Educational Sociology: Education and Economic Development

Historically, education has been essential for economic development. This is particularly true today as the jobs necessary to be competitive within the global marketplace become increasingly complex and rely on an ever-broader baseline set of knowledge, skills, and abilities. In the 21st century, in many ways, the control of technology differentiates a highly developed country from one that is underdeveloped. Not only does education matter in jobs relating to the science and technology fields, but it is also important for economic development. Although the United States is often viewed as a place for social mobility and working one's way out of a lower class and lower socioeconomic status, the literature shows a more complicated relationship between social class, race and ethnicity, education, occupation, and income.

RESEARCH STARTERS

ACADEMIC TOPIC OVERVIEWS

Educational Sociology > Education & Economic Development

Overview

Arguably, particularly in the high-tech environment of the twenty-first century, education is essential for economic development. Without education and the concomitant passing on of knowledge from one person to another and from one generation to another, humankind would still be reinventing the wheel rather than making smaller and smaller computers with greater and greater processing and storage capacity. In addition, as society becomes increasingly technologically advanced and economic growth becomes more dependent on knowledge, science, mathematics, and technology, education becomes increasingly essential in order to gain and maintain a competitive advantage in the global marketplace of the twenty-first century. Economic development and the education that enables and sustains it are imperative when one competes not only with the farm down the road or the shop around the corner, but with mega corporations and conglomerates that operate around the globe.

In the twenty-first century, technological and scientific expertise is an important factor in economic development. In many ways, the control of technology differentiates a highly developed country from one that is underdeveloped. Although today we tend to think of technology in terms of electronic tools and gadgets, in a more general sense, technology--or the application of science to industrial or commercial endeavors--has helped societies grow and advance throughout history. Irrigation systems, steam engines, and electrical power sources--all of which seem commonplace to us today--were once high technology advances that moved their respective societies forward. Arid lands have been reclaimed, homes made more inhabitable year round, and the long-distance transportation of goods have all been enabled by technological advances. These elements provide the infrastructure necessary for societies to continue advancing and sustaining their economic development. As this infrastructure becomes more complicated, it requires an increasing amount of knowledge in order to sustain and improve it. For the most part, expertise in these areas comes from education. Those countries with individuals who have the education and knowledge necessary to work with technology tend to continue to grow and develop; those that do not often struggle.

Obviously, education matters particularly in the knowledge, science, and technological fields. Similarly, education is important for economic development, or the sustainable increase in living standards for a nation, region, or society. More than mere economic growth (i.e., a rise in output), economic development is sustainable and positively impacts the well-being of all members of the group through such things as increased per capita income, education, health, and environmental protection. However, education is not the only factor that influences occupation and income, nor is the relationship between these two variables a simple one.

Education & Socioeconomic Status

Socioeconomic status is the position of an individual or group on the two vectors of social and economic status and their combination. Socioeconomic status is determined by sociologists in a number of ways. One of these is based on a determination of an individual's education, income, and occupation. Typically, there is a strong positive correlation between a person's level of formal education and socioeconomic status. (This is not a perfect correlation, however. For example, college professors with doctoral degrees often receive notoriously low wages when compared to their years of formal education. On the other hand, Bill Gates of Microsoft Corporation is an exemplar of how a person can become an economic success despite a lack of postsecondary education.) In general, the more formal education an individual has, the more likely that person is to have a higher socioeconomic status and concomitant prestige. For example, on the average, physicians, lawyers, and others engaging in professional occupations that require advanced degrees have higher socioeconomic status than unskilled laborers.

Education & Social Class Origin

As is illustrated by the stories of Horatio Alger, education in the United States is often viewed as a tool for social mobility and working one's way out of a lower class and lower socioeconomic status. However, the literature suggests that this is true only to a limited extent. For example, one's eventual occupation and income are also dependent on the social class into which one was born. For example, for upper-class Anglo Americans (including those with inherited wealth, professionals, and high-level managers) research has found social class origin to be more important than education in determining eventual occupation and income. In this case, the factors of class and race protect individuals from downward social mobility. On the other hand, these factors also act to block lower class minorities from too much upward mobility. The relationship between social class, race and ethnicity, education, occupation, and income is shown in Figure 1.

