How does education and Training Affect the Economy



Both can bring benefits and assist in eliminating inequities

What is the relationship between a nation’s education system affect the economic growth of its country? What is the reason that people who have college degrees earn much more than people with degrees? Understanding the way that education and training interact in the economy will help us understand the reasons why certain workers, businesses and economies prosper and others fail.

When the supply of labor increases upward pressure is placed on wage rates. When the employers’ demand for labor isn’t keeping up with the demand for labor the wages will usually decrease.


The oversupply of workers can be particularly detrimental for workers in sectors with low barrier in entrance for new workers, that is, the ones with jobs that do not require a degree or specific training. In contrast, those with more education requirements and higher training requirements usually pay employees higher wages. The higher wages are due to a lower available workforce in those fields, and the education and training requirements costing a lot.

How education benefits a nation

Internationalization along with global trade demand that nations as well as their economic systems to be competitive each other. The countries that are economically prosperous will have competitive and competitive advantages over other nations even though one country is rarely the only one to specialize in a specific sector.


The typical industrialized economy is comprised of a range of industries that have distinct competitive advantages and disadvantages the global market. The quality of education and training for the workforce of a country is a significant aspect in determining the way the economy of the country will perform.

What is the impact of job training on the economy

A prosperous economy has a workforce that is capable of running industries at a level that enjoys an edge over the economies of other nations. Countries may consider incentivizing education by offering tax incentives and facilities to instruct workers, or using a variety of other methods that aim to build a proficient workforce. While it’s unlikely for an economy will have the advantage across all industries, it could focus on certain sectors where skilled workers are more likely to be educated.


Differences in training levels are a significant factor that separates developed and developing countries. However, other factors are involved, like availability of resources and geography training, having more skilled workers can create ripples across the economy and beneficial externalities.


Externalities could have a positive impact on the economy because of an educated workforce. That is to say every business benefits from the external benefit of having a well-trained workforce from which to choose employees. In certain instances the labor force that is highly skilled could be concentrated within a certain geographical area. This is why businesses with similar operations could cluster within the same geographical region because of the highly skilled workers. An example is an example isSilicon Valley in Calif.

For Employers

Ideally, employers seek employees who are productive and need less supervision. Employers should consider several aspects when deciding whether or not to fund training for employees, such as:


  • Can the training program boost the effectiveness of workers?
  • Does the rise in productivity justify the expense of the entire or a portion in the course?
  • If an employer provides training, can the employee be able to leave the company to work for another company when the training is completed?
  • Are the newly-trained workers likely to be able to earn an increase in pay?
  • Does the worker get an increase in bargaining power , or leverage to get a raise?
  • If increases in pay are justified because of the training program, will the rise in productivity and profits suffice to pay for any increase in wages in addition to the overall cost of the training?


A lot of employers require employees to stay with their company for a set period of time in exchange for training in lieu of a fee which eliminates the possibility of trainees being let go when their free training ends.

There are times when employees do not want to take on training. This could be the case in areas controlled by unions as increased security for jobs may make it difficult to find skilled workers or dismiss employees who are not trained. However, unions can also bargain together with their employers in order to make sure their members are more educated and, consequently, more productive which decreases the chance of work being moved to overseas.


For Workers

The ability to earn more is increased by enhancing and enhancing their skills and abilities. The more they understand about the job’s purpose and sector and their value are to employers.


Some employees may be interested in learning new techniques or learn new techniques to be able to compete for a better pay. In general, employees can anticipate that their salaries will increase however, at a lower proportion than the gains in productivity from employers. A worker should consider a variety of aspects when deciding to join a school or training program for example:

  • How much additional productivity could they achieve?
  • Does the training program cost the worker to participate in the program?
  • Is the worker likely to see an wage increment that justifies the expense to implement the plan?
  • Are there any conditions of the labor marketplace conditions for professionals with higher education in this particular field?
  • Does the market for labor be over-saturated with skilled laborers in that field?


Employers could pay for all or a portion the cost of training, however this isn’t always the scenario. Additionally, an employee could lose money if the training program is not paid and they are in no position to work as many hours as they did before.

To the Economy

A number of countries have put greater importance on creating an educational system which will create workers who can work in the emerging industries like technology and science. This is due to the fact that older industries in advanced economies are less competitive and therefore less likely to remain dominant in the industrial world. Additionally, a trend to enhance the basic education of the populace is gaining momentum, with the growing conviction that all citizens have the right to receive an education.


In the event that economists refer to “education,” the focus is not exclusively on the workers getting university degrees. Education is usually broken down into distinct levels:


  • Primary–elementary school in United States
  • Secondary school–middle, high school and preparatory school
  • Post-secondary–university, community college, and vocational school


A nation’s economy is more productive when the proportion of people with education increases, as educated people can better perform tasks that require critical thinking and literacy. However, having an education that is higher isn’t without cost. It is not necessary for a country to offer a vast system of universities or colleges to gain from education. it could provide basic literacy programs, and witness economic growth.


Countries that have a larger percentage of their population enrolled and graduating from high schools experience higher growth in their economy than those with less educated workers. In turn, numerous countries offer funds for secondary and primary education to boost economic performance. In this way the education system is an investment into the human capital like the purchase of better equipment.


It is the ratio between kids who are of secondary school age that are in school to the total number of children aged between the ages of secondary school and official in the total population (referred to by its ratio of enrollment) is more in developed countries as compared to developing nations. 2


The percentage of students enrolled is different as a measure from the calculation of education expenditure in percentages from the gross domestic product (GDP) that does not always correspond with the education level within a nation’s population. GDP is the amount of services and goods for the country. So, spending a large percentage of GDP for education does not necessarily guarantee that a nation’s population is educated.


An employee’s intellectual abilities can be viewed as an asset. This asset is used to develop items and products that are able to be offered for sale. The better-trained employees employed by a company is the greater amount of product that the firm could theoretically create. A society where employers view education as an asset is usually called an Knowledge-based Economy.


Like all decisions making, investing in education comes with the chance cost for the individual. Time spent in school mean less time at work and less an income. Employers offer higher salaries when the duties required for completing a job need more education. So, even though the income of an employee may be less in the immediate time but wages will likely be higher after the training has been completed.

The Bottom Line

The expertise and knowledge of workers who are in the labour market are crucial to the growth of both economic and business. The economies that have a substantial amount of skilled labor which is the result of formal education and professional training are usually successful through the development of more high-value industries, for instance, high-tech manufacturing.


The nations must ensure that through laws and programs for jobs that their citizens can access the educational and training opportunities that will boost the performance of the quality of work, businesses and the economy in general.