Economists have usually considered education as an investment in human capital, which has a direct impact on both the educated individuals and the society at large. Generally speaking, people with better education have an upper hand in politics, social life and economics than those with basic schooling. However, it would be biased to assume that all the observable differences among people are brought by education. Many factors contribute to the difference in economic status and this includes family backgrounds and innate ability. In actual sense, these factors interact with the formal education environment and jointly help to develop preferences that determine people’s economic behavior. Even so, still there is evidence pointing out that better educated individuals normally have better jobs and higher income than those with average education. Further, they enjoy other benefits attributed to their schooling experience. Furthermore, it is factual that communities and countries with higher literacy levels have better living conditions than those with a less educated population. Therefore, this paper discusses the benefits of education as an attempt to substantiate the fact that most of the observable difference in welfare are as a result of differences in education levels. To this end, the research will have explored the reasons behind the need to be educated.
The Impact of Education
From an economic point of view, the time and money invested in educating an individual is in itself an investment, and like any other its form and under ideal conditions, the education must be paid off. Typically, these returns have a positive net impact on the educated fellow and the society around him or her as a whole. Additionally, they can be seen as the ability of the educated individual to satisfy human needs. As consequence, the benefits of education can be defined as the impacts of schooling that produces the utility function. Given that the educated individuals live in communities, it follows that the benefits of education should be analyzed in terms of individual and society utility. Further, the benefits of education may be contained in terms of better production capabilities and less need to incur losses. Free primary education or subsidies on either tertiary or secondary education are examples of benefits that reduce the tax-payers educational costs. From a human capital perspective, numerous researches have been conducted to determine the relationship between schooling and monetary returns to both the leaner and the society at large. The section that follows, outlines the benefits of education by reviewing several empirical researches, and then discusses their findings with respect to the reasons behind schooling.
Education Reduces Poverty in both Developed and Developing Countries
Van der Berg (1) contends that when discussing the concept of education as a remedy of poverty in both developed and developing countries contexts, the debate should be broadened beyond the focus on an individual’s lack of financial resources to meet his or her basic needs: food, clothing and shelter. This is in view of the fact that the relationship between poverty and education is multifaceted. Poor households are often unable to access adequate education. As a result, they are constrained both economically and socially. For example, a student from a poor family may not access tertiary education, thereby limiting his or her employment options. Unless someone breaks out and supports other family members, the poverty cycle is likely to continue within such contexts. Remarkably, it is only through basic education and technical skills that even peasant farmers get to understand how to climb their way out of either absolute or relative poverty. The first one is the lack of monetary resources crucial to meet basic human needs. Conversely, relative poverty is determined by the society within which a person lives. For example, under the same economic resources, a family which may not be perceived as poor in Washington may be considered as poor in London. As of this writing London was the most expensive city. Inadequate financial resources may limit schooling among absolute needy people in developing countries. In contrast, the relatively poor people in developed countries often feel estranged in the schooling environment and such perceived exclusion hampers their ability to gain from education or to translate the benefits of being educated into meaningful employment.
Better schooled people are economically productive, thus earn higher incomes that those that less educated. The higher profit is also linked to the fact that better educated people have a better chance of being employed due to their rich skill set and experience. As economies continue to move to the global village and digital space, the probability of being employed rises with the levels of education. In the same context, earnings become lucrative for people with higher levels of education. As consequence, households with better education are less likely to be poor irrespective of their location across the world. Van der Berg (3) notes that middle-income countries are more likely to reap the benefits of educated labor than developing countries subject to the fact that the former often have developed markets for educated labor. In Chile, for example, between 25% and 30% of family income differences can be substantiated by the level of education of the family heads.
Education Enhances Economic Growth
Education fuels economic growth in both poor and developed countries. Noteworthy, the upshot of education in economic development relies on the quantity and quality of education. Understandably, it is illogical to support a rapid expansion of education within a company while compromising quality. Arguably, both quality education and quantity of its output stimulates economic growth. It is quality of education that translates to strategic leaders and managers. Quality and quantity education compliment the growing demand for highly skilled workers in the globalised world. As noted above, individual with better education earn more. In financially literate settings, high incomes translate to considerably high saving and investment patterns. For example, China and India has consistently strived to improve education and this has been mirrored by an increase in their economic growth rate. Such growth can mitigate poverty dramatically.
Educated labor force competes for jobs at the international level. Lack of skilled labor derived from education is sometimes a constraint of development. For example, lack of doctors, engineers, information technology experts and scientist limit growth of developing countries because they have to rely on developed countries for infrastructural progress. In the context of labor market, the more educate people are likely to earn higher wages than the less educated ones. It is worth noting that higher wages is also linked to higher productivity, which is time and again associated with strategic and knowledgeable human capital. Additionally, productivity indicates the employers’ ability to recruit and retain a human resource that is well-educated. Perhaps, this explains why most 500 Fortune companies continue to train their Human Resource departments on issues pertaining to production and investments.
