Education systems operate within a complex demographic, social and economic environment. In order to interpret countries' investment in education and their educational outputs and outcomes, it is important to know about the existing supply of human knowledge, competence and skills to which education systems seek to add. These factors can be set alongside the current investments in education (see Chapter B ) and the output of education systems, shown especially in Indicators C2 and C4 .
Demographic patterns determine the size of the client-base of educational services. Other important factors shaping the demand for learning include the speed of change in the knowledge requirements of the labour market. Such changes encourage individuals, education systems and other stakeholders to extend learning beyond formal and initial education.
Families and societies invest in child-rearing and education in order to provide for their own sustained well-being and that of succeeding generations. Furthermore, individuals and families with more foresight have long known that by investing in education they can actually improve their economic situation and living standards. In today's knowledge economies, human capital is seen as a major resource for the development of a country's wealth..
Indicator A1 shows the demographic background to educational provision, in terms of the trend in the size of youth cohorts at the "expected" ages of participation in various stages of education. This indicator must be qualified with two observations. First, participation rates among age groups before and after compulsory schooling are by no means constant. Second, participation is not always at the "expected" age, and is becoming less so as lifelong learning becomes commonplace. Nevertheless, demographic data are important in forecasting costs both within compulsory education and, in combination with plans or expectations for particular patterns of participation, outside it.
Indicator A2 estimates the existing stock of human knowledge and skills, sometimes referred to as human capital. A common method of estimating educational attainment in a population is the highest level of education completed by members of the adult population. This is the most easily measurable proxy for the overall qualifications of the workforce, and is a factor which plays an important role in shaping economic outcomes and the quality of life. Since formal education systems do not change very rapidly, and are comparable on the basis of the time and human resources allocated to education, the educational attainment of national populations, expressed as the highest level of attainment of their members, is a robust indicator of the stock of human capital. It can show how attainment has been rising over time, by comparing differences between younger and older people, educated in different decades. It can also highlight gender differences in education, and changes in women's education over time.
looks at the human capital investment aspect of education. It is shown on the basis of growth analysis that human capital (as measured by the educational attainment of the population of working age) has a measurable influence on economic growth and on trading opportunities (trade exposure). Trade exposure can be regarded as a measure of the 'favourable climate' for the population, and educational attainment as a measure of its 'health and vigour'. A well-educated population can combat difficulties, and can recognise and take advantage of opportunities. Even with imperfect measures it can be shown that educational attainment is one of the variables contributing to growth.