How our education system affects the economy of the future

In the 1820s Ireland had an impressive system of primary education in spite of its relative poverty. This system had developed independently of the government, with the fees paid by pupils financing the schools.

Just over a third of children here attended school.* By the European standards of the day, this was quite a high participation rate. There were higher rates in Germany, but the rate in England was similar to that in Ireland, with lower rates in countries such as France.

In the 1830s, the beginnings of a national system of primary education were put in place and this developed steadily over the rest of the 19th century. To begin with, this system was meant to be multidenominational but, under pressure from Presbyterians in Ulster, it rapidly evolved into the denominational system we know today. The evolution of a secondary education system came later and it depended heavily on the roll-out of new schools by Catholic religious orders.

Northern Europe

Despite the role of teachers and poets in the Irish revolution, from independence in 1922 the new Irish State did not prioritise investment in education for the following 40 years. By contrast, in much of northern Europe, there was a continuing expansion of the scope of their educational systems over the same period.

As shown in Figure 1, of those born in the early 1930s in Germany, the United States, the UK or Estonia, 75 per cent completed the equivalent of the Leaving Certificate with about one in five going on to third-level education. By contrast, in Ireland, Spain, Greece and France 30 per cent or less of the population reached Leaving Certificate equivalent level and only one in 10 went on to third level.

After the second World War, much of northern Europe invested heavily in education. The Education Act of 1944 in the UK marked a turning point there. Educational systems were improved and the proportion of the population completing high school and continuing to third level rose continuously. Ireland, like much of southern Europe, chose not to invest in education.

Subsequent decades

This investment in education in northern Europe had an important impact on economies in the subsequent decades. Where there was major investment in education after the war, as in Germany, the benefits were realised in the 1970s in terms of higher growth. By contrast, Ireland received no such benefit because the education system had changed relatively little between 1930 and 1960.

Realisation of what Ireland was missing out on came in 1965 with the publication of a report entitled Investment in Education. This resulted in a change in policy and the introduction of free secondary education in 1967. But it took some considerable time for the full effects of this policy change to be seen in terms of participation rates. However, over the course of the 1980s and the 1990s, the situation in Ireland changed dramatically.

As a result, as shown in Figure 2, the educational attainment of the cohort of children born here in the early 1980s was dramatically different from that of earlier generations. More than 40 per cent of them went on to complete a third-level qualification and fewer than 20 per cent failed to do the Leaving Certificate.

Thus, over the space of a generation, Ireland moved from having one of the least satisfactory education systems in Europe to having one where an exceptionally high share of the young population was benefitting from third-level education.

What is also interesting about these data is the continuing north-south divide in Europe, with Ireland now restored to a northern European status. Poland, Estonia, and Latvia, more recent member states of the EU, all had an educational attainment above the EU average.

Obviously these data say nothing about the quality of the education received, but other evidence does suggest that this educational transformation had a major economic effect, albeit decades after the initial investment took place. In the case of Ireland, the maximum effect on growth from the expansion of the educational system was probably felt in the late 1990s and the early years of the2000s. However, there will be continuing effects for some time to come as the generation born in the 1950s retire and are replaced by a younger generation who had much better educational opportunities.

Employment figures

The benefits of rising educational attainment are highlighted in the recent employment figures published by the Central Statistics Office. They show that, since the recovery in employment began at the beginning of 2012, a majority of the net jobs created have been for graduates and there has been no net new jobs for those who had not completed the Leaving Certificate. It is to be hoped that the evolving nature of the economic recovery will see growth in jobs for those with more limited educational attainment too but it is also clear that the bulk of the employment being created requires quite a high level of education.

If decisions had not been taken to expand the educational system and increase participation at second and third level between 1970 and 1990, the labour market position today would be very different.

This highlights the importance of strategic thinking in public policy, especially education policy. Decisions on how to improve the educational system today will have continuing effects on the economy and the wider society for decades to come.

* http://iti.ms/1w9QzkD Figure 1: Educational Attainment of those born between 1931 and 1935. Source: EU Labour Force Survey Figure 2: Educational Attainment of those born between 1981 and 1985