Tag Archives: GDP

[Revised] Why Educational Investment is Non-Negotiable

The United States must invest in education because of the returns to GDP an educated population can create.

When addressing current economic issues one cannot ignore human capital, specifically investment in education. Educational outcomes strongly affect the economic growth of a country. George P. Shultz and Eric A. Hanushek, contributors for The Wall Street Journal, compared the GDP-per-capita growth rates between the years 1960 and 2000 with achievement results as determined by an international math assessment test. The majority of countries followed a straight line that revealed that as the scores on the assessment test increased so did economic growth. Although the U.S. remained above the average, this position will not hold strong for long in the future unless we make significant increases in overall education in the U.S. Students of today, the labor force of the future, are no longer competitive in comparison to other developed countries. The U.S. was ranked 31st in math according to the OECD’s Programme for International Student Assessment, an alarming statistic.

The importance of education on the economy cannot be understated. Better education leads to a faster growing economy. Education directly correlates to higher wages. The median weekly earnings in 2013 were $472 for someone with less than a high school diploma compared to $1,108 for individuals with a bachelor’s degree. Educational disparities lead to economic disparities that without new reform will maintain and foster the inequality problems that continue to hurt the economy for decades to come. For this reason, we must increase national investment in education.

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Noah Berger and Peter Fisher, researchers from the Economic Policy Institute, investigated how the state government can boost the economic well-being of their people. Berger and Fisher revealed that high-wage states are the same states with well-educated workforces, which reveals a strong correlation between educational attainment of a state’s workforce and median wages. Therefore, investing in state-wide education is necessary to build a strong foundation for economic prosperity. The U.S. must focus on educational investment soon. In addition to building a strong base, investing in education upfront will show a greater return in the long run in terms of state budgets. Since individuals with higher levels of educational attainment will ultimately have higher incomes, these individuals will therefore contribute more to the state’s taxes over the course of their lifetime.

The students of today are the laborers of the future. The need to invest in education is non-negotiable when considering the investment that is being made. Without an educated labor force our economy will suffer, but with an increased investment in education the possibilities look promising.

 

Why Educational Investment is Non-Negotiable

When addressing current economic issues one cannot ignore human capital, specifically investment in education. Educational outcomes strongly affect the economic growth of a country. George P. Shultz and Eric A. Hanushek, contributors for The Wall Street Journal, compared the GDP-per-capita growth rates between the years 1960 and 2000 with achievement results as determined by an international math assessment test. The majority of countries followed a straight line that revealed that as the scores on the assessment test increased so did economic growth. Although the U.S. remained above the average, this position will not hold strong for long in the future. Students of today, the labor force of the future, are no longer competitive in comparison to other developed countries. The U.S. was ranked 31st in math according to the OECD’s Programme for International Student Assessment, an alarming statistic.

The importance of education on the economy cannot be understated. Better education leads to a faster growing economy. Over the next 80 years improvements in GDP could ultimately exceed $70 trillion, which plays out to be an average boost of 20% for every U.S. worker each year over the course of his or her career. In addition, education directly correlates to higher wages. The median weekly earnings in 2013 were $472 for someone with less than a high school diploma compared to $1,108 for individuals with a bachelor’s degree. Educational disparities lead to economic disparities that without new reform will maintain and foster the inequality problems that continue to hurt the economy for decades to come.

Noah Berger and Peter Fisher, researchers from the Economic Policy Institute, investigated how the state government can boost the economic well-being of their people. Berger and Fisher revealed that high-wage states are the same states with well-educated workforces, which reveals a strong correlation between educational attainment of a state’s workforce and median wages. Therefore, investing in state-wide education is necessary to build a strong foundation for economic prosperity. In addition to building a strong base, investing in education upfront will show a greater return in the long run in terms of state budgets. Since individuals with higher levels of educational attainment will ultimately have higher incomes, these individuals will therefore contribute more to the state’s taxes over the course of their lifetime.

The students of today are the laborers of the future. The need to invest in education is non-negotiable when considering the investment that is being made. Without an educated labor force our economy will suffer, but with an increased investment in education the possibilities look promising. Just imagine if our GDP could exceed $70 trillion and what that amount of money could do to help pay off the U.S. debt.

Can a Simple Snowstorm Have a Meaningful Impact on a Nation’s Economy?

