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The Economic Value of Cognitive Skills Development


The Organization for Economic Cooperation and Development (OECD) has published a report on the economic value of improved educational outcomes, entitled The High Cost of Low Educational Performance, which describe its conclusion as follows:

The report uses recent economic modeling to relate cognitive skills as measured by PISA and other international instruments  to economic growth. The relationship indicates that relatively small improvements in the skills of a nation’s labour force can have very large impacts on future well-being. (PISA refers to the Programme for International Student Assessment.)

How large is the impact on future well-being? Well, the value of improving student performance by 25 points on the PISA scale (a relatively modest goal) translates into $40 trillion of GDP in the U.S. If the U.S. were able to reach the same levels of performance routinely achieved by students in Finland, the value of the difference is over $100 trillion. The value of getting every student in the U.S. to minimum proficiency on the PISA would have a GDP impact of over $70 trillion in the U.S.

Skeptics might argue about the ability of economic models to project into the future. If the impact of cognitive skills becomes more or less important as technology and economic demands continue to evolve, then the economic impact will be correspondingly more or less. And, as the report points out, the value of cognitive skills is very likely to increase, making the value of improvements even greater, and the cost of improvements truly insignificant in light of the broad impact on our nation’s, and other nation’s, well-being.

The experience of nations like Finland and Poland, the latter of which has seen rapid increases in the quality of schooling, suggests that improvement is possible. The potential payoff suggests that improvement is an absolute necessity.

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