantity and quality of education.
Many state governments blindly pour money into the public education system, falsely expecting to see positive outcomes. Despite the drastic increases in spending per child, school performance has not improved. Much of this disparity between spending and performance is due to bloated administrative costs. Some politicians have proposed free community college. But such a program will only increase the quantity of education, not the quality of human capital.
Progressives often talk about the injustice of income equality, focusing on income disparities between race, gender, or social class. With an emphasis on human capital, instead of arbitrary distinctions such as race, Professor Hanushek and his colleagues get to the heart of the problem.
Their findings echo those of June and Dave O’Neill, in their book The Declining Importance of Race and Gender in the Labor Market, published in 2012. The O’Neills suggested that income disparities between individuals of different races come primarily from differences in education, not from discrimination. The NBER paper offers additional evidence for this thesis by shows how income disparities based on educational differences also applies to states as a whole.
Progressives who focus on inequality reject giving parents the option to remove their children from failing public schools and place them in better-performing private or charter schools. They argue that if the government spends more money on traditional public education, then all children will benefit. School choice, progressives argue, gives more privileged children an upper hand.
However, school choice programs work because they allow parents to address the individual educational needs of their own children, rather than forcing them into a one-size-fits-all system. Rather than expanding public education in its current state or implementing “free” college, policymakers should concentrate on expanding school choice programs that improve the quality of education, not only the number of years students spend in school. States that have implemented school choice such as Nevada give parents flexibility and improve the quality of education.
In order to ensure the accuracy of the results, the authors adjusted for interstate and international migration. They found that test scores and years of schooling of all workers, not only those educated in the state, were important in accounting for the differences in state-level GDP per capita.
This means that having a good education system is not enough for a state to be economically successful. States must also be able to hold onto its well-educated residents. For example, New Jersey is one of the best states for education, but the state’s regulatory burdens to work or start a business may drive these workers out of New Jersey to states with greater economic opportunity.
The new study provides yet more evidence that an educated population leads to innovation, higher levels of productivity, and increased economic growth. Professor Hanushek and his colleagues support policies that would improve the quality of education. One way to improve the quality of education is for state governments to implement innovative programs such as school choice and charter schools, rather than pouring money into a failing public education system. At the same time, states must lower the regulatory burdens to keep talent at home—and attract it from elsewhere.
Jonathan Nelson is a contributor to Economics21. Follow him on Twitter here.
Interested in real economic insights? Want to stay ahead of the competition? Each weekday morning, e21 delivers a short email that includes e21 exclusive commentaries and the latest market news and updates from Washington. Sign up for the e21 Morning eBrief.