Education can be defined as the stock of skills, competencies, and other productivity-enhancing characteristics embedded in labor, or in other words the efficiency units of labor embedded in raw labor hours.⁵⁰ In general, education—as a critical component of a country’s human capital—increases the efficiency of each individual worker and helps economies to move up the value chain beyond manual tasks or simple production processes. Since Schultz (1961), human capital has been considered the “most distinctive feature of the economic system,”⁵¹ and further work has proven the impact of education on productivity growth empirically.⁵²

Three channels have been suggested through which education affects a country’s productivity. First, it increases the collective ability of the workforce to carry out existing tasks more quickly. Second, secondary and tertiary education especially facilitate the transfer of knowledge about new information, products, and technologies created by others.⁵³ Finally, by increasing creativity it boosts a country’s own capacity to create new knowledge, products, and technologies—as discussed further in the last two categories below.

Education concerns not only the quantity of schooling—the percentage of the population that completed primary, secondary, or tertiary education—but also, critically, its quality. Hanushek and Kimko (2000), for example, find that it is not merely years of schooling but the quality of schooling (which may be reflected in international examinations) that has a significant relationship with economic growth.⁵⁴

Although traditional areas of education such as literacy and numeracy remain important drivers of productivity, the GCI needs to be updated to place greater emphasis on the delivery of education that meets 21st century demands such as knowledge diffusion and innovation. Current debates on the relationship between the quality of education and productivity center on softer skills such as the extent to which educational institutions equip their students with the ability to think critically and creatively, and how extensively and effectively these institutions foster and support students’ curiosity. This has two important implications for delivering education. First, research suggests that teaching creativity and curiosity involves complementing the focus on numeracy and literacy with concepts of intelligence in areas such as the arts, music, interpersonal relations, control of the body (as needed, for example, for dancing and theater), and intrapersonal knowledge.⁵⁵ Second, it requires a reassessment of our current methods of teaching: departing from the assumption that all children learn equally, it suggests the need for a tailor-made learning experience based on an individual analysis of the way a child absorbs knowledge, thereby allowing the teacher to properly assess a child’s progress.⁵⁶