The city of New York is, even as I write, battering down for what it expects to be one of the worst blizzards in the history of the city.  As Charlie Baker, governor of Massachusetts, put it it in the New York Times, “this is a top-five historic storm, and we should treat it as such.”  Subways are shutting down, roads are banned, flights are being held, businesses are closing their doors, and schools are out – at least for a day or so.  New York City is by far and away the most populated metropolis in the United States, and is home to much of the nation’s corporate activity on top of being one of the world’s leading financial centers.  So it seems reasonable enough to pose the question: how big of an impact will New York effectively shutting down have on the nation’s economy, even if just for a day?

Being the preeminent center of American industry that it is, most would suspect that New York accounts for a significant chunk of the United States economy, but many might be surprised  at just how disproportionately large that chunk is – I know I certainly was.  As Alexandr Trubetskoy demonstrated in The Week Magazine (a link to his data is available in the article, in spreadsheet form), the greater New York metropolitan area accounted for a whopping 8.52% of the United States GDP in 2013.  According to the Bureau of Economic Activity, US GDP in 2013 was 16,768.1 billion dollars (link leads to excel file).  Going off of Trubetskoy’s estimate, New York was responsible for roughly 1428.64 billion dollars worth of economic activity in that year.  If we multiply this by 1/365, we get 3.914 billion dollars.  This is merely a back-of-the-napkin estimate, but it is still nothing to bat an eye at.  New York shutting down for a single day could cause a loss of ~3.9 billion dollars of economic activity, or .023% of the nation’s GDP (using 2013’s numbers).  When dealing with such massive numbers as the United States GDP, even that mere fraction of a percentage is something that will be sorely missed.  And that is if we assume that New York is the only area affected – which it isn’t.  As reported by MSNBC, five northeastern states have declared states of emergencies, two of which are homes to cities (Boston and Philadelphia) which are amongst the top ten contributors to US economic activity.  As corporate headquarters lose a day of work and traveling workers are halted in their tracks by the freeze (no pun intended) on flights, the impact of the storm could reach well beyond the northeast.  Power outages and the costs to the government of emergency services and road workers will only lengthen the strain on the local economies.

Americans Spend Less Income on Food Than Ever Before- Why This Might Not Be Good

According to an image created with information from the World Bank and U.S. Department of Agriculture, posted on the Gates Foundation’s 2012 Annual letter, Americans on average spend only six percent of their annual income on food, a smaller proportion than any other country in the world (http://www.gatesfoundation.org/who-we-are/resources-and-media/annual-letters-list/annual-letter-2012). According to Daniel Wesley’s article “100 Years of Consumer Spending” for Credit Loan Visual Economics, consumer spending on food was at least forty percent in 1901 (http://visualeconomics.creditloan.com/100-years-of-consumer-spending/)

While this has much to do with the technological farming innovations of the 1970s and the rise of agribusiness, all of which are productive advancements of our country, it has left us with negative externalities as well.

 

Alyssa Battistoni explores the downsides of the revolution of the food industry in her article for MotherJones titled “America Spends Less on Food Than Any Other Country.” She explains that the United States has shifted from small family farms, to large farms with a goal of producing the most calories for the least amount of money. These cheaply produced calories tend to be the most unhealthy, leading to rising rates of obesity, unsafe food, and underpaid employees in the food industry (http://www.motherjones.com/blue-marble/2012/01/america-food-spending-less).

 

Sarah Wolfe writes in her article for The Week titled “Why Americans spend less of their income on food than any other country” that the disparity of income proportion spent on food is so great between America and other countries that even the second lowest country, Singapore, is at 7.3 percent, a full percentage point higher than the U.S. (http://theweek.com/articles/446652/americans-spend-less-income-food-than-other-country). Yes, some of this disparity can be attributed to America being a wealthier country overall, but a greater majority has to do with the way the food is produced.

 

According to the Central Intelligence Agency’s World Factbook, the United States has the highest purchasing power parity (GDP) of any country in the world. The United States is also the eighteenth most obese country in the world (https://www.cia.gov/library/publications/the-world-factbook/rankorder/2228rank.html). Having the freedom to explore efficient but HEALTHY food production options should be one of the benefits of being a wealthy country. It is time for Americans to take the initiative to find the middle ground between the pre-1970s farming methods and the destructive practices of today’s agribusiness culture. What good is it to be so wealthy? If we cannot make productive and healthy choices and innovations, we will not be around to see what else we can innovate and revolutionize as a country.