Why education is important to the economy, especially the local economy, and how business can help improve education

On June 13, I gave a presentation to a group of business leaders on why education is important to national and local economic development. The presentation then went on to review how we’re doing on educational quality, what the key “leverage points” are in improving educational quality, and what businesses can do to help improve education. The presentation can be found here, and the accompanying PowerPoint slides here.

The main reason that education drives local economic development is that the overall skill level of the local labor force is one of the key drivers of local job growth and wage growth.  If some workers get better skills, this not only benefits those workers, but also increases the employment rates and wage rates of everyone else in that local economy.

This particular presentation focuses on educational quality trends in the Kalamazoo/ Battle Creek area, but these trends are fairly typical of the U.S. Across the U.S., there has been some improvement in school test scores. However, high school dropout rates are still too high, and high school graduates still do not have high enough skill levels. The educational system has made some improvements, but it is short of where the system should be to adequately support increased earnings per capita growth for all workers.

But improving educational quality in a complex educational system is challenging. We need to focus on the key “leverage points”, where politically feasible investments of money and political capital can yield large changes in educational quality. The presentation argues that the two key leverage points are early investments (pre-K to 3rd grade)  in added learning time, and later investments (high school or later) in more career-relevant education.

Early investments work because people are more malleable at early years, and because this malleability allows us to make investments that increase people’s future ability and motivation to learn at later ages. Pre-k’s long-run effects are not due solely to program participants knowing a few more letters or numbers at kindergarten entrance, but rather are due to pre-k’s effects in providing hard skills, soft skills, and self-confidence that increase learning in later grades.

At later ages, more learning time by itself is not enough. Rather, we need to focus on in providing educational time that is more career-relevant, more motivating, and more hands-on. There is good evidence that well-designed career and technical education programs can work for a wide variety of students, assuming they have at least some minimal skill levels entering high school.

What can businesses do to affect these educational leverage points? First, they can advocate for changes in public policy, to supply more funding support for early childhood education, extended learning time in early elementary school, and career and technical education. Second, they can donate funds to support scholarships for early childhood education and summer school in early elementary school, and to provide support for some of the extra expenses of career and technical education. Third, they can be willing to become directly involved with career and technical education, for example by providing the job shadowing and internship opportunities that are needed in these programs.  Finally, they can provide support and encouragement for individual employees and employee groups to target their volunteer efforts on some of these key leverage points, for example by helping out as tutors in pre-K to 3rd grade, and volunteering in career and technical education programs.

Why should businesses become involved in these educational issues? Because it is in the enlightened long-run self-interest of the business community to do so. If we want higher rates of broad-based economic growth in this country, which will help support the prosperity of many businesses, we need to increase our labor force skills. This can be most effectively done through increasing investments in the early development of skills, and then later on focusing that skills development around career relevant skills.

About timbartik

Tim Bartik is a senior economist at the Upjohn Institute for Employment Research, a non-profit and non-partisan research organization in Kalamazoo, Michigan. His research specializes in state and local economic development policies and local labor markets.
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