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HISET ROI

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HISET ROI

  1. 1. Franklin County Adult Education 2015 HISET and High School Diploma Cost Benefit Analysis Prepared by Jeremy Demers (BA Business Economics at University of Maine Farmington) Email: jeremy.demers@maine.edu ExecutiveSummary It is widely acknowledged that capital spent on educational services is an investment rather than an expense. Strategic investments in education yield nearly immediate returns that will continue to pay dividends to the community for the the remainder of each student’s life. By striving to create a more educated, and skilled labor force the staff of the Franklin County Adult Education is working to make the county a more socially prosperous place to live. Their work with the recently implemented HISET program has already began to achieve quantifiable financial results for greater Franklin County. This report will examine the the direct financial impacts of each additional HISET or high school diploma to the society. This will be done by observing 4 directly measurable outcomes associated with earning a high school equivalent: employment, wages, tax contributions, and incarceration rates. By quantifying the disparities in these four variables a compelling point for the importance of a high school education (or equivalent) is vividly painted. Final findings indicate that in 2015 alone Franklin County Adult Education’s HISET and HS diploma programs generated $345,147.24 in social benefit for a return on investment of 623%. Perhaps the most compelling aspect of this finding is that the majority of these savings are directly injected into and circulated around the local economy. EarningsData
  2. 2. The most recent data suggests that a non high school graduate (NHSG) in Franklin County has an average earnings of $16,842.5 a year. Meanwhile the average income for their high school graduate (HSG) counterparts is $23,474 annually. UnemploymentData Recent data clearly suggests that level of educational attainment has a drastic impact on rates of unemployment. Unfortunately non high school graduates (NHSGs) have been left behind during the economic recovery that has followed the 2008 recession. In 2014 15.4% of NHSGs in the state of Maine were unemployed while only 6.4% of those with a diploma were unemployed. This gap in levels of employment is a trend that has been growing as the need for an increasingly educated and skilled labor force has grown. Let us examine the disparities in average wages after we have adjusted for unemployment. - An average NHSG in Franklin County makes $16,842.50 annually. By multiplying this number by the rate of employed NHSGs we are able to estimate the average wage of NHSGs including those who are unemployed. - (NHSG%Employment*NHSG Average Earnings)=.846*$16,842.5=$14,248.76 Thus after accounting for unemployment the average NHSG earns $14,248.76 annually. - An average HSG in Franklin County makes $23,474 annually. By multiplying this number by the rate of employed HSGs we are able to estimate the average wage of HSGs including those who are unemployed.. - (HSG%Employment*HSG Average Earnings)=.936*$23,474=$21,971.66 Here we find that after adjusting for unemployment the average HSG earns $21,971.66 on an annual basis. By finding the difference between these two numbers we are able to discern that on average a HSG in Franklin County makes $7,722.91 more than their less educated counterparts.
  3. 3. - (HSG earnings-NHSG earnings)= $21,971.66-$14,248.76=$7,722.91 Differences in Tax Contributions The fact that HSGs earn more than NHSGs means that they also contribute more to both local and federal taxes. Using the earnings data explained above we are able to observe the average difference in tax contributions between HSGs and NHSGs. The following tax numbers represent a taxpayer filing as single with no children. - After accounting for unemployment rates the average NHSG in Franklin County earns $14,248.75. This individual contributes $1,673 in annual income taxes. - After accounting for unemployment rates the average HSG in Franklin County earns $21,971.66. This individual contributes $2,835 in annual income taxes. - Difference in tax contribution after accounting for level of unemployment = $2,835-$1,673= $1,162 increased tax contribution from HSGs. HSGs in Franklin County pay an average of $1,162 more in annual income taxes than NHSGs. Prison CostImplications It is no secret that the high costs of incarceration are displaced onto local taxpayers. According to the Maine Department of Corrections the cost of incarcerating one prisoner per year in 2012 was $51,954. To better understand the social costs of this number it is beneficial to examine the various cohorts of Maine’s prisons by their level of education. A study which tracked all inmates in Maine from 2004-2012 indicated that: - 6.5% of prisoners had some college experience - 45.8% of prisoners had a diploma or GED - 47.7% of prisoners had less than a highschool diploma - while only 9.7% of Mainers have less than high school diploma
