Understanding the Impact of Education on Economic Growth During a Pandemic

COVID-19’s global impact on education is staggering. The pandemic has caused school closures in more than 190 countries and has affected as many as 1.6 billion learners worldwide, according to UNESCO.

COVID-19 and school shutdowns have caused incalculable damage to the health and well-being of families, educators, and school administrators. The economic impact of school shutdowns may seem trivial compared to the human costs, but the economic and academic ramifications of widespread disease outbreaks are intertwined.

A closer look at some issues that have arisen during the current pandemic illustrates the impact of education on economic growth and the consequences for students and schools.

How Education Contributes to Economic Growth

The COVID-19 pandemic has caused economic disruption of historic proportions. In the first quarter of 2020, U.S. gross domestic product (GDP) declined 4.8 percent over the previous quarter—the first decline in the nation’s output in six years. The second quarter of 2020 saw the GDP decline an additional 32.9 percent. The drop was a result of lower personal consumption expenditures, exports and imports, residential and nonresidential fixed investments, and state and local government spending.

The relationship between education and the economy is complex, but exploring some ways that schools contribute to spending and productivity highlights education’s role as an economic engine.

Employment

Schools employ large numbers of teachers, administrators, and support staff. Some teachers receive paid leave or can work from home during a shutdown, but those who are laid off or furloughed may be forced to curtail spending and investments. The U.S. education services sector employed more than 3.9 million teachers and administrators at the end of 2019; that number dropped to 3.2 million in June 2020, according to the U.S. Bureau of Labor Statistics.

Consumer Spending

School shutdowns negatively impact school-related shopping. So far, back-to-school shopping expenditures in 2020 have been buoyed by increases in technology spending, which offset large declines in other categories, such as clothing. However, the impact on individual retailers can be devastating, and the variability of school closings and reopenings creates additional supply chain challenges. School shutdowns also have a negative effect on consumer confidence, which can drive down total household spending.

Productivity

The productivity lost when parents must suddenly transition to spending workdays caring for—and, in many cases, educating—children who would normally be at school is significant. The loss isn’t just work hours. Balancing work and family responsibilities in a confined environment can result in physical, mental, and emotional stress and exhaustion that further hamper productivity.

The Economic Impact on Students and Schools

The near-term effects that a crippled education system has on the economy as a whole are substantial, but the long-term impact on schools and students is even greater.

Impact on Students

The negative effects that long breaks in the school year can have on learning are well established. A phenomenon commonly known as “summer learning loss” or “summer slide” occurs when students fail to retain some portion of knowledge that they’ve acquired during lengthy breaks. Given the length and severity of pandemic-related school disruptions, a learning gap seems inevitable for the current generation of students.

To gauge the full economic impact of such a learning gap is impossible, but even rough estimates reveal startling ramifications. A Brookings Institution study attempted to estimate how much students would lose in lifelong earnings due to current education shortfalls. Assuming school closures lasting five months, the study concluded that this generation of students, globally, stands to lose $10 trillion in earnings over its working life.

Impact on Schools

The degree to which the COVID-19 pandemic will reduce funding of pre-K-12 schools has yet to be determined, but the main sources of school funds are threatened. Public schools receive federal money, but the majority of their funds come from state and local sources. Local funding generally comes from property taxes, but state funding primarily comes from income and sales taxes, both of which are highly vulnerable to the effects of lower employment and reduced spending.

Disproportionate Costs

Disadvantaged student populations will bear a disproportionate burden of the costs associated with school closings. The access that schools have to remote learning resources varies greatly, as does the access that families have to necessary technology. Tasked with serving as their children’s teachers, some parents face much greater challenges. Parents in low-income and single-parent households may have much less flexibility in their work schedules. Children attempting to learn in home environments with lower education levels, less fluency in English, or fewer technology resources are also disadvantaged.

The pandemic’s effects on disadvantaged groups worldwide could be far-reaching. A recent UNESCO report estimates that global aid to education will decline by as much as $2 billion between 2018 and 2022 as a result of the COVID-19 recession. The decline translates to a 12 percent drop in international funding for education.

Imagining Recovery

School shutdowns have spotlighted weaknesses in the education system. The reliance of schools on state and local funding has already necessitated federal help, and much greater assistance will likely be required. The need for greater investments in remote learning resources and training has also become painfully apparent.

Despite its devastating effects, the COVID-19 pandemic could prove to be a call to action. Designing education systems that are more resilient and more equitable is a long-standing cause of education policy makers, and the long road to recovery may come with new opportunities to advocate for resources and funding.

Educators interested in shaping education policy to be more equitable and inclusive can attain the training they need through American University’s School of Education online. The school’s Doctorate in Education Policy and Leadership program provides education leaders with the knowledge and skills they need to transform pre-K-12 education.