A university degree has a rate of return of 15 percent. These are truly high returns and they have remained high over time. They are high during periods of economic growth as wages rise. They are high during periods of financial distress when foregone earnings are lower.

Despite the revolution in access to school, there is still an enrollment problem. According to UNESCO <u>(http://uis.unesco.org/en/topic/out-school-children-and-youth), there were more than</u> 258 million children and youth out of school for the school year ending in 2018. The total includes 59 million children of primary school age, 62 million of lower secondary school age and 138 million of upper secondary age.

Even more importantly, there are another 260 million children in school but who cannot read (UNESCO). This is particularly worrying. Also, according to UNESCO, 1 in 4 young people in developing countries are unable to read. The World Bank recently released its Learning Poverty estimates <u>(https://www.worldbank.org/en/topic/education/brief/learning-poverty).</u> Learning poverty means being unable to read and understand a simple text by age 10. It is estimated that more than half of the world’s 10-year-olds are in learning poverty. The World Bank has also estimated the gaps in learning outcomes between countries and regions of the world as part of its Human Capital Project. The harmonized learning outcomes show the gap between highest performers in the world (in East Asia, Europe and North America) and the lowest performers (mostly low-income countries) to be 2 to 3 standard deviations (Patrinos and Angrist 2018). While these are technical terms, they mean that almost the entirety of low-income countries’ education outcomes are eliminated once the quality of learning is considered. In other words, there is not much learning taking place in low-income developing countries (Angrist et al 2019). The situation is only slightly better in middle-income countries.

We are also seeing a shift in the demand for skills. The types of skills being demanded are changing. There is more demand now for analytic and non-routine skills, and less demand for manual skills. In other words, the skills demanded are more complex. This puts a premium on learning (Autor, Levy and Murnane 2003; Autor and Price 2013). It is also found that the labor market is increasingly rewarding social skills; that is, jobs requiring high levels of social interaction. Employment and wage growth were particularly strong for jobs requiring high levels in both math skill and social skills. This is because in a world where machines will undertake more of the routine skills, there will be a premium for social skills that reduce coordination costs and allow workers to work together more efficiently (Deming 2017). Higher social skills lead to higher wages because they reduce the cost of trading tasks with other workers, allowing one to specialize in their most productive tasks and trade output with others. Thus, there is a premium to team-based work and team work, all made easier with social skills.

This is a reversal from what occurred during most of the twentieth century. As countries built their education systems and the population received more schooling, the economic benefits were realized. These included national economic growth and private returns to schooling. The increases in schooling levels also promoted equity as wage gaps declined. This occurred when the increase of educated workers was higher than the demand for them. This had the effect of boosting income for most people and lowering inequality. An influential summary of the state of the art concluded that “higher average levels of schooling exert an equalizing effect on income distribution” (Winegarden 1979; see also Psacharopoulos 1977; Psacharopoulos and Marin 1976). The Nobel 3