The $700 Trillion Bill Lying On The Sidewalk: All We Have To Do Is Make All The Children In The World As Smart As Lake Wobegon's Kids
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From the International Monetary Fund’s Finance & Development magazine:




April 26, 2022

… Based on the available evidence, we highlight three key issues: (1) Skill differences account for three-quarters of cross-country variations in long-term growth. (2) The global skill deficit is immense, as two-thirds or more of the world’s youth do not reach even basic skill levels. (3) Accordingly, reaching the goal of global universal basic skills would raise future world GDP by $700 trillion over the remainder of the century.

… Our interpretation of the pattern of economic growth and development is straightforward: although a number of factors enter into short-term growth, in the long run growth depends primarily on the skills of the people (Hanushek and Woessmann 2015). In addition, our analysis indicates that the relevant economic skills are captured quite well by international student achievement tests in math and science.

The relationship between long-term growth and achievement is easiest to see in Chart 1. The skills of the population are measured by scores on international student assessments (for example, the Programme for International Student Assessment [PISA], the Trends in International Mathematics and Science Study [TIMSS], and their predecessors). The plot shows growth in GDP per capita during 1960–2000 after filtering out variation as a result of each country’s starting income level (since it is easier to imitate technology developed elsewhere than to innovate).

Growth and achievement are closely linked: countries with high-achieving populations grew fast; those whose people lag in achievement hardly grew at all. Achievement explains three-quarters of the variation in growth rates across countries. Moreover, years of schooling have no bearing on growth after accounting for what has actually been learned.

Economic growth
The standard concern about such a picture is that it might not represent a causal relationship because other factors may be more important and are simply correlated with achievement. We have investigated other possible explanations in depth (Hanushek and Woessmann 2015), and—while it is impossible to remove all doubt—we show a credible case that lifting achievement has a powerful impact on growth. We find, for example, that achievement tests up to the early 1980s predict subsequent growth (which rules out simple reverse causation) and that greater spending (which may come from faster growth) does not consistently raise achievement. Furthermore, if we use only part of the achievement variation that emerged from good institutions of the school system, such as strong accountability measures or more school choice, we find the same link to faster growth, which rules out the notion that higher achievement simply captures omitted factors from outside the school system. And we find that countries with increased achievement over time have subsequently shown increased growth rates, thus dealing with potential omitted cultural or institutional factors.

The world picture of education
Tracking success in the area of education has historically been difficult. International achievement tests were first developed in the 1960s—and all rich countries are now participating regularly—but a majority of poor countries have never participated. A series of parallel regional tests have been developed, but they lack direct linkages to the broader-scale international assessments. And many countries, including the two most populace, have not produced student outcome data in a consistent manner.

In our most recent research, we bring the different international and regional assessments of student achievement together (Gust, Hanushek, and Woessmann, forthcoming). While some uncertainty remains, we characterize the world pattern of achievement and skills with sufficient accuracy to permit addressing the state of the world with respect to the SDGs.

We define basic skills as the skills necessary to participate productively in modern economies. Pragmatically, we assume these to be represented by mastering at least the lowest of the six skill levels of the international PISA test—that is, PISA Level 1 skills. Students at this level are able to carry out obvious routine procedures according to direct instructions, but they cannot draw direct inferences or reliably employ basic conventions to solve simple problems involving whole numbers. Such basic skills are a key foundation not only for participating in modern societies, but also for engaging in lifelong learning as is necessary in an ever changing world.

The picture that emerges from our analysis is disturbing. Two-thirds or more of the world’s young people fail to reach the minimum skill levels required to compete in the international economy. These deficits are found worldwide, but are most severe in the poorest countries—as shown in Chart 2.

Lack of Skills
Six stylized facts summarize the development challenges presented by global deficits in basic skills:

At least two-thirds of the world’s youth do not obtain basic skills.
The share of young people who do not reach basic skills exceeds half in 101 countries and rises above 90 percent in 37 of these.
Even in high-income countries, a quarter of young people lack basic skills.
Skill deficits reach 94 percent in sub-Saharan Africa and 90 percent in south Asia, but they also hit 70 percent in Middle East and North Africa and 66 percent in Latin America.
While skill gaps are most apparent for the third of global youth not attending secondary school, fully 62 percent of the world’s secondary school students fail to reach basic skills.
Half of the world’s young people live in the 35 countries that do not participate in international testing, resulting in a lack of regular foundational performance information. …

We have calculated the economic value of erasing the learning deficits through actions to bring all youth up to basic skill levels (see table). …

The results are staggering. As the table indicates, the present value of added world GDP that would accrue over the remainder of the century is $700 trillion, or five times current annual world GDP. …

ERIC A. HANUSHEK is senior fellow at the Hoover Institution of Stanford University.

LUDGER WOESSMANN is professor of economics at the University of Munich and director of the ifo Center for the Economics of Education.

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