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How public schools benefit local economies

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  • 1. How public schools benefit local economiesGraduation Rates • Everyone benefits from increased graduation rates. The graduates themselves, on average, will earn higher wages and enjoy more comfortable and secure lifestyles. At the same time, the nation benefits from their increased purchasing power, collects higher tax receipts, and sees higher levels of worker productivity (The High Cost of High School Dropouts). • The nation’s economy and competitive standing also suffers when there are high dropout rates (The High Cost of High School Dropouts). • Nationally, more than 7,000 students become dropouts every school day, adding up to over 1 million students annually who will not graduate from high school with their peers as scheduled (Editorial Projects in Education, ―Diplomas Count 2010: Graduation by the Numbers: Putting Data to Work for Student Success, ‖ special issue, Education Week 29, no. 34 (2010). • Addressing the high school dropout crisis is a key strategy for economic growth. Years of research repeatedly highlights the link between education and the economy. Not only does improving education improve the economic outcomes of individuals who earn degrees—the individual gains also compound to benefit the economy at the local, state, and national levels (Tucci).Income • Most high school dropouts see the result of their decision to leave school most clearly in the slimness of their wallets. The average annual income for a high school dropout in 2005 was $17,299, compared to $26,933 for a high school graduate, a difference of $9,634 (U.S. Bureau of the Census, 2006). U.S. Bureau of the Census. (2006). Income in 2005 by educational attainment of the population 18 years and over. Table 8. Washington, DC: U.S. Government Printing Office. Retrieved from http://www.census.gov/population/www/socdemo/education/cps2006.html) • Research by Cecilia Rouse, professor of economics and public affairs at Princeton University, shows that each dropout, over his or her lifetime, costs the nation approximately $260,000 (Rouse, C. E. (2005). “Labor market consequences of an inadequate education.” Paper prepared for the symposium
  • 2. on the Social Costs of Inadequate Education, Teachers College Columbia University, October 2005). • Unless high schools are able to graduate their students at higher rates, more than 12 million students will drop out during the course of the next decade. The result will be a loss to the nation of $3 trillion ("The High Cost of High School Dropouts.”). • Increasing a person’s education will on average increase his wage rate; for example, college-educated workers tend to be paid about 60 percent more than workers with only a high school degree (author’s calculations using the Current Population Survey, previously presented at Michigan Consensus Revenue Estimating Conference, May 18, 2004). • Research suggests that a one-point increase in the percent of a local economy’s population that is college educated will increase real wages of non-college- educated local residents by 1.4 percent, and real wages of local college graduates (Moretti, Enrico, 2003. “Human Capital Externalities in Cities,” National Bureau of Economic Research working paper 9641). • In Illinois in 2011, on average, a high school graduate in Illinois earns $8,220 more each year than a high school dropout does (Illinois High Schools).Community • As for the general public, in a recent public opinion survey the assertion that public schools “Improve the local economy and attract business” was identified as the second most important benefit which schools bring to communities(Education Week & Public Education Network. 2002 Accountability for All: What Voters Want from EducationCandidates: National Survey of Public Opinion.). • The only benefit of public schools ranked above local economic improvement was the “benefit [to] families.”(Weiss). • Public schools are an important economic tool, and can be integrated with other aspects of economic development, such as developing other social capital and improving quality of life (Weiss). • More recently, Thomas Lyson’s study in the Journal of Research in Rural Education, “What Does a School Mean to a Community?” (2002) concludes that rural towns with local public schools are often more economically advanced, with more people employed in professional, managerial, and executive occupations
  • 3. (Lyson, T. A.(2002, Winter. What Does a School Mean to a Community? Journal of Research in Rural Education,17(3), 131-37). • Research evidence suggests that higher education increases local economic development principally by increasing the quality of the local workforce, and secondarily by increasing local innovative ideas (Bartik). • More surprising is the research finding that increasing the proportion of college graduates in a local economy will increase the wage rates of local residents other than those receiving more education (Bartik). • If half of Illinois’s 45,600 dropouts from the Class of 2010 had stayed in school and earned a high school diploma there would have been 1,600 new jobs (all4edfiles).Facts • State and local economies suffer further when they have less-educated populaces, as they find it more difficult to attract new business investment. Simultaneously, these entities must spend more on social programs when their populations have lower educational levels (The High Cost of High School Dropouts). • The economic vitality of a city is linked to the performance of its schools (Weiss). • In addition to raising national productivity as seen in the last section, research indicates that quality public schools can help make states and localities more economically competitive (Weiss). • Higher education’s most fundamental contribution to economic development lies in its traditional role: creating an educated population. The new economy is making the traditional academic mission ever more important (Shaffer & Wright). • The twenty-first century paradigm, in contrast, is shifting toward putting knowledge first. For states, increasingly, that means connecting their higher education systems more closely to their economic development strategies (Tucci). • A new Economic Policy Institute report shows adequate and targeted investment in education is the best way to achieve faster growth, more jobs, greater productivity, and more widely shared prosperity (Schweke).
