The Power of Education Policy

Source details

Education has been a central driver of global poverty reduction over the past four decades.
Global GDP per capita doubled in real terms over the past four decades.
The proportion of the world’s population living below the international poverty line of $2.15 a day dropped from 44 percent in 1981 to 9 percent in 2022, according to the World Bank.
Education accounts for fully half of total economic growth and two-thirds of real income gains among the world’s poorest 20 percent since 1980 (Gethin 2023).
Education was responsible for 60–70 percent of real income growth among the world’s poorest 20 percent in the author’s analysis.

Built a microdata base of surveys conducted around 2019 by statistical institutes in 150 countries, covering labor forces and individual incomes, combined with historical educational attainment data since 1980.
The sample represents 95 percent of the world’s population.
Calculated how individual incomes increased with additional education for each country and education level, and measured how education affected income inequality.

The doubling of global income per capita between 1980 and 2019 would have been only half as large without advances in educational attainment.
Higher education expansion contributed importantly to inclusive growth by:
- Allowing a broader group of workers to access high-skill jobs.
- Freeing up lower-skill job opportunities and raising marginal productivity and wages for remaining workers in traditional sectors (e.g., agriculture).
The aggregate and distributional effects of education depend on employers’ demand for skilled labor and interactions with technological change.

Contrary to conventional wisdom, returns per year of schooling are not necessarily greater at lower education levels:
- In India, a year of primary education increases earnings by 2–3 percent.
- In India, a year of secondary education increases earnings by 6–8 percent over the earnings of someone with only primary education.
- In India, a year of postsecondary education increases earnings by more than 13 percent over those of a person with secondary education alone.
Expanding access to higher education can generate significant indirect positive spillovers for less-educated workers, particularly from postsecondary education, reflecting substantial unmet demand for highly skilled labor in some countries.
Trade-offs noted: higher education is generally more expensive per student, and highly skilled workers are more likely to emigrate.

From 1980 to 2019:
- The share of the world’s citizens with no schooling declined from 35 percent to 15 percent.
- The share of adults with at least some secondary education grew from 25 percent to 60 percent.
Education quality, based on internationally comparable test scores, stagnated over this period.
Empirical example: India’s District Primary Education Program (implemented in 1994) significantly expanded access to primary education with no effect on education quality, yet generated a 13 percent increase in earnings per year of schooling (Khanna 2023).
Conclusion: education quantity, not quality alone, was central to global poverty reduction since 1980.

Technological advances in recent decades disproportionately benefited highly skilled workers; education expansion was necessary to realize broad-based gains from these advances.
Without educational expansion, technological change would have produced little growth and would have benefited a much narrower set of skilled workers.
New technologies such as AI offer large opportunities for productivity growth and innovation, but benefits depend on creating a sufficiently large skilled labor force.
Education and innovation policy should be coordinated; expanded access to education is likely to be particularly beneficial given major developments in AI and other technologies.

Continue expanding access to education—particularly secondary and postsecondary education—to promote both equity and efficiency.
In shaping education policy, authorities should:
- Pay close attention to the dramatic differences in returns to different levels of schooling.
- Consider the projected evolution of labor demand and complementarities with technology adoption.
- Promote policies that encourage the adoption of new technologies alongside education expansion.
Recognize trade-offs: resource costs of higher education and risks of emigration for highly skilled graduates must be factored into policy design.

Amory Gethin, "The Power of Education Policy," F&D Magazine, March 2025.

The Power of Education Policy
- The Power of Education Policy (Markdown version)
- The Power of Education Policy (PDF)