Economic Discrimination

Educational Attainment

According to Mankiw (2024), a human capital view of education suggests that schooling bolsters workers’ productivity. An alternative viewpoint avers that employers leverage educational attainment to sort between low-ability and high-ability workers. This viewpoint does not imply that when people attain degrees, they become more productive. Instead, educational attainment signals to employees that those who have achieved the degrees are high-ability employees and, hence, will be prioritized when it comes to hiring and receiving higher perks: Economic Discrimination.

This reasoning aligns with the signaling theory used by firms in advertising. Whereas advertisements do not contain any real product information, the willingness to allocate significant budgets to advertising signals to consumers that the products are of high quality. Based on the signaling theory, once workers acquire college degrees, they will not be discriminated against based on wage since employers understand they have high abilities.

National Savings

National savings refer to a country’s GDP that is saved rather than spent. Scholars have consistently established that low savings slow development and pose welfare challenges among the general population (Mankiw, 2024). On the other hand, higher national savings contribute to increased capital accumulation, potentially fostering economic growth. It is worth noting that national savings go beyond fiscal accumulation as they contribute to investment ability, financial stability, credit access, and the overall welfare of the people.

For instance, employees are encouraged to save while young so that their livelihoods do not deteriorate once they retire. Besides, high national savings enhance people’s access to credit, which they can leverage to invest in different businesses, enhancing prosperity in the long run. Since economic development is about harnessing the ability of every individual, firm, and community, high national savings will offer each of them the opportunity to exploit their potential and contribute to economic prosperity.