Why is an educated workforce important

Their locations on the graph suggest that states with valuable natural resources and a very limited number of people may be able to offer reasonably high wages without a well-educated workforce.

In the case of Alaska, it may also be a matter of being forced to offer high nominal wages to attract workers because of the high cost of living. In some ways, the correlation between wages and education should not be surprising. For an individual, annual earnings rise with increasing education, as shown in Figure E.

Higher median annual earnings for those with more education reflect not just higher hourly pay, but more stable employment and fewer periods of unemployment.

While this correlation between education and high-wage jobs is not surprising, what perhaps should be surprising is how often policymakers ignore it and pursue other quick fixes, such as special tax breaks or other subsidies for businesses. Looking at the correlation between education and wages, there is little indication that states have found a way to create a high-wage economy without a well-educated workforce. Interestingly, this was not always the case.

If we turn back the clock to the late s, we see a very different picture, represented in Figure F. Alaska is again an outlier. Ohio and West Virginia also had reasonably high wages but not well-educated workforces. We had a very different economy in the s and the wage premium for a college degree the gap between wages of college and high school graduates was much smaller.

It then grew significantly in the s and s Mishel et al. Not surprisingly, the share of corporate revenue that is paid in wages rather than distributed in profits has declined significantly Jacobson and Occhino Unions now represent a much smaller share of the workforce than they did in the decades immediately following World War II and so are not the force that they were for creating middle-class jobs for large numbers of workers with a high school education or less.

Does the correlation between education and earnings necessarily mean that states can strengthen their economies in the long run by adopting policies that increase the number of well-educated workers? Increasing educational attainment can be achieved by a variety of policies and programs, including those that increase access to postsecondary education by restraining tuition growth or increasing financial aid, reduce high-school drop-out rates, move people without high school degrees through GED and associate degree programs, increase the quality of K education to improve success of high school graduates in postsecondary education, and offer preschool programs that lead to long-term improvements in educational outcomes.

An evaluation of the effectiveness of alternative education strategies is beyond the scope of this report. But there is evidence that state expenditures on primary and secondary education improve school performance and raise state per capita income. For example, investments in school facilities led to improvements in student test scores Cellini, Ferreira, and Rothstein And over a year period, states that improved their position relative to other states on real per-capita education spending improved their relative position in real per-capita income, and the direction of causality was from education spending to income Bensi, Black, and Dowd Also, the long-term benefits of early childhood education programs have been well documented Lynch This may seem counterintuitive since education is a large share of state-financed expenditure—typically over half if including postsecondary education and state aid to K school systems.

The majority of students graduating from state schools will remain in the state over their working lives, and as a result of being better trained, will have better jobs. This means they will earn more and stay employed at a higher rate, paying more income and sales taxes and relying less on state assistance programs. This means that scholarships or other programs that lead more students to higher education can more than pay for themselves, even if a third of the graduates leave the state French and Fisher The overall returns from investments in early childhood education mean that such investments will generally pay for themselves Lynch States would do well if they focused their resources on their historic role as the guarantors of high quality education for all, while broadening the scope of that role to include universal preschool and other early childhood education programs, and beginning to view high quality postsecondary education and training as the standard for all students.

In most states that would mean reversing recent cuts to, and even elimination of, publicly funded preschool, 5 and declines in public investments in postsecondary education. From — to —, real funding per student at public colleges and universities declined 26 percent, and the share of state personal income going to higher education fell 30 percent, while tuition at four-year institutions more than doubled and at community colleges rose 71 percent Quinterno Instead of improving access to higher education in response to the needs of a changing economy, most states have restricted it.

Ultimately, the wealth of a society can increase only if the economy becomes more productive. A more productive economy can support both higher wages and higher profits, as well as shorter work weeks and a higher quality of life. So the question of how to increase productivity needs to be at the center of any debate about state economic development. As this paper shows, moving jobs from one state to another state does nothing to increase productivity.

Rather, productivity rises with investments in infrastructure and workers, with investments in education that raise educational achievement providing a major boost. Thus, investing in education is a core contribution states can make to the well-being of their residents and the national economy overall.

At the same time, increasing productivity does not by itself guarantee that the resulting economic gains will be broadly shared. At the national level, productivity and wages grew hand in hand from the end of World War II until the early s Mishel et al.

