The Economic Benefits from Halving the Dropout Rate
February 09, 2010
Alliance for Excellent Education
The commonly cited phrase that an investment in kids is an investment in our collective future is no understatement. This report by the Alliance for Excellent Education examines the potential impact of increased high school graduation rates on local economies, individual earnings, and home sales.
In 2008, an estimated 600,000 students from the fifty largest US cities and surrounding metropolitan areas made the decision to forego high school graduation. The authors, perhaps realizing that achieving a 100 percent graduation rate isn’t realistic, determine the economic impact of reducing that rate by just half (300,000 students).
The predicted gains are noteworthy. For the forty-five metropolitan areas included in the model, graduating 300,000 high school students would result in: $4.1 billion in additional earnings over the average year; 30,000 new jobs and increased local GDP by up to $5.3 billion by the midpoint of graduates’ careers; increased local and state tax revenues -- up to $536 million during an average year; and home purchases totaling $10.5 billion. All of this, from 300,000 additional high school diplomas.
For Columbus alone, the benefits would be $39 million in earnings and economic growth of $49 million. For Cleveland, earnings would increase by $52 million and overall economic growth by $66 million. These figures clearly spell out the benefits students and society as a whole would reap from increasing graduation rates.
Unfortunately, despite the obvious returns of reducing the dropout rate, Ohio’s fiscal perils probably mean that education could take a back seat to issues of unemployment, broken pensions systems, or filling budget holes, especially considering that our current budget is plugged with about $8 billion of one-time federal stimulus money.
While the report presents useful data showing the cost of the dropout crisis –count on economists to drum up forecasts about the relationships between graduation rates and economic growth or earnings –this doesn’t guarantee action or even tell us the best policies by which to reduce the dropout rate. Although increasing Ohio’s graduation rate is a laudable goal, education strategies to achieve this will surely be costly. With an unemployment rate of 11 percent and a looming deficit of $8 billion, Ohio simply can’t pay for it all. Read the full report here.