How Higher Education Contributes to Economic Development

By Manuela Theissen

When a young adult pursues higher education – also known as tertiary, post-secondary or third-
level education — the reason or reasons are usually personal. Some students pursue this level of
education simply because having a degree under their respective names helps bring respect and
good image. Likewise, some student pursue higher education because they are aware that by
having at least a college degree, their path to the future is clearer – better jobs, higher pay and
improved lifestyle. In short, students pursue tertiary education because it contributes to their
personal development.

On the other hand, does higher education contribute to economic development? How does it
make contribution to economic development?

Take the case of South Korea. With almost no natural resources to exploit, South Korea was able
to become a developed country with a high-income economy. It is ranked 15th in the world in
terms of nominal GDP. It is now the fifth largest economy in Asia. In the past half a century,
South Korea was an input-driven economy, but now, it is a knowledge-based economy.
Much of the economic growth in South Korea has been driven by knowledge. The country is
among the top OECD countries investing a large percentage of their GDP knowledge, which
includes field of higher education, software, and research and development. As early as 1950s,
public third-level schooling started to rise, followed by beginnings of private higher education in
the next decade. In the next two decades, South Korea promoted science and engineering
programs. In the 1990s, the country’s focus was quality assurance, research and development,
and performance-based funding.

As tertiary schooling in South Korea advances, the country’s economic development also
accelerates. The Asian country has overall supported post-secondary schooling as a means to
accelerate economic development.

When more students pursue higher education, economic growth could be seen through personal
and public channels. Those who have pursued this level of schooling typically have job
prospects, higher income, and a wider ability to save and invest – leading to better health and
improved quality of life.

These personal gains, however, may not be too personal at all. When citizens of a country gain,
the society also gains. Higher incomes also mean higher tax revenues. Higher incomes also mean
greater consumption and greater demand for different products and services inclusive in an
economy. With growing demand, businessmen will have greater incentives to invest to produce
and introduce their products and/or service. This will lead to creation of more jobs and a rise in
infrastructure projects in a country. The influx of investments into an economy also bodes well
for the government as it means higher income from taxes and other regulatory fees.

Higher education graduates, armed with knowledge, skills and higher income, could help
encourage entrepreneurships. Small and medium businesses are also a vital part of the economy
as they do not only mean higher revenue from taxes but also more jobs for the less-educated

Economies could also benefit less directly from higher education. For instance, higher education
produces well-trained teachers, which in turn could improve the quality of compulsory education
in the country and provide those non-college graduates to advance economically. When
universities and colleges produce a crop of quality graduates, they are also helping build and
secure future for younger generations.

Directly or indirectly, higher education does contribute a lot to economic development. As a
country places emphasis on encouraging its younger generations to pursue this level of formal
learning as well as on investing heavily on it, it is planting seeds for economic development.