Education Deflation

In the United States, an increasing number of individuals are obtaining post-secondary degrees. Based on the positive correlation between education and socioeconomic status, this might seem like a good thing not only for the individual, but for the economic development of society at large. However, research has found that in industrialized nations such as the United States, as the level of education continues to rise, the relative advantage of completing that education (measured in terms of income) has not risen at the same rate. This can be due to grade inflation, in which an excessive number of high grades are given to students or average students are given above average grades. Grade inflation effectively lowers the value of the top grades earned by higher achieving students. In such situations, academic credentials are no substitute for bona fide expertise in a job. The practice of grade inflation makes graduates ill-prepared for the realities of college or the work world, and society ill-prepared to compete in the global marketplace. In addition, grade inflation effectively lowers the value of the top grades earned by higher achieving students. This situation is called education deflation, a condition in which education at all levels is worth less than it was a generation or two ago.

Applications

Education & Development in Japan

Godo and Hayami (2002) performed an in-depth analysis of the role of education in helping Japan to develop its economic system. The study examined historical data from Japan and the United States and compared progress in education in these two countries. This comparison is important to understanding the relationship between education and economic development because Japan is a relative newcomer to industrialization when compared with Western Europe and North America. One of the primary goals for the modernization of Japan after the Meiji Restoration of 1868 was to bring Japan into a position of economic strength to rival that of Western nations. One of the ways in which Japan accomplished economic growth was through the progress of education. Around the year 1890, the Japanese economy was only beginning the process of modern economic growth. On the other hand, during that same time period, the economy of the United States had passed through the initial stage of industrialization and was firmly established in the process of reaching economic maturity. Given the obvious success of Japan in reaching their economic goals as well as the fact that on international tests of proficiency in mathematics and science, Japanese children at the eighth-grade level do significantly better on average than their American counterparts, this analysis is of particular interest.

The Japanese Educational Infrastructure

To accomplish its goals, Japan sought to promote industry by borrowing modern technology from the West. Japanese government leaders recognized, however, that importing technology was insufficient for the economic growth they sought; they realized that they also needed to put in place an infrastructure of education that would enable them to produce a workforce that would be qualified to work with the technologies. In 1872, the government implemented a modern educational system that required the enrollment of all children for a minimum of eight years of primary education. In 1886, the Primary School Order introduced two types of primary schools: ordinary (which provided four years of compulsory education) and higher (which provided an additional two to four years of education for those who completed the primary program). In 1907, the law was again changed to require six years of compulsory education rather than four. The primary educational system applied to nearly all Japanese children and provided a homogenous general education. The higher education systems comprised several paths based on profession and gender. Only a small percentage of students continued all the way from compulsory primary education through the university level. Most students ended their education either at the higher primary school level or at the vocational school level. Once one entered the vocational track, it was virtually impossible to enter a university. In addition, education for males and females was markedly different. Middle schools were segregated by gender. Further, girls were given very limited access to vocational programs and were not allowed to enter the university (Godo & Hayami, 2002).

After the defeat of Japan in World War II, the educational system was again overhauled. Under the direction of the Allied Occupation Forces, the educational system was transformed along the lines of the educational system in the United States. In addition to six years of primary education, an additional three years of junior high school were made compulsory. Senior high school provided three years of education in both vocational and general education subjects. Restrictions against vocational students advancing to university and restrictions resulting in gender discrimination were also lifted at this time (Godo & Hayami, 2002).

Closing the Education Gap

According to the analysis of Godo and Hayami, the reduction in the education gap between Japan and the United States occurred primarily before World War II. As shown in Table 1, during the early part of the period covered by the data analyzed, Japan's educational level was significantly behind that of the United States. In 1890, for example, the average rate of schooling in Japan was only 20 percent of the rate in the United States. However, Japan also experienced a much faster growth rate in average schooling for the remainder of the period that enabled it to close the gap between it and the United States. During this time, the average level of schooling for the total working age population in Japan increased at a rate of 2.2 percent per year whereas that in the United States only increased by 0.7 percent during the same time period. This resulted in a rise in average schooling levels in Japan from 20 percent at the start of the period under analysis to 85 percent at the end. Much of this occurred before World War II, with a rise from 20 percent to 67 percent in the period between 1890 and 1940 and a rise from 72 percent to 85 percent in the period between 1950 through 1990.

