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How Education and Training Affect the Economy
How does one measure the impact of education on economic performance? Why are workers with college degrees so much more likely to earn a higher salary than those without?
These are just a few of the many questions that can be answered by understanding how education and training affect the economy. The answers may help explain why some populations, businesses, and economies are thriving while others struggle.
As we see a growing labor supply, wage pressure falls. If employers desire labor doesn’t keep up with the demand, wages will usually fall.
In industries with low barriers to entry, an excess supply of workers is harmful to employees. Industries that require higher education and training pay their workers more because they carry a smaller labor supply. And the increased pay is due to the high cost of getting that degree or specialized training.
How Education Benefits a Nation
Globalization and international trade means countries need to compete with one another. Economically prosperous countries will hold advantages over other countries in the same industry, though a country will more likely specialize in a single industry.
That’s why a country that provides good education and training for its citizens is more likely to have an advantage in today’s world.
How Job Training Influences the Economy
If a country wants to maintain economic success, it’s important that people can adequately and skillfully run the industries necessary for its operations. To incentivize training, nations may offer tax breaks or provide facilities for individuals to train in specific trades or professions.
However, even when an industry is successfully managed, there are going to be other industries with skilled workers—often more readily available. The key is finding a strategy in which your economy has a competitive advantage in some industries, but not all.
A difference in training levels is one of the main factors that separate developed and developing countries. Although other factors such as geography and available resources have an impact, better-trained workers have the ability to bring positive externalities and sustainable benefits throughout an economy.
In some situations, an external factor can have a positive effect on the economy, such as when a company has a well-trained workforce.
This means that all of the company’s competitors also benefit from having available skilled labor to hire employees. A well-skilled labor force might be concentrated in a specific geographic region. Therefore, other businesses with similar needs will use this region since they’ll find it easier to recruit highly skilled workers—the Silicon Valley example is a perfect example.
When looking to hire employees, employers want employees who are productive and require little to no management. There are many factors to take into account when deciding whether or not to invest in employee training, such as:
Is the training program going to have a positive impact on the workforce? Paying for training can be an expensive process. Will the increase in productivity justify the cost?
In your business, you’ll have employees who take advantage of training opportunities. Many people will stay at their company and enjoy the benefits after completing a training program. However, some employees don’t see things that way.
They might think the competition is more attractive or they might not want to work there anymore and are willing to risk leaving for another company for higher pay.
Will the newly trained worker be able to command a higher wage after new training? In order to get a higher wage, the worker needs to negotiate with the employer and hope that they are successful. If the training pays off and results in more productive employees, will it generate enough revenue to cover any pay raises as well as the cost of the training program?
Employers want their employees to be productive and low-maintenance, but training programs can cost a lot.
There are many factors that must be taken into account when considering whether or not you will pay for them, such as: How will the training program affect the workers? Is the increase in productivity going to be worth the cost of paying for the training yourself or having your team participate on their own?
Employees may want to improve their skills in order to earn a higher wage. Usually, an employee’s wages will increase with time, but at a slower percentage than an employer’s productivity gains. When deciding if they should enroll in a training program, employees must consider several factors including:
How much more productive can they be with our software? Does the training program cost anything for the person you’re trying to hire?
Will the employee actually see more money? What is the labor market like for better-trained professionals in that field? Is there a high demand for labor in that specialty?
Sometimes employers will help to cover the fees, but this is not always the case. Also, a worker will lose income if they’re paid below their normal salary due to unpaid training hours.
In some states, an employer may not be required to cover the cost of work training; however, employees must be paid for training time unless the course takes place outside of their normal working hours (or outside of normal business hours), is not related to the job, doesn’t interfere with other work they are performing at the same time, and attendance is voluntary.
For the Economy
In many countries, teachers are being taught to teach skills that prepare their students for new industries.
This is partly because older industries in developed economies are less competitive, which means they’re likely to fade away and be replaced by new industries. Additionally, the movement to educate people at a basic level has more momentum and this belief is gaining speed.
All people have the right to an education, so our society should make sure everyone has equal opportunity for education.
Sometimes, the word “education” is meant to refer to the level of education an individual has obtained. For example, college degrees are really advanced degrees and you don’t need them to get a good job. However, you may need a high school diploma or GED to get a job.
Educational attainment is linked to a stronger economy, but education can be expensive. Although higher levels of education are needed for certain tasks such as literacy, a country does not have to have extensive network of schools or universities in order to benefit from having educated workers.
Basic literacy programs and literacy homeschooling is just as helpful, and can provide a better return on investment.
Countries with high educational attainment rates experience greater economic growth than countries with lower levels of education. They recognize the correlation between a more educated citizenry and an improved economy, and many of them provide funding for primary and secondary education to boost their economic performance.
In this sense, education is a form of investment in human capital which is similar to investing in something like improved equipment.
In nations with well-developed economies, more children of secondary school age are enrolled in school than the population average. Conversely, in less developed economies, many are left out and do not benefit educationally.
Who Foots the Bill for Mandatory Workplace Training?
If you have to attend training for your job, your employer will usually cover the cost of your course. Some states, like California, make it a legal requirement for employers to cover all work-related expenses. If your employer is ordering you to pay for workplace training, check to see if this type of expenditure is legal in your state. Chances are it is, but if not, don’t worry – there are ways to get the training you need and still make your work schedule.
The Bottom Line
Countries with an educated workforce are better able to enjoy economic growth and development. As the labor supply, they’ll have a higher-skilled workforce and be able to capitalize on this by developing their value-added industries.
To put it simply, all countries need to do is make sure their citizens have the education and training necessary to succeed. This can be achieved through legislation and job programs that give everyone in the country an equal chance at economic mobility.