Diagnostic #1: Gross Domestic Product (GDP)

GDP in Utah. While Utah’s GDP has been growing at a significant rate (3.8% in 2013), it is still the 19th lowest in the country.[1] Utah’s GDP growth to date has been primarily fueled by durable goods manufacturing, finance/insurance, and retail. Industries such as real estate, agriculture, mining, and utilities have not recently performed as well.[2]

The Impact of Education on GDP. The connection between increased educational attainment and state and national GDP is well documented. According to a Cisco Systems report in 2007, “’years of school attainment at the secondary and higher levels for males age 25 and over has a positive and significant effect on the subsequent rate of economic growth.’ This can be interpreted to mean that if the average number of years of upper level schooling for this particular group increases by one year then the rate of economic growth increases by 0.44 percent per year. These are powerful results since an increase in economic growth of almost half a percent will have a large impact on the total GDP of a country over time. This is one of the reasons that education has been treated as such a positive investment for governments.”[3]

Similarly, a team of researchers led by Eric Hanushek at Stanford University concluded, that “across 50 countries, each additional year of schooling in a country increased the average 40-year growth rate in GDP by about 0.37 percentage points.”[4] Hanushek points out: “That may not seem like much, but consider the fact that since World War II, the world economic growth rate has been around 2 to 3 percent of GDP annually. Lifting it by 0.37 percentage points is a boost to annual growth rates of more than 10 percent of what would have otherwise occurred, a significant amount.”[5]

A more recent report by the Milken Institute found that “adding one year of schooling to the average educational attainment among employed workers with at least a high school diploma is associated with an increase in real GDP per capita of 17.4 percent.”[6] Therefore, a significant increase in the number of Utah adults who complete even just one year of postsecondary education after high school would have a dramatic effect on Utah’s GDP.

Likewise, Utah would see major benefits if it were to increase its high school graduation rate to 90%. The Alliance for Excellent Education asserts that such an improvement would result in annual increase of $55 million to Utah’s gross state product.[7]

[1] MarketWatch. (2014). Update: 10 states with the fastest growing economies. Morningstar, Inc. Retrieved from http://news.morningstar.com/all/market-watch/TDJNMW2014070853/update-10-states-with-the-fastest-growing-economies.aspx

[2] Utah shows some of the strongest GDP growth in U.S. (2013, June 6).

[3] Miller, R. (2007). Education and economic growth: From the 19th to the 21st century. San Jose: Cisco Systems, Inc., 10. Retrieved from http://www.cisco.com/web/strategy/docs/education/eeg_what_research_says.pdf

[4] Hanushek, E.A., Jamison, D.T., Jamison, E.A., & Woessmann, L. (2008). Education and economic growth. Education Next, Spring, 66. Retrieved from http://educationnext.org/files/ednext_20082_62.pdf

[5] Ibid., 66.

[6] DeVol, R.C. (2013), 58.

[7] Alliance for Excellent Education. (2013). The economic benefits of increasing the high school graduation rate for public school students in Utah. Retrieved from http://all4ed.org/wp-content/uploads/2014/01/Utah_econ.pdf

This is an excerpt from Prosperity through Education: The Innovation, Accountability, and Investment Plan for Utah’s Future. Read the plan to learn more about how educational attainment levels impact household income, gross domestic product, unemployment and more.