Working Smarter: Education and Productivity

Skills, innovation and human capital as they feature prominently on the policy agenda of industrialized countries concerned with productivity and competitiveness issues. Not surprisingly, formal education is the preferred and most conventional policy instrument of governments in pursuing these objectives. Indeed, "more is better" is often the guiding principle here. The actual linkages, however, are not as straightforward as they may appear. Certainly, there are gains to be achieved through a better understanding of the relationship between the skills developed through formal education and their causal impact on productivity, as well as a more nuanced approach to policy in this area. In this chapter, Arthur Sweetman points out, "the issue is not whether education has benefits but, rather, the magnitude of its 'true' benefits, the benefits relative to costs, and the distribution of costs and benefits. Sweetman examines three different sets of evidence, focusing on the impact of education on earnings at the individual level and on productivity at the macroeconomic level, and on issues related to the operation of the Canadian educational system.