CLOSING the Human Capital Gap by Richard Holden and Jessie Zhang
EXECUTIVE SUMMARY – Extract
This report documents the differences in educational outcomes between rural, regional & remote Australia and urban Australia. The report then quantifies the rural of these disparities in educational outcomes. By linking education to human capital formation—one of the key components of economic output along with physical capital—we estimate the shortfall in Gross Domestic Product (GDP) due to these differences.
If the human capital gap between urban and non-urban Australia was closed, Australia’s GDP could be increased by 3.3%, or $56 billion.
To put this in perspective, this is larger than the contribution of the entire Australian tourism industry. Put another way, one would need to quadruple
the size of the Australian beef industry to achieve the same economic improvement.
Yet these are only the direct effects, on wages, of closing the human capital gap. There are important spillovers in addition to this, such as improvements in physical and mental health and enrichment of communities. We do not speculate about the size of these spillovers, but
they are likely to be substantial. Furthermore, there is a multiplier effect throughout the economy from increased productivity and wages which
we do not include. Thus, the size of the benefits we identify are in many ways quite conservative …
The report summarises work from randomised controlled trials overseas that point to which educational interventions are most promising in
this respect. We also outline an approach—building on the concept of Social Return Accounting—to calculate the return on investment (or “Social Internal Rate of Return—SIRR”) of different interventions.
SOURCE: Holden, Richard and Zhang, Jessie. “The Economic Impact of Improving Regional, Rural and Remote Education in Australia.” Gonski Institute for Education, UNSW, October 2018.
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