(Illustration by Chad Hagen)
“An investment in education pays the highest return,” Benjamin Franklin aptly said. The economic benefits of education for individuals and nations are well known: enhanced economic opportunities, greater employability, and higher income.
While these advantages are undeniably important, they do not fully capture education’s transformative power. When policy makers and researchers focus solely on financial returns, they risk undervaluing education’s profound influence on personal empowerment, social equity, and collective well-being, particularly for those who operate outside formal labor markets.
Consider a housewife whose contributions to her family and community have no monetary value. Does education hold value for her? The answer is unequivocally yes. Research demonstrates that education empowers individuals by fostering critical thinking, enhancing decision-making, and building confidence. Education’s role in shaping health behavior is particularly significant for women. For a housewife, these attributes translate into better management of family health and nutrition. In addition, overwhelming empirical evidence shows that women with more schooling have fewer children.
Studies demonstrate that higher levels of education are linked to greater civic participation. Educated people are more likely to vote, volunteer, and support democratic values. No fixed global benchmark for education spending exists—it varies by country. UNESCO recommends allocating 4-6 percent of GDP, but the global average is slightly below 4.5 percent, reflecting differences in economic development, population needs, and national budget priorities.
Yet the traditional framework for evaluating educational returns, focused primarily on economic metrics, fails to capture education’s full societal impact. While the worldwide average education expenditure of almost 4.5 percent of GDP represents significant investment, our understanding of returns must evolve beyond conventional economic measures. The evidence overwhelmingly suggests that education’s dividend extends far beyond labor market outcomes, serving as a fundamental catalyst for social transformation and democratic vitality.
From our viewpoint, policy makers and researchers must adopt a more comprehensive framework that recognizes education as a public good with far-reaching societal benefits. This requires moving beyond simplistic return-on-investment calculations to embrace methodologies that capture education’s role in fostering critical thinking, civic engagement, and social cohesion.
The India Case
To better understand this point, let’s consider India, which spends almost 4.5 percent of GDP on education. The scale of the country’s education system is, of course, vast. It includes approximately 1.5 million schools, 252 million students, and 9.5 million teachers. Currently, India’s expected years of schooling (EYS)—the number of years an average student spends in the system—stands at 12.8 years. Research from the World Bank reveals that each additional year of education can enhance productivity by 10 percent, while estimates from UNICEF indicate a 0.37 percent rise in GDP for every extra year of schooling. Raising the EYS to 18 years could potentially add $84 billion to India’s GDP.
As important as these economic statistics are, they do not capture the full impact of education. Research must delve deeper into how education influences societal change, civic participation, and democratic empowerment.
Traditionally, people in India have viewed education as a pathway to enhanced employment prospects and higher wages, but recent evidence presents a more nuanced picture. To be sure, research suggests that private returns to education average 6-10 percent and that education significantly improves employment prospects and wage potential for Indian youth. But recent findings by development economists Ravi Srivastava and Siddharth Dhote reveal emerging challenges in this relationship. Rising graduate unemployment, widespread overqualification, and a growing mismatch between acquired skills and available jobs suggest that structural issues in the labor market are undervaluing educational returns. These complications demand that researchers adopt a more comprehensive framework for assessment.
Economists Daron Acemoglu and Joshua Angrist have explored social returns to education—the broader benefits that accrue to society beyond the private gains (such as higher income) experienced by individuals. These social returns may manifest as increased civic participation, lower crime rates, improved health outcomes, and more cohesive communities. The pair used variations in schooling patterns based on birth quarters and changes in compulsory schooling laws to assess the impact of education on social returns. Their analysis of data from 1960 to 1980 showed minimal social returns (minus 1 percent to 2 percent), though later data from the 1990 Census suggested higher social returns of 4 percent or more. Although Acemoglu and Angrist highlighted the importance of social returns, their results stopped short of proving that education consistently yields strong civic or social advantages across all contexts.
In a 2021 article for World Development, researchers Ying Cui and Pedro Martins published the first systematic examination of the social returns to education. Analyzing more than 1,000 estimates from 32 studies across 15 countries, they investigated how education generates positive spillovers such as enhanced productivity and civic engagement that benefit society beyond the individual. Their findings indicate that these effects tend to decrease as countries become more economically developed. However, they increase with higher levels of tertiary education (postsecondary education at universities and through vocational training), with greater schooling dispersion (variation in educational attainment within a population), and at the firm level, where educated employees can positively influence their colleagues.
Such research highlights the need for continued investment in education, particularly tertiary education, in developing countries where social returns are significantly higher at earlier stages of development. When evaluating returns to investments in education, policy makers must appreciate that educational attainment is a stepwise process, whereby specific types of knowledge are gained at each education level, producing different returns depending on the context.
Research has consistently demonstrated that individuals with higher educational attainment are more likely to engage in political activities and vote in elections. Theoretical considerations suggest that political activity directly results from the benefits of education in enhancing participation. Education can enhance political engagement in two ways, according to research by economists Kevin Milligan, Enrico Moretti, and Philip Oreopoulos: first, by equipping individuals with the cognitive skills and critical thinking necessary to participate effectively in a representative democracy; and second, by increasing their political awareness, interest, and sense of efficacy, which fosters sustained involvement in civic life.
While education is a vital component in promoting civic participation, policy makers should consider a holistic approach that addresses these additional factors to maximize the benefits of education for democratic societies. To return to the India example, evidence demonstrates the value of education in fostering civic engagement and democratic participation. An analysis of India’s 2019 general elections by political scientist Oliver Heath reveals a positive association between constituency-level literacy rates and voter turnout. Constituencies with literacy rates above 80 percent recorded voter turnout approximately 7-8 percentage points higher than those where literacy was below 60 percent.
Additionally, the India Human Development Survey data shows that households where at least one member has gained a college degree are 23 percent more likely to have all eligible voters exercise their franchise. National Sample Survey data suggest that the link between education and voting is stronger in rural areas than in urban ones: A 10 percent rise in literacy rates leads to a 6 percent rise in voter turnout, compared with a 4 percent rise in urban areas. So the social boost of education is widely dispersed.
A New Paradigm for Educational Value
The civic and social benefits of education underscore the need to reconsider its role in policy and research. Education’s value transcends economic and income growth. It functions as a public good that fosters civic participation, strengthens trust in institutions, and promotes social cohesion.
Evidence from India shows that higher levels of education are closely associated with increased voter turnout, greater democratic engagement, and higher rates of volunteerism. Internationally, the social value of education is particularly high in low- and middle-income countries, where civic norms and institutions are still evolving. In high-income settings, tertiary education plays a vital role in sustaining civic engagement and fostering democratic values such as critical thinking, media literacy, and tolerance.
Together, these insights cast education not only as a means for individual advancement but also as a key driver of collective well-being. Policy makers should prioritize educational systems that enhance civic engagement, such as community volunteering, debates, youth parliaments, and mock elections, while ensuring equity and lifelong learning opportunities.
To better understand education’s broader impact, policy makers need better ways to measure its value beyond jobs and income. More research is needed to find out how education leads to positive results in different situations. Longitudinal studies and instrumental variables can help find the causal pathways. Tracking people over time and comparing different groups can show how education influences civic life, trust, and participation. Such evidence can help policy makers design policies that reflect education’s role in building stronger, more vibrant societies.
Read more stories by Rahul Pachori & Neha Dhaka.