Budget & Finance

Researchers Tally Costs of Education Failings

November 01, 2005 4 min read
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The United States could recoup nearly $200 billion a year in economic losses and secure its place as the world’s future economic and educational leader by raising the quality of schooling, investing more money and other resources in education, and lowering dropout rates, scholars argued here last week.

Researchers presented evidence at a symposium held at Columbia University that the nation’s health-care, crime, and welfare costs could be devastating in the decades to come if the inadequate schooling received by too many American students isn’t vastly improved.

Read more about the Social Costs of Inadequate Education symposium, from Columbia University’s Teachers College.

“If we take that long to make the grade, … the United States may be a colony of China by that time,” said Michael A. Rebell, the executive director of the Campaign for Educational Equity at Teachers College, Columbia University and the lead lawyer in a lawsuit seeking more state aid for New York City schools. The Oct. 24-25 conference here inaugurated the college’s new center.

Cecilia E. Rouse, a professor of economics and public affairs at Princeton University, told the audience of more than 300 that her research found that lower earnings among dropouts could cost the United States about $158 billion in lost earnings and $36 billion in lost state and federal income taxes for each class of 18-year-olds.

Those amounts total a loss of about 1.6 percent of the gross domestic product each year.

Dropout Impact

Ms. Rouse showed that only about half the nation’s high school dropouts hold down regular jobs, compared with 69 percent of high school graduates and 74 percent of college graduates. Adults with bachelor’s degrees earn almost three times more annually than dropouts—$33,701, compared with $11,989.

Costs of Inadequate Education

Researchers presented several findings on the costs of low educational attainment at a conference in New York City last week sponsored by the Campaign for Educational Equity at Teachers College, Columbia University.

• A high school dropout earns about $260,000 less over a lifetime than a high school graduate and pays about $60,000 less in taxes. Annual losses exceed $50 billion in federal and state income taxes for all 23 million of the nation’s high school dropouts ages 18 to 67.

• The United States loses $192 billion—1.6 percent of its current gross domestic product—in combined income and tax-revenue losses with each cohort of 18-year-olds who never complete high school. Increasing the educational attainment of that cohort by one year would recoup nearly half those losses.

• Health-related losses for the estimated 600,000 high school dropouts in 2004 totaled at least $58 billion, or nearly $100,000 per student. High school dropouts have a life expectancy that is 9.2 years shorter than that of graduates.

• Increasing the high school completion rate by 1 percent for all men ages 20 to 60 could save the U.S. up to $1.4 billion a year in reduced costs from crime. A one-year increase in average years of schooling for dropouts would correlate with reductions of almost 30 percent in murder and assault, 20 percent in car theft, 13 percent in arson, and 6 percent in burglary and larceny.

• The country will have a shortfall of 7 million college-educated workers by 2012, compared with the projected need.

• Participation in excellent preschool programs has been shown to boost academic achievement and reduce dropout rates, among other benefits. The economic benefits of such programs range as high as $7 for each dollar spent, although savings and positive results are not linked to preschools that lack adequate funding and strong teaching.

SOURCE: Campaign for Educational Equity at Teachers College, Columbia University.

Adults with low levels of education must rely on the government to help pay medical bills and retirement costs, Ms. Rouse added. Nearly 80 percent of dropouts depend on government health-care assistance, she said. She found similar gaps in dropouts’ participation in pension plans.

While the costs of helping greater numbers of students finish high school and proceed to the workplace and into higher education might seem staggering, Ms. Rouse argued that the price the nation pays for not fixing the problems is even greater.

“We might not be able to afford not to” spend more on education, she said.

Other research discussed here showed that increasing the education of single mothers who are high school dropouts could remove about 125,000 families annually from public-assistance rolls, saving about $1.5 billion a year. Single mothers who are dropouts represent more than one in four welfare recipients.

If one-third of that same group of single mothers completed some years of college, the savings could reach $3.8 billion, said Columbia University social work and public affairs professor Jane Waldfogel, who presented research she co-authored. “These are huge numbers.” she said.

Syracuse University economist Tim Smeeding said that such savings could soar even higher, since some families receive welfare in the form of services or indirect payments, such as child-care vouchers.

Some researchers here focused on the impact of America’s growing racial and ethnic diversity.

Princeton University sociologist Marta Tienda outlined the projected growth of some minority groups in the United States, including an expected 77 percent increase in the Latino population between 2000 and 2020, based on federal estimates.

To take advantage of this “demographic dividend,” she said, policymakers must stress workforce quality over quantity and work to improve high school graduation rates in large minority-rich states such as California, Texas, and Florida.

Another researcher at the conference found that the gaps between a person’s earnings and his or her level of education is growing, and that a lack of educational advancement among some minority groups spells trouble as those groups get bigger.

Other Costs

Thomas Bailey, a professor of economics and education at Teachers College, said the percentages of blacks and Hispanics earning bachelor’s degrees continue to lag well behind those of whites.

Low education levels also appear to affect the physical health of the nation’s residents, said Dr. Peter A. Muennig, a medical doctor and a public-health professor at Columbia University.

He showed that high school dropouts in the United States live an average of 9.2 years less than high school graduates. Dropouts have higher rates of cardiovascular illnesses, diabetes, and other ailments, and require an average of $35,000 in annual health-care costs, compared with $15,000 for college graduates, Dr. Muennig said.

Higher achievement also could help reduce crime, said Enrico Moretti, an economist at the University of California, Berkeley.

A 1 percent increase in graduation rates nationally would correlate with about 100,000 fewer crimes annually in the United States, Mr. Moretti estimates. Such a step would save the nation $1.4 billion a yearin law-enforcement and incarceration costs, he said.

Mr. Moretti’s research suggests that increasing graduation rates by 10 percentage points would correlate with a 20 percent reduction in murder and assault arrest rates. “It’s hard to think of a better reason for investing in public schooling,” he said.

A version of this article appeared in the November 02, 2005 edition of Education Week as Researchers Tally Costs Of Education Failings


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