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DMI Daily Digest

What’s the Importance of Higher Education on the Economy?

Higher education is one of the key drivers of growth performance, prosperity, and competitiveness in national and global economies.

Universities and other institutions not only deliver tertiary education and ongoing skills training, but also provide a bustling research environment that produces innovations with valuable commercial applications.

In this blog, we explore 7 ways in which the higher education sector impacts society, workforces and graduates.

1) Create a Quality Workforce

The modern workplace is in a constant state of evolution. Even within the last decade, job roles and the skills required to succeed in them have changed enormously, with technological advancements being a key factor.

Personnel need to regularly evaluate their work-related skills and take opportunities for continued learning, which should be supported by their employers.

The higher education sector is pivotal in delivering training to people at all stages of their careers, from students and recent graduates to senior managers.

Accreditation at every level gives assurance to employers and allows employees to have concrete evidence of their career development. This, in turn, reduces staff turnover and improves job satisfaction leading to higher morale in the workplace.

Plus, skills training has an immensely positive impact on the wider economy. A well-trained, highly-skilled workforce is better prepared for the challenges and opportunities of the modern workplace. Staff with the right expertise work more efficiently and confidently than those struggling to keep up with the changing demands of their roles. Ultimately, a skilled workforce increases productivity, boosts output, and propels growth in the wider economy.

This outcome depends on high-quality and accessible continued training for the workplace. It’s an exciting new market for the higher education sector to move into, and one that has limitless potential for growth. Universities and other institutions already promote lifelong learning; driving excellence in professional education is just a natural progression.

2) Drive Innovation

Most innovative universities

A key role of higher education institutions is to drive innovation, with the aim of finding solutions to global challenges in areas that matter to society, such as healthcare, environmental protection, resource security, international development, and population trends.

Many of the greatest advances of recent years, including augmented reality, self-driving cars, combination therapies for HIV and cloud computing, were all born from research that took place at universities. Innovations certainly have high economic value, but they also enrich our health, work and impact us socially.

The wider economy benefits from university research and innovation as it drives investment, both locally and globally, promote exports, and makes the economy more balanced. An environment that promotes research also allows students to learn transferable skills that will help them succeed in the workplace, further strengthening the knowledge-based economy.

Research also directly impacts the wealth of an economy. For example, British universities contribute £95 billion to the country’s economy, Australian universities generate $25 billion, and Canadian universities create $55 billion. In the United States, technological advancements developed in universities and colleges have contributed $591 billion to the national GDP between 1996 and 2015 alone.

3) Increase Employability

Applicants are faced with a highly-competitive job market, in which their qualifications might not be enough to secure the kind of work they desire. As the economy moves further toward competency-based recruitment, with its focus on skills and experience over pure academics, graduates and established professionals must be armed with the tools they need to find and succeed at work.

Higher education institutions are critically important here. Universities should be proactive in arranging opportunities for current students to develop industrial expertise through work experience and internships. In addition, technological and workplace skills training should be taught adjacent to an academic curriculum. Further, it can be beneficial to offer mentoring opportunities to help prepare expectant graduates for a competitive job market.

Knowledge really is power, but it’s not just about formal academic qualifications. Broad employability skills help graduates give employers precisely what they need: technologically-minded workers who are flexible, organised, and resourceful.

In addition, universities are ideally-placed to offer employability training to people looking to change careers or apply for new roles, who need an update to their existing skills. Advanced courses for experienced professionals also represent an exciting intersection for higher education and industry.

4) Upskill Existing Workforces

As digitization changes the landscape for working professionals, higher education can provide them with the opportunity to enhance their existing knowledge and learn new skills. For employers, this has a positive impact on productivity, output, and staff morale. It also helps companies to drive efficiency and thus profitability.

Offering professional development opportunities to employees also allows companies to identify potential leaders for the future. Staff who are receptive to continuing education and express an interest in courses that fit into their long-term career plan are the ones to watch.

For businesses, this can provide assurance that future leaders are well-trained and fully-equipped to drive continued success.

5) Boost Graduate Earning Power

Earning Power of Graduates

Graduates with the right knowledge and skills have the ability to demand higher salaries, as they are equipped to make significant contributions to the revenue and growth of the companies they work for.

Higher education institutions are crucial here.

As mentioned above, universities have a responsibility not only to provide academic instruction, but also to offer opportunities to learn skills for the workplace, gain industry experience, and benefit from mentoring. All graduates will be rightly proud of their academic achievements, but those who have used their time at university to prepare for life in the workplace will have a better chance of success in the highly-competitive job market and be in a stronger position to command higher pay or jump into their careers at a higher pay bracket.

Don’t forget that as part of the application process, prospective students and their parents look at metrics such as university league tables and future employment prospects when making decisions. Offering employability skills training helps universities attract diligent, forward-thinking students. In turn, these institutions will produce graduates that are ready to embark upon successful careers.

This feeds back into the rankings and employment prospects lists, strengthening the reputation of universities as both centers of innovation and places where the future of the economy is made.

6) Collaborate Between Education and Business

In the last decade, there has been substantial growth in the number of research deals between companies and universities.

Businesses, which have been reducing their spending on early-stage research for more than 30 years, have increasingly turned to universities to perform that role, as they provide access to the best scientific and engineering minds in specialized areas. Meanwhile, reduced government support of academic research has made universities more receptive to private investment and industrial collaboration.

There are also substantial benefits for wider society, thanks to advances in life sciences, communications, engineering, and more. In short, this kind of partnership has the potential to benefit all sides enormously.

Universities and companies both favor long-term collaboration over one-off contracts. A transactional model, whereby a lengthy period of negotiation prefaces each research project, is not desirable for either side. Instead, continuous connections are preferred, allowing ongoing early-stage research which can rapidly be transformed into commercially-viable products that contribute to economic growth.

It’s helpful for universities and their collaborative partners in industry to be geographically close in order to create research hubs that attract the best academics and continued industrial investment.

A crowning example of this concept is the relationship between Stanford University and Silicon Valley. Several of the most high-profile tech companies have their headquarters in the area, including Apple, Alphabet (the parent company of Google), Facebook, Twitter, Cisco, AMD, and Intel. This collaborative space has produced many of the most exciting technological innovations of recent times and provides an excellent precedent for alliances elsewhere.

7) Feed into a Knowledge-Based Economy

Knowledge Based Economy WeForum

A knowledge-based economy is characterized by dependence on a highly-skilled, well-educated, and technically-minded workforce. It makes use of advancements in technology alongside intellectual capital to move away from material consumption and aim toward an economy built on knowledge and data.

The higher education sector is a natural partner to the knowledge-based economy. As the source of advanced learning and new information from research, universities help train the workforce of tomorrow while supporting the innovations of today.

Knowledge creation has been identified by economists as a key driver of economic growth. This is largely due to greater efficiency in various forms. Highly-skilled staff requires less supervision, are more productive, and add greater value.

Automation, one of the key features of the knowledge-based economy, removes the burden of some repetitive tasks, allowing staff to focus on the aspects of their work that requires their specialist skills the most. Automated processes also make manual tasks less labor-intensive, allowing businesses to expand their capacity without substantially larger staff costs.

The higher education sector can support all aspects of continuing education and take advantage of existing relationships, such as research agreements, to bring universities and businesses closer together.

Conclusion

The higher education sector has a wide-ranging, proven influence on the economy. Its confluence with business provides commercial value to innovation, while academic instruction and skills training help individuals and organizations to have the tools to succeed in a knowledge-based economy.

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