  • 4. • At a time when our knowledge-based economy demands increasingly higher skills to stay competitive, support for well-resourced schooling and training is key. This strategy is also an important tool for advancing economic quality (Schweke). • The best economic stimulus package is a diploma (all4edfile). • Estimated Additional Lifetime Income If High School Dropouts Graduated With Their Class in 2006-2007 in Illinois. o States 9th Graders (2003-2004) 174,343 o Estimated Graduation Rate(2006-2007) 75.7% o Estimated Number of Dropouts for the class of 2007 42,365 o Total Lifetime Additional Income if Dropouts Graduated $11,014,990, 740 o Projections are available for each state and more than 200 MSAs on the Alliance’s website, http://www.all4ed.org/publication_material/Econ.Costs • Class of 2010 alone would have resulted in significant economic benefits to the nation, including more than $7.6 billion in increased annual earnings and the creation of 54,000 new jobs (Tucci). • Finally, and perhaps most critically, research suggests that improving education could have the power to grow the economy by boosting the gross domestic product (GDP) and creating jobs. In 2009, McKinsey & Company released an often-cited report that likened low levels of academic achievement and attainment to a ―permanent national recession (McKinsey & Company, Social Sector Office, ―The Economic Impact of the Achievement Gap in America’sSchools.http://www.mckinsey.com/App_Media/Images/Page_Images/O ffices/SocialSector/PDF/achievement_gap_report.pdf (accessed November 16, 2010). • In the report, the authors assert that if the United States had improved its educational achievement levels to those of the world’s leaders in education— Finland and South Korea—the nation’s GDP could have grown by as much as $2.3 trillion, or 16 percent(McKinsey & Company, Social Sector Office, ―The Economic Impact of the Achievement Gap in America’s Schools.http://www.mckinsey.com/App_Media/Images/Page_Images/Offices/Soc ialSector/PDF/achievement_gap_report.pdf (accessed November 16, 2010).Real Estate
  • 5. • If half of Illinois’s 45,600 dropouts from the Class of 2010 had stayed in school and earned a high school diploma there would have been a $458 million in increased home sales (all4edfile). • Increased home and vehicle sales. By the midpoint of their careers, these new graduates, combined, would likely have spent as much as $19 billion more on home purchases than they will likely spend without a diploma. In addition, they would likely have spent up to an additional $741 million on vehicle purchases during an average year (Tucci). • If just half of Illinois’s dropouts had graduated in 2011, they would likely have provided the following economic benefits: $717 million in increased home sales (Illinois High Schools).Auto Sales • If half of Illinois’s 45,600 dropouts from the Class of 2010 had stayed in school and earned a high school diploma there would have been a $21 million in increased auto sales (all4edfile). • If just half of Illinois’s dropouts had graduated in 2011, they would likely have provided the following economic benefits of $26 million in increased annual Auto sales (Illinois High Schools). • Increased home and vehicle sales. By the midpoint of their careers, these new graduates, combined, would likely have spent as much as $19 billion more on home purchases than they will likely spend without a diploma. In addition, they would likely have spent up to an additional $741 million on vehicle purchases during an average year (Tucci).Tax Revenue • Improving high school graduation rates can result in a wave of economic benefits, including increases in individual earnings; home and auto sales; job and economic growth; spending and investment; and state tax revenues (Tucci). • Increased tax revenue. As a result of these new graduates’ increased wages and higher levels of spending, state tax revenues would likely have grown by as much as $713 million during an average year (Tucci). • If half of Illinois’s 45,600 dropouts from the Class of 2010 had stayed in school and earned a high school diploma there would have been a $20 million in increased state tax revenue (all4edfile).
  • 6. • When education levels increase, public expenditures decrease and tax revenues increase (Tucci). Sources: http://www.all4ed.org/files/archive/publications/HighCost.pdf"The High Cost of High School Dropouts." All4ed.org. Oct. 2007. Web. <http://www.all4ed.org/files/archive/publications/HighCost.pdf>. http://www.mea.org/tef/pdf/public_schools_development.pdfWeiss, Jonathan D. "Public Schools and Economic Development." Mea.org. 2004. Web. <http://www.mea.org/tef/pdf/public_schools_development.pdf>. http://www.rockinst.org/pdf/education/2010-03-18-A_New_Paradigm.pdfShaffer, David F., and David J. Wright. "A New Paradigm for Economic Development." Rockinst.org. Mar. 2010. Web. <http://www.rockinst.org/pdf/education/2010-03-18- A_New_Paradigm.pdf>. http://www.all4ed.org/files/EdEconomy_seb_leb.pdfTucci, Tara N. "Education and the Economy." All4ed.org. June 2011. Web. <http://www.all4ed.org/files/EdEconomy_seb_leb.pdf>. http://www.nsea.org/CORE/media/040708-schweke-pr1.pdfSchweke, William. "Investment in Education Best Route to Stronger, Fairer Economy." NSEA.org. July 2004. Web. <http://www.nsea.org/CORE/media/040708-schweke- pr1.pdf>. http://www.upjohninst.org/publications/wp/04-106.pdf
  • 7. Bartik, Timothy J. "Increasing the Economic Development Benefits of Higher Education in Michigan." Upjohnist.org. Sept. 2004. Web. <http://www.upjohninst.org/publications/wp/04-106.pdf>. http://www.all4ed.org/files/Illinois_sebps.pdf "The Economic Benefits of Helping High School Dropouts Earn Both High School Diplomas and College Degrees." All4ed.org. Dec. 2011. Web. <http://www.all4ed.org/files/Illinois_sebps.pdf>. http://www.all4ed.org/files/Illinois_hs.pdf"Illinois High Schools." All4ed.org. Jan. 2012. Web. <http://www.all4ed.org/files/Illinois_hs.pdf>.