Table 1: Comparisons in Average Schooling between Japan and the United States, 1890-1990

Time Frame Japan United States Japan/United States (US = 100) Total Male Female Total Male Female Total Male Female 1890 1.3 1.9 .6 6.5 6.7 6.3 20 28 10 1900 2.0 2.9 1.1 7.2 7.3 7.1 28 40 15 1910 3.0 4.1 2.0 7.7 7.8 7.7 39 53 25 1920 4.3 5.4 3.1 8.3 8.3 8.4 51 65 37 1930 5.6 6.8 4.4 9.1 9.0 9.1 62 75 48 1940 6.5 7.5 5.6 9.8 9.8 9.8 67 77 57 1950 7.6 8.4 6.9 10.5 10.6 10.5 72 79 66 1960 8.7 9.4 8.1 11.3 11.5 11.1 77 82 73 1970 9.8 10.4 9.2 12.0 12.3 11.7 82 84 79 1980 10.7 11.2 10.2 12.8 13.1 12.5 84 85 82 1990 11.5 11.9 11.1 13.5 13.8 13.3 85 86 83

Time Frame Japan United States Japan/United States (US = 100) Total Male Female Total Male Female Total Male Female Growth Rate (%/Year) Ratio (US = 1) Entire period (1890-1990) 2.2 1.9 2.9 .7 .7 .7 3.0 2.5 3.9 Pre-WWII (1890-1940) 3.3 2.8 4.4 .8 .8 .9 4.0 3.7 5.0 Post-WWII (1950-1990) 1.1 .9 1.4 .6 .7 .6 1.7 1.3 2.2 (adapted from Godo & Hayami, p. 965)

The result of this education growth applied not only to Japanese males, but to females as well. In fact, the rise in average education was even more marked for women than for men. This rise was almost 50 percent faster than the concomitant rise of education levels for men within Japan. During that same time period, there was no such difference between genders in the United States. Although there may be implications for the role of women in the economic development in Japan, it must be remembered that at the start of its modern development, women averaged 0.6 years of education (versus 1.9 years for men). However, despite these advances in education for women, they still lagged behind men up to the period of the Second World War (Godo & Hayami, 2002).

Impact on Economic Development

As fascinating as the statistics comparing educational growth in Japan to that in the United States are in their own right, they are even more so when examined through the lens of the concomitant economic development in that same period. During the time period covered by the analysis, the per capita gross domestic product of Japan increased at an annual compound rate of three percent with a capital/labor ratio similar to that in the United States. The speed of growth for the gross domestic product was 60 percent higher in Japan than in the United States. During the same period, the growth of the capital/labor ratio was 150 percent higher than that in the United States and the rise in average schooling was 200 percent higher. These statistics support the hypothesis of some theorists that countries which enter the era of industrialization later may need to accumulate physical and human capital more quickly relative to the improvements in efficiency for those countries that entered their period of industrialization earlier.

Another interesting finding from this analysis is that it appears that there was a significant change in Japan's reliance on physical versus human capital during this time period. Before the Second World War, average schooling rates rose faster than the capital-labor ratio. However, after the war, the reverse is true. During the period between 1890 and 1910, the rate of increase in the gross domestic product in Japan was 1.3 percent per year, or approximately 40 percent of that in the United States. This was accompanied by rapid growth in the capital-labor ratio (5.5 percent per year), at a rate approximately 50 percent higher than that of the United States. During the same time period, average schooling levels rose at a rate approximately five times that of the United States. During the period between 1955 and 1970, however, the gross domestic product and capital-labor ratio increased about four times faster in Japan than in the United States with a concomitant rise in average schooling of approximately two times the American rate.

Conclusion

Although the argument could be made that education has been important for economic development throughout history, it has become particularly so as a result of industrialization and the ever increasing rates of technological advancements. Although on-the-job training is still important for many jobs in today's age of information and technology, formal education is increasingly so. Sometimes this leads to situations of credentialism, in which proof of education and degrees are used as a substitute for bona fide job requirements. However, as the need for baseline skills required to perform a job increases with advances in global technology and information sharing, education and the value that it gives to human capital will continue to be important to economic development.

Terms & Concepts

Class: A group of people or stratum within society that shares a similar level of wealth and income and that have access to the same resources, power, and perceived social worth. Social class is the stratum of the group within the society.

Correlation: The degree to which two events or variables are consistently related. Correlation may be positive (i.e., as the value of one variable increases the value of the other variable increases), negative (i.e., as the value of one variable increases the value of the other variable decreases), or zero (i.e., the values of the two variables are unrelated). Correlation does not imply causation.

Credentialism: The requirement for educational credentials for their own sake as a prerequisite for employment or for conferring social status in place of an objective emphasis on the qualifications, skills, or abilities of the person.

