Education is considered by many as the
panacea of almost all the ills in society.
All nations provide a significant level of
funding for education because the level and
quality of education determine the capability
of human resources to enhance the quality of
life of society.
The skills, capabilities and knowledge of
human resources are the determinants of
economic, political, spiritual and social
development of society.
In the UNESCO report, comparative data
on public expenditures on education as a
percentage of GNP showed that the
Philippines did not devote a high percentage
of public expenditures to education. However,
in terms of total expenditures for education
the country had a respectable performance
because of the contribution of the private
sector in the financing of education
Impact of Education on Society and Country
1. Education, Income and Economic
Development
Why education matters for economic
development?
Education is an investment
Human Capital Theory posits that investing in
education has a payoff in terms of higher wages. 
Education is truly one of the most powerful
instruments for reducing poverty and inequality and
it sets the foundation for sustained economic
growth.
To show the relationship between education
and economic development, three aspects are
analyzed. These are the:
Education and income nexus
An important determinant of income of a worker is
his educational attainment.
Between educational levels and income levels,
the imperative would be to provide workers with a
variety of educational and training enhancement
programs.
The program should directly address the need to
improve the productivity of workers.
Education and occupation
Thus, the majority of both elementary and high
school graduates occupy the two lowest levels of
occupation consisting of:
Agriculture, animal husbandry, forestry workers,
fishermen and hunters
Production and related workers, transport equipment
operators and laborers.
• Conversely, the higher levels of occupation are
dominated by college graduates occupying:
1. professional, technical and related workers
2. administrative and managerial worker
Education and capital formation
Those with higher levels of income have higher
savings rate, and, therefore, they contribute more to
capital formation. • Those with higher levels of
income also have a greater contribution in providing
funding to education because the percentage of
expenditures for education is closely associated with
income levels.
2. Education, Democracy and Political
Development.
Proof that education has prepared the individual to
exercise his right of suffrage is in terms of voter’s
participation as a percentage of total population.
As education expands in terms of enrolment and
participation rates, participation in election increases.
3. Education, Social Inequality and Social
Development
The State shall take into account regional and
sectoral needs and conditions and shall encourage
local planning in the development of educational
policies and programs.
Gave rights to every citizen “to select a profession or
course of study, subject to fair, reasonable, and
equitable admission and academic requirements.”
With higher levels of education, greater
income distribution is achieved.
4. Education, Values and Spiritual Society
Education should strengthen ethical and moral
values, spirituality, and personal discipline, love of
country, patriotism, social well-being and critical and
creative thinking. These are the values that are
conducive to social and economic development.
 All these aspects of the benefits of education
are contained in the provisions of successive
Philippine Constitution which require
allocating the highest budgetary priority to
education

EDUCATION, INCOME AND EDUCATION, INCOME AND
ECONOMIC DEVELOPMENT
Why education matters for economic development
At the Global Conference on Equity and
Excellence in Basic Education, in Shanghai,
China, May 17-19, 2016, the World Bank will be
discussing Shanghai’s eminence in ranking highly
in international achievement tests. The conference
will also cover how good policy can help improve
education quality in other countries.
See slideshow, press release, key findings . 
“Give a man a fish and he will eat for a day. Teach
a man to fish and he will eat for a
lifetime.”- Laozi (老子), ancient Chinese
philosopher and writer, known as the reputed
author of the Tao Te Ching. He is the founder of
philosophical Taoism and is worshipped as a deity
in Taoism and traditional Chinese religions.
There are more children in school today than ever
before.  For example, in 1950 the average level of
schooling in Africa was less than two years. It is
more than five years today.  In East Asia and the
Pacific, the schooling of the population went from
two to seven years between 1950 and 2010. This
is a more than a 200 percent increase! Globally,
average years of schooling are now projected to
rise to 10 years by 2050.  This is larger than a five-
fold increase within a century and a half.
Yet, there are still 124 million children and
adolescents not in school.  Also, more than 250
million school children cannot read, even after
several years of schooling. 
Here are five things you should know about the
pivotal role of education in economic development:
Education is an investment
The importance of knowledge and learning has
been recognized since the beginning of time.  Plato
wrote: “If a man neglects education, he walks lame
to the end of his life.”
But it was really the Nobel winning economists that
put the argument of education as investment.
T.W. Schultz argued that investment in education
explains growth and Gary Becker gave us
the Human Capital Theory. 
In a nutshell, the Human Capital Theory posits that
investing in education has a payoff in terms of
higher wages.  Moreover, the theory and empirical
estimates are backed up by current science, as
explained by James Heckman.
Neurogenesis tells us that learning can continue
into advanced ages. The relative costs and
benefits to investments in older persons compared
to younger persons differs. Investments in more
able workers at any age generate higher returns
than investments in less able workers, and ability is
formed at early ages.
Education pays
Overall, another year of schooling raises earnings
by 10 percent a year.  This is typically more than
any other investment an individual could make:
 