Education influences income levels, which in turn affect the saving and investment patterns on an individual, group, community or country. As a matter of fact, education stimulates financial independence and transforms the lives of people ranging from investors, consumers and average citizens. In the view of the fact that there is a constructive relationship between education and income, it follows that financially literacy plays a critical role in the level of investment and Gross Domestic Product (GDP). That is to say, education, financial literacy to be precise, stimulates progressive investment in human capital and businesses at both individual and national levels. Such investments fuel economic growth relative to the GDP. Eventually, local investors and venture capitalist benefit from educated labor and financial stability. While some studies provide a strong case for supporting primary education due to quantified economic benefits of being educated, new evidence indicates that investment in secondary and tertiary education may harvest higher benefits in most countries. Globalization has increased the demand for highly skilled workers with diversified backgrounds. To meet this demand, individuals, education institutions and governments must adjust their educational output accordingly. Logically, it also implies that persons must continue to work hard at school in all levels so as to remain relevant in the ever dynamic labor market.
Education Improves Living Standards or Social Welfare
People should be educated because schooling brings significant benefits to individuals and the society, not only through remunerative economic activities, but also through improved living standards and enhanced social status. By appreciation the power of education, government, policy makers and relevant stakeholders can address diverse societal challenges. A recent OECD report covering the social benefits of education indicated that out of the sampled 15 OECD member states, 30 -year of tertiary graduate could live in the next 51 years, whereas 30-year old people with not secondary education could expect to live for an additional 43 years. This implies that education raises life expectancy. Consistent with that deduction, van der Berg (3) contends that education promotes the position of women in the society. Further, education is one of the avenues for combating health issues such as HIV and AIDs, mental disorders as well as the outbreak of deadly diseases such as the Asian flu and Ebola.
People need to be educated because through schooling, social skills and politics are learnt. Politics is essential for order because it entails laws, regulation and governance. Basic political knowledge gives people an understanding of governance, human and consumer rights as well as other debatable subjects surrounding the individual’s well-being Further, education enables household heads and families members to create family environments that are not only health or morally conscious, but also helps to create financially disciplined environments. Household heads and members with better education are more likely to consider issues such as health and education insurance than households with negligible education. Typically, educated people are enlightened about financial independence and retirement plan. Such plans ensure that people live comfortably even under difficult economic conditions. According to Vanguard Asset Management (5), financial independence or security begins with career planning, goal setting, as well as, an understanding of financial markets, taxes, government regulation and income source. Undeniably, these prerequisites are attained through education. Ryan (2) notes that choices affect income, and the latter, in its turn, influences saving and investment patterns. Before pointing at the correlation between profit and investments or economic growth, it should be noted that income is product of good education and employment.
As people continue to gain more education, profit tends to rise proportionally. In the same context, people become more informed about investments and better living standards. To that end, retirements are secured and portfolios are protected from unnecessary losses and risks. Financial success and social well-being depends on the choices made. Certainly, informed choices leads to strategic management and decision-making at individual, corporate and government level. Debatably, education makes people good decision makers in political, economical and social contexts. As cited by OECD (2), Aristotle and Plato noted that education was the foundation to moral fulfillment and well-being of both individuals and the society as a whole. This conventional wisdom has been supported by research pointing out that education also helps people to improve their active citizenship, promote health and contain violence. Based on the discussion and illustration presented above, this paper would be consistent with Benjamin Franklin’s assertion that “If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest”. Like annuity, education is a onetime investment that provides returns for both the educated and the society in which he or she resides.
From the reviews and illustrations presented in the course of this paper, it is imperative that people need to be educated. Moreover, education is very important in human life because it offers numerous benefits to both the educated that the society in which they live. Some of the benefits of being educated is that: educations reduces poverty, fuels economic growth and development, and raises living standards in both developing and developed countries. Absolute poor households in developing countries often have low education levels. Therefore, universal primary education is crucially significant to reduce poverty. In the same context, focus should be placed on quality because rapid expansion of education may result in lowering its quality. In other words, a lot of effort in both developing and developed countries must made for the enhancement and protection of education quality. In addition, social exclusion in reference to language, immigrant status, relative poverty and ethnic minority should be addressed to ensure that those students at risk of not accessing adequate education are included in the social mainstream through subsidies and mentorship programs. It is also important to note that the economic and social benefits of education also vary with factors such as the supply of educated human resource, the level of economic development and the shift in demand for educated labor in the development process. For example, the demand for highly skilled human resource often rises as a company or country develops. The income effects of education also influence social outcomes such as improved life expectancy and happiness. In summary, education plays a critical role in the social, political and social well-being of humans in both developed and developing countries.