Economic Development: The sustainable increase in living standards for a nation, region, or society. More than mere economic growth (i.e., a rise in output), economic development is sustainable and positively impacts the well-being of all members of the group through such things as increased per capita income, education, health, and environmental protection. Economic development is progressive in nature and positively impacts the socioeconomic structure of a society.

Education: From a sociological perspective, education is a formal learning process in which some individuals take on the social role of teacher and others take on the social role of student.

Globalization: Globalization is the spreading of businesses or technologies across the world. This creates an interconnected, global marketplace operating outside the constraints of time zone or national boundary. Although globalization means an expanded marketplace, products are typically adapted to fit the specific needs of each locality or culture to which they are marketed.

Grade Inflation: The situation in which an excessive number of high grades are given to students or average students are given above average grades. Grade inflation effectively lowers the value of the top grades earned by higher achieving students.

Gross Domestic Product (GDP): The total market value of all final goods and services produced within the borders of a country during a given period of time. The gross domestic product includes the total consumer, investment, and government spending in addition to the value of exports minus the value of imports.

Human Capital: The individual resources of workers such as knowledge, skills, abilities, training and education, and work experience. Human capital can be used to explain the differences in wages among different individuals.

Social Mobility: The movement of an individual between classes in a society over a period of time.

Society: A distinct group of people who live within the same territory, share a common culture and way of life, and are relatively independent from people outside the group. Society includes systems of social interactions that govern both culture and social organization.

Socioeconomic Status (SES): The position of an individual or group on the two vectors of social and economic status and their combination. Factors contributing to socioeconomic status include (but are not limited to) income, type and prestige of occupation, place of residence, and educational attainment.

Bibliography

Andersen, M. L. & Taylor, H. F. (2002). Sociology: Understanding a diverse society. Belmont, CA: Wadsworth/Thomson Learning.

Demeulemeester, J., & Diebolt, C. (2011). Education and growth: What links for which policy?. Historical Social Research, 36 , 323-346. Retrieved November 5, 2013 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=65999906&site=ehost-live

Diebolt, C. (2011). Does Douglass North offer an original research agenda to analyse the relationships between education and economic performance? Historical Social Research, 36 , 338-342. Retrieved November 5, 2013 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=59158774&site=ehost-live

Kantor, H., & Lowe, R. (2011). The price of human capital. Dissent (00123846), 58 , 15-20. Retrieved November 5, 2013 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=61963962&site=ehost-live

Krueger, A. B. & Lindahl, M. (2001). Education for growth: Why and from whom? Journal of Economic Literature, 39 , 1101-1136. Retrieved June 18, 2008, from EBSCO Online Database SocINDEX with Full Text. http://search. ebscohost.com/login.aspx?direct=true&db=sih&AN=5743563&site=ehost-live

Godo, Y. & Hayami, Y. (2002). Catching up in education in the economic catch-up of Japan with the United States, 1890-1990. Economic Development and Cultural Change, 50 , 961-978. Retrieved June 18, 2008, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=7704844&site=ehost-live

Stockard, J. (2000). Sociology: Discovering society (2nd ed.). Belmont, CA: Wadsworth/Thomson Learning.

Suggested Reading

Fershtman, C. Murphy, K. M., & Weiss, Y. (1996). Social status, education, and growth. Journal of Political Economy, 104 , 108-132. Retrieved June 18, 2008, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=9602230865&site=ehost-live

Gylfason, T. & Zoega, G. (2003). Education, social equality and economic growth: A view of the landscape. CESifo Economic Studies, 49 , 557-579. Retrieved June 18, 2008, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=12668278&site=ehost-live

Jewell, R., & McPherson, M. A. (2012). Instructor-specific grade inflation: Incentives, gender, and ethnicity*. Social Science Quarterly (Wiley-Blackwell), 93 , 95-109. Retrieved November 5, 2013 from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=73908408&site=ehost-live

Lazzeretti, L. & Tavoletti, E. (2005). Higher education excellence and local economic development: The case of the entrepreneurial University of Twente. European Planning Studies, 13 , 475-493. Retrieved June 18, 2008, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=17253505&site=ehost-live

Monteils, M. (2004). The analysis of the relation between education and economic growth. Compare: A Journal of Comparative Education, 34 , 103-115. Retrieved June 18, 2008, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=12917212&site=ehost-live

O'Neill, D. (1995). Education and income growth: Implications for cross-country inequality. Journal of Political Economy, 103 , 1289-1301. Retrieved 18 June 2008 from EBSCO Online Database SocINDEX with Full Text http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=9601263675&site=ehost-live