The value of human capital – the share of human
capital in total wealth – is 62 percent.  That’s four
times the value of produced capital and 15 times
the value of natural capital.  Globally, we –
governments, private sector, families, individuals –
spend more than $5.6 trillion a year on education
and training. Countries spend 5 percent of GDP on
education or 20 percent of their national budget. 
Education employs about five percent of the labor
force.
Moreover, private returns to schooling – what
individuals receive in the labor market – have been
increasing.  Returns are increasing by more than
20 percent in Africa and more than 14 percent in
East Asia and the Pacific.  The big change recently
has been that the returns to tertiary education are
now highest.
Skills demanded by the labor market are
changing
One of the reasons for the change in the returns
pattern is the race between technology and
education, as labor markets adjust to automation. 
In this new world, the ability of workers to compete
is handicapped by the poor performance of
education systems in most developing countries. 
Technological change and global competition
demand the mastery of competencies and the
acquisition of new skills for many.
Countries can compete- and succeed
To promote success in today’s labor market, one
needs to invest early, and then invest in the
relevant skills (see below).  Above all, countries
need to invest smartly, by promoting attention to
the 3 A’s: Autonomy, Accountability, Assessment.
They need to pay attention to teachers, early
childhood development and culture.
 
It’s important to focus on results
Education systems that do well prepare
children early on, reform continuously, and
use information for improvement and
accountability.  Information for accountability
works, as do high stakes assessment; but so
do low stakes assessments.  Either way,
test-based accountability is cost-effective.  inequality and it sets the foundation for
"Even if accountability costs were 10 times
as large as they are, they would still not
amount to 1 percent of the cost of public
education" (Hoxby).
Expand opportunities but pay attention to
equity
Countries need to improve quality, strive for
excellence, and expand opportunities, based
on efficiency and equity. This means
ensuring that disadvantaged youth enroll and
succeed. 
While the returns to schooling are high
on average (Psacharopoulos and Patrinos
2004), results vary (Montenegro and
Patrinos 2014). There must be better
information for such student who don’t
perform well and greater support networks to
help them take on the challenges of
completing their tertiary level education. 
More information will also benefit students
and families from disadvantaged
backgrounds, who tend to overestimate
benefits and underestimate costs.
Education is truly one of the most powerful
instruments for reducing poverty and
sustained economic growth. Let’s start
investing in it more.
 growth, largely as a consequence of a strong shift towards higher
skills and the impact of the global economic crisis on overall
economic activity in these countries. Annual labour costs increase
. THE ECONOMIC AND SOCIAL BENEFITS OF EDUCATION substantially with educational attainment. On average across OECD
countries, a person without an upper secondary education costs
38 EDUCATION AT A GLANCE 2012: HIGHLIGHTS © OECD 2012
USD 38 000 to employ, an individual with an upper secondary
How does education affect the economy? – More than half of the education costs USD 46 000 and a tertiary-educated person costs
GDP growth in OECD countries over the past decade is related to USD 68 000 per year. In Austria, Denmark, Ireland, Italy,
labour income growth among tertiaryeducated individuals. – Luxembourg, the Netherlands, Norway and the United States, over
Employers pay almost twice as much for a 45-54 year-old worker the course of a year, employers pay at least USD 20 000 more than
with tertiary education, than for someone without an upper the OECD average to employ individuals with tertiary degrees. The
secondary education. – The most attractive wages for people with most attractive wages for tertiary-educated individuals are found in
tertiary education are found in Australia, Austria, Ireland, Australia, Austria, Ireland, Luxembourg, the
Luxembourg, the Netherlands, the United Kingdom and the United
States, where average spending power exceeds USD 40 000 per
year. Significance The skills available in the labour force and the
price of those skills determine how countries will fare in the global
market. As services and production systems become more complex,
they require workers with higher levels of education. In order to
attract and retain skilled workers, it is important for societies to
strike the right balance between fostering overall equity and
offering strong economic incentives. Increasing attainment levels in
the population, better employment prospects and the increasing
earnings that come with higher educational attainment can all
contribute to growth and prosperity in OECD countries. In this
context, labour income growth in GDP by educational categories
provides a simple measure to illustrate this move towards higher
skills and the impact it has on economic growth. Findings On
average, about half of the economic growth is related to labour
income growth at the tertiary level of education. In France, Norway,
Switzerland and the United Kingdom, 60% or more of growth in
gross domestic product (GDP) is generated by those who have
attained a tertiary education. In Denmark and Ireland, the labour
income growth of those with tertiary education exceeds GDP