Higher education is highly valued all over the world for his contributions to economic and social development. The existence of universities in the city (region) provides two types of effects. On the one hand this is the short-term impacts of the university through the monitoring of expenses related to the existence of the university (expenditure of the institution, staff, students, visitors, etc.). On the other hand the existence of university provides also long-term effects, which include revenues associated with the growth of human capital (wage growth), the development and growth of companies, economic development of city (region, country) and so on.
In an increasingly globalised and knowledge-based economy, any country needs a well-skilled workforce to compete in terms of productivity, quality, and innovation. And higher (tertiary) education is the most important factor of maintenance the conditions for both economic and social development of society.
In the Europe 2020 strategy it is considered that higher education contributes to social and economic development through the implementation of four key tasks: the formation of human capital (primarily through training); building knowledge bases (primarily based on research and development of knowledge); dissemination and use of knowledge (primarily due to the interaction with the user's knowledge); knowledge support (primarily through knowledge between generations of storage and transfer) [5].
Various studies indicate a significant relationship between higher education and economic development (in particular, economic growth). In his paper Panagiotis Pegkas examines the link between educational levels and economic growth and estimates the potential impact of the different educational levels on economic growth in Greece over the period 1960-2009 [6]. The results of empirical analysis reveal that there is a short-run causality running from higher education to economic growth and that in the long run the elasticity of Greece GDP to higher education is 0.52.
As part of the Europe 2020 strategy, EU leaders have agreed a target that 40% of those aged 30-34 should have a higher education or equivalent qualification by 2020 [1]. In order to achieve this EU-level "headline" target, EU countries have set their own national attainment targets to be reached by 2020.
A considerable part of the research shows that the level of education of the population significantly affects economic development. The contribution of higher education to economic development can be measured by means of the production function, or even a simple regression equation. Studies that have been used as the higher education variables, the proportion covered by education (gross enrolment ratio) and the level of educational attainment (higher educational attainment), have shown that these two variables have a positive effect on the level of economic development (GDP per capita) [7].
In United Kingdom higher education sector is one of the largest service sectors of its economy. In 2011-12 UK universities generate £73 billion in output – up (24%) from £59 billion in 2009 [9]. This part of country‘s output was generated through both direct and multiplier effects. Thus, higher education contributed 2.8% of UK GDP in 2011 (up from 2.3% in 2007-2008) and generated 757,268 full-time-equivalent (FTE) jobs throughout the economy [9]. More than half of revenues received by UK universities were from private sources.
Growth accounting analysis indicated that graduate skills accumulation contributed to roughly 20% of GDP growth in the UK from 1982-2005 [2]. This approach limits the estimated impact to the productivity enhancement directly accrued to graduates and misses any externalities to higher education which may raise the productivity of the rest of the economy. Authors indicated that a 1% increase in the share of the workforce with a university degree raises the level of long run productivity by 0.2-0.5%. The long-run adjustment is gradual, with about 5-15% of the correction absorbed per annum. With the UK share of the workforce with a university education having increased by 57% between 1994 and 2005, estimates suggest this will have raised UK long-run productivity by 11-28%. This means that at least one-third of the 34% increase in labour productivity between 1994 and 2005 can be attributed to the accumulation of graduate skills in the labour force.
Eun Kyung Lee argues that Japanese and South Korean higher education showed a positive effect on their economic growth, and a bidirectional relationship of higher education development and economic growth was examined in both countries‘ industrialization periods [3]. The public sector in Japanese higher education contributed to their economic growth. Among four major groups, the Japanese science major group had a positive effect on the increase of their GDP value added by industry and service et al., but the South Korean science major group showed the least effect on their economic growth among four major groups. In South Korea, the social science major group contributed to the economic growth through affecting on the increase of their industrial and service GDP.
In Ukraine in 2014 total expenditure on higher education amounted to 2.9% of GDP and 1,8% of public expenditure. Ukrainian university‘s funds consist mainly from the expenditure of the expenditure from state budget (69%) and students fee (31%) [10]. In the UK, the share of the expenditure from state budget is 49%, the share of funds from private sources is 31% and from international sources is 20% [10]. In UK universities revenues from the state budget and tuition fees are only 65% of total university funding. The rest part is formed from grants for research (16%), other revenues from different services (18%) and contributions to endowment fund (1%) [10].
The education level of workers affects on level of their earnings (table 1). For all OECD countries higher level of education means higher level of earning of workers.
Although in EU countries the level of worker‘s education matters less (on the average) than it matters in OECD countries (on the average too), average extra-salary of worker with university diploma is more than 50% of the salary of worker without such diploma. The developing countries are characterized by the most significant effect of higher education for workers and, as a result, for economy of these countries. Chile is the brightest illustration of this fact. A worker with education on the level of below upper secondary education earns four times less, than a worker with a university diploma.
As data of United States labour market show, in 2011 the median weekly earnings for bachelor‘s degree holders were 65 percent higher than earnings of high school graduates ($1,053 compared to $638) [8]. In aggregate, the additional earnings from two or four years of college (relative to only high school) were $2.4 trillion, or 16 percent of the $15 trillion in total GDP of US.
Even during the crisis, labour income growth among tertiary graduates generated a positive impact on GDP of more than half a percentage point per year (between 2008 and 2010). While GDP shrank by almost 4% across OECD countries in 2009, labour income growth among tertiary graduates still made a positive contribution to GDP of 0,4% [4].
About half of the economic growth is related to labour income growth at the tertiary level of education. In France, Norway, Switzerland and the United Kingdom, 60% or more of growth in gross domestic product (GDP) is generated by those who have attained a tertiary education. In Denmark and Ireland, the labour income growth of those with tertiary education exceeds GDP growth, largely as a consequence of a strong shift towards higher skills and the impact of the global economic crisis on overall economic activity in these countries [4].
So, as the workers with higher education receive higher incomes, then their activity they are doing a greater contribution to GDP, thereby contributing to economic development. It means that well-educated workforce is vital to nation‘s future economic development. The significant impact of higher education for economic development should be taken into account under improvement the strategy of higher education in Ukraine.
References
- Europe 2020. A strategy for smart, sustainable and inclusive growth. Communication from the Commission. COM (2010) 2020 final, 3 March 2010. [EU Commission – COM Document].
- Holland, D. at al. The relationship between graduates and economic growth across countries. BIS Research Paper No 110. August
- Lee, E.K. Higher Education Expansion and Economic Growth in Japan and South Korea. University of Pittsburgh,
- OECD (2012), ―How does education affect the economy?‖, in Education at a Glance 2012: Highlights, OECD Publishing,
- OECD (2008) Tertiary Education for the Knowledge Society: OECD Thematic Review. Paris: Organisation for Economic Co-operation and Development,
- Pegkas, P. The Link between Educational Levels and Economic Growth: A Neoclassical Approach for the Case of Greece. International Journal of Applied Economics, 11(2), September 2014, p.38- 54.
- Pillay, P. Higher Education and Economic Development. Literature review. CHET 2011, 72.
- The Economics of Higher Education. Washington, DC: U.S. Department of Education. Departments of Education and Treasury, December 2012.
- Universities‘ contribution to economy increases by 24% [interactive]. [viewed on February 23, 2016]. Access via Internet http://www.universitiesuk.ac.uk/highereducation.
- Роль університетів в економічному розвитку міст, регіонів, країни. Звіт III Національного форуму «Бізнес і університети». Укладачі: О. Янковська, А. Зінченко. Київ,