But since then, wages have largely stagnated while productivity has continued to rise. From to productivity increased The vast majority of the gains from productivity were captured by those at the very top. While national policies will have to play the major role in creating a national economy in which economic growth leads to incomes rising across the income spectrum, there are measures that states can take to strengthen the ability of working people to participate fully in the gains from economic growth.

These include restoring state minimum wages to the real level that prevailed in the late s, aggressively addressing problems of wage theft and employee misclassification, adopting higher wage standards in economic development programs, and other measures.

But most importantly, states can build a strong foundation for economic success and shared prosperity by investing in strategies that make their people more productive, chief among them education. Providing expanded access to high quality education and related supports—particularly for those young people who today lack such access—will not only expand economic opportunity for those individuals, but will also likely do more to strengthen the overall state economy than anything else a state government can do.

Noah Berger is president of the Massachusetts Budget and Policy Center, an independent research organization that analyzes state budget and tax policies, as well as economic issues that affect low- and moderate-income people in Massachusetts. Prior to joining the center, Berger served as counsel and policy director for the Massachusetts Senate Committee on Ways and Means from to and as policy director for Massachusetts Senate President Tom Birmingham from to Berger graduated from Harvard College and has a J.

Peter Fisher is the research director at the Iowa Policy Project. Fisher is a national expert on public finance and has served as a consultant to the Iowa Department of Economic Development, the State of Ohio, and the Iowa Business Council. His reports are regularly published in State Tax Notes and refereed journals. He has authored or co-authored the majority of Iowa Fiscal Partnership reports and guest opinions on state tax policy. Fisher has a Ph. An economy has reached full-employment when any further increases in aggregate demand would fail to reduce the unemployment rate.

The Employment Act of called for the federal government to maintain full employment, and fiscal and monetary policy in the ensuing postwar period was used to attain that goal while keeping inflation low. In more recent decades, concern with inflation has often taken precedence over unemployment in Federal Reserve monetary policy, and the effectiveness of fiscal policy to stimulate the economy has been challenged by those who would shrink government at all costs.

In , for example, the correlation between state union coverage and state median wage was. Union coverage by state and year comes from the Current Population Survey and can be found at unionstats. In , expenditures for education accounted for 36 percent of total state government expenditure in the United States, but 56 percent of state own-source revenue U.

Per pupil spending on preschool programs has been on the decline for a decade Barnett et al. Aten, Bettina H. Figueroa, and Troy M. Bureau of Economic Analysis, August. Barnett, W. Carolan, J. Fitzgerald, and J. New Brunswick, N. Today, a well-educated workforce with skilled employees makes businesses more competitive and productive. Today, the hiring process demands that employers look for candidates with the best credentials.

To meet the growing need for highly skilled employees, employers should think about investing in employees and their educational future as it can be an added benefit to the longevity of the business. An advantage to encouraging current employees to finish their degree is that employees already understand the company. Therefore, businesses can spend less on searching for the right candidate. The importance of an educated workforce cannot be understated. After all, according to the Lumina Foundation, by , 60 percent of Americans will need a college degree, workforce certificate, industry certification, or some other credential beyond high school.

There is a common misconception that only employees see the benefits of higher education in the form of higher wages. Employers see a return on investment when they hire an educated workforce. Some of the benefits of a well-educated workforce can be having highly skilled and happy employees, new and creative ideas, and even increased profits and investment.

Businesses with an educated workforce are also more efficient, capable of contributing new and valuable innovations. More satisfied employees: Employees who receive education opportunities from their employer generally feel more satisfaction with their work, have better morale, are more engaged and motivated, and are less likely to look for another job.

Consistent work processes in your company: When employees are subject to the same training and education as one another they will be shown processes and methods that are best practice. This will be replicated by anyone who does the same training. Keeping abreast of industry trends: Most industries are constantly evolving thanks to technology, societal and regulatory changes.

Ensuring your staff have up-do-date skills to handle this level of change will ensure your company keeps pace. Implementing training schemes that are ongoing will help your employees to develop their skills. This is a great opportunity for you to build up the right people for your organization - think of them as being like a blank canvas.

When you train them in your systems and processes they will have the skills required to work for you. Advantage over your competitors : If you train your staff to go above and beyond in, say, customer service you will have an edge over your competition.