School & District Management

Economists Tout Value of Reducing Dropouts

By David J. Hoff — February 13, 2007 4 min read
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The nation would reap more than twice the cost of wide-scale adoption of effective pre-K-12 educational interventions, resulting in a gain of $45 billion from increased tax revenues and reduced social costs over the lifetime of high school graduates, a study by a team of economists concludes.

“What we’ve tried to show, across a range of interventions, … is that all of them, using very conservative assumptions about benefits, have big payoffs,” said Henry M. Levin, a professor of economics and education at Teachers College, Columbia University, and the lead author of the report.

Although many research studies have tried to calculate the return on money spent in education, Mr. Levin said the new report is the first to use economic analytical techniques to measure the cost benefits of specific educational programs that have research documenting their success in producing additional high school graduates.

“We’re the first to come up with concrete costs of specific interventions that have shown to be effective,” Mr. Levin said in an interview last week. “Others simply make some assumptions of what the costs are. … These are based on clear economic criteria.”

“The Costs and Benefits of an Excellent Education for All of America’s Children” is posted by the Center for Benefit-Cost Studies of Education at Teachers College, Columbia University.

If the United States were to spend on average $82,000 for every student who became a high school graduate because of those interventions, the economy would benefit during each of those students’ lifetimes from $209,000 in additional tax revenues and $70,000 in lower costs for public health, social welfare, and corrections, says the study, released last week. If the interventions succeeded in cutting the high school dropout rate in half, a single cohort of students who graduated because of the interventions would provide $45 billion for government treasuries in the form of tax revenue or reduced demand for services over the course of their adult lives, the study adds.

Playing in Peoria

An economist who has reviewed the research said that the study uses sound methodology to estimate the economic benefits of improving students’ educational attainment. But it underestimates the costs of the interventions needed to ensure that those students actually succeed in school, said Timothy M. Smeeding, a professor of economics and public administration at Syracuse University, in Syracuse, N.Y.

“I think the costs of doing it are higher than they think,” he said. “None of these programs are magic bullets. We need to figure out if they work on bigger scales as well as smaller scales, in Peoria as well as Chicago.”

Pay Now or Pay Later?

A new study estimates that spending an extra $82,000 per student over the span of a pre-k-12 career for effective education programs would be returned to the U.S. economy with other benefits during the adulthoods of those who otherwise might drop out of high school.

Increased tax revenue: $139,100
Savings in public-health care: $40,500
Savings in law-enforcement and prison costs: $26,600
Savings in welfare costs: $3,000
Total benefit: $209,100

SOURCE: “The Costs and Benefits of an Excellent Education for All of America’s Children”

And a researcher said that the pre-K-12 interventions endorsed by the economists might not have the impact on student achievement the study predicts. The study endorses two preschool programs, the reduction of class sizes in elementary grades, and one high school intervention. It also predicts that an across-the-board 10 percent increase in teacher salaries would produce more high school graduates.

“I don’t think these are things that everyone agrees that there’s a large amount of vigorous research on,” said Marcus A. Winters, a senior research fellow at the Manhattan Institute, a think tank based in New York City.

For example, although the Tennessee study on class-size reduction cited by Mr. Levin and his co-authors documented long-term benefits of small classes in primary grades on students’ educational attainment, a program that reduced class sizes in California showed no such benefits in the 1990s, Mr. Winters said.

To account for such questions, Mr. Levin said, the study tries to estimate the full cost of implementing each of the interventions. With smaller classes, for instance, the analysis estimates the costs of expanding school buildings, providing teacher professional development, and recruiting and preparing high-quality teachers for the additional classes.

Return on Investment

The study is the first major product of the Center for Benefit-Cost Studies of Education at Teachers College. Mr. Levin is the co-director of the center along with Clive Belfield, an assistant professor of economics at the City University of New York. Mr. Belfield contributed to the study, as did Cecilia Rouse, a professor of economics and public affairs at Princeton, and Peter Muennig, an assistant professor of health policy and management at Columbia.

For the study, the researchers focused on identifying education programs that had documented an increase in the number of high school graduates. The programs that met the criteria were:

• The Perry Preschool program, a 1960s-born project based in Ypsilanti, Mich., that offers preschool for children and home visits and education for parents;

• The Chicago Child-Parent Centers, another 1960s model, which provides preschool for children and health and nutrition services for parents;

• The Tennessee Student Teacher Ratio Project, in the 1980s, which compared the achievement of students who attended schools with small class sizes with a control group; and

• First Things First, a comprehensive project for high schools that combines small class sizes and professional development for teachers, which showed a dramatic impact on high school graduation when fully implemented in Kansas City, Kan.

The fifth idea—raising teacher salaries—isn’t a specific intervention, but the authors found research to support its positive effect on high school graduation rates, Mr. Levin said.

Increasing salaries would create “a larger pool of talented people,” he said. “By combining higher salaries along with these other changes, … you’re really going to maximize the impact.”

Mr. Levin said that other interventions might be able to show achievement gains, but the authors could not find ones that resulted in better high school graduation rates. They chose that educational outcome, he said, because high school completion is correlated with success in the workplace and earnings.

A version of this article appeared in the February 14, 2007 edition of Education Week as Economists Tout Value of Reducing Dropouts

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