The Exaggerated Dropout Crisis

By Lawrence Mishel

There’s a consensus that our high schools are in crisis. The conventional view is that only about two-thirds of students graduate, and that only about half of black youths do. These data, generated mostly by Manhattan Institute senior fellow Jay P. Greene and former Urban Institute research associate Christopher B. Swanson (now the director of the Editorial Projects in Education Research Center), have had enormous influence. Foundations have directed major resources to stem the crisis, while the Bush administration and the governors have shifted their attention to high school reform.

I’m new to education issues, with a career as a labor-market economist, concentrating not on test scores but on wages, employment, and household incomes. The more I’ve read about the dropout crisis, the more skeptical I’ve become, because the story is inconsistent with the economic data I know.

Consider this: Knowledge is becoming more important in the economy, and “returns to skill”—higher wages for workers with more education—should be growing. Yet the ratio of high school graduates’ wages to dropouts’ wages has not changed for 30 years. The most plausible explanation, accepted by most economists, is that the share of graduates in the workforce has grown, while the share of dropouts has fallen. If the demand for graduates relative to dropouts has gone up, the wage ratio can remain stagnant only if the supply of graduates relative to dropouts...