  4. 4. Using the most recent available data we may observe that in 2011 there were 2145 prisoners incarcerated in the state of Maine. By multiplying this number by the % of prisoners by educational attainment we are able to discover how many actual prisoners these percentages relate to. Using this method data suggests that there are approximately 1023 inmates without a high school diploma or equivalent and 1,122 inmates with at least a highschool degree. - .477*2145=1023 inmates that are NHSGs - .523*2145=1122 inmates with a diploma or higher In 2015 the population of Maine was estimated to be 1,329,328. Of this population 20.7% are under the age of 18, for this reason they will not be included in this portion of the analysis. After controlling for the population that is under 18 Maine has an adult population of 1,054,157. - 20.7% of mainers are under 18 (1,329,328*.207=275,171=children under 18) - 1,054,157 Mainers are over 18 thus have had opportunities to earn at least a high school diploma (1,329,328-275,171=1,054,157). Multiplying the adult population by the corresponding level of educational attainment reveals the number of HSGs and NHSGs in the state. 89.8% of the over 18 population, or 946,633 people, have attained at least a high school education. Meanwhile 10.2% of the over 18 population, or 107,524 people, have not achieved a high school diploma or equivalent. - Approximately 946,633 HSG or greater in Maine (1,054,157*.898=946,633) - Approximately 107,524 NHSG graduates over 18 in Maine(1,054,157*.102=107,524) By dividing the NHSG population in prison by the over 18 NHSG population we find that .9515%, or nearly one percent of the NHSG population in Maine is incarcerated. - (NHSG population in prison/NHSG population in Maine)=(1023/107,524= .9515%) of NHSGs are in Maine are incarcerated. Similarly by dividing the HSG population in prison by the over 18 HSG population we find that .1185% of HSGs in Maine are incarcerated - (HSG population in prison/HSG population in Maine)=(1,122/946,633=.1185%)
  5. 5. This means that in Maine a NHSG is over 8X more likely to be incarcerated than their HSG counterparts. - .9515/.1185=8.0295 times more likely for a NHSG to be imprisoned than a HSG Implications of Prison Findings - By multiplying the portion of NHSGs who are incarcerated by the annual cost of incarceration we find that a NHSG has a social prison cost of $493.34 a year. - (proportion NHSG in prison*cost of prisoner per year)= .009515*51,954=$494.34 - By multiplying the portion of HSGs who are incarcerated by the annual cost of incarceration we find that a HSG has a social prison cost of $61.57 a year. - (Proportion HSG in prison*cost of prisoner per year)= .001185*51,954=$61.57 This data suggests that on average a NHSGs added cost to society from increased likelihood of incarceration is $431.77 annually. - ($494.34-$61.57= $431.77) This powerful data clearly illustrates the correlation between educational attainment and incarceration rates. Lack of sufficient education does not force citizens to become criminals, but it does limit their opportunities to make a living wage legally. Cost BenefitAnalysis Now we will compile the data collected above to draw macro conclusions concerning the socio economic impacts of a high school equivalency. - The financial benefit of one additional high school equivalency can be quantified as follows: - Prison social costs will be reduced by $431.77 per person a year. - Average earnings will increase by $7721.91 per person a year. - Tax contribution will increase by $1,162 per person a year.
  6. 6. - These three data points add to a combined $9,315.68 of increased economic potential annually. - This means that every additional high school equivalency has a total social benefit of $9,315.68 a year. - This number is conservative in that the additional income earned by HSGs is mostly spent in the local economy where it continues to circulate amongst other local businesses. This surplus that is spent locally is also taxed locally and will help contribute to any upfront costs associated with educational programs. SocietalCost By multiplying the NHSG population in Maine by $9,315.68 we find that the current added social cost of all NHSGs in Maine is $1,001,659,176 a year. - (NHSG population in Maine* cost per NHSG a year)= 107,524*9,315.68=$1,001,659,176 Through the same technique we find that the current cost of all NHSGs in Franklin County, Maine is $34,943,116 a year. - (NHSG population in Franklin County*cost per NHSG a year)= 3,751*9,315.68=$34,943,116 Benefits associated with Franklin CountyAdult Education’sHISET and High SchoolDiploma Programs Franklin County Adult Education’s HISET program is specifically targeted at generating the social impacts described above as well as empowering individuals to make positive changes that will impact their own lives. In 2015 Franklin County Adult Education assisted 24 students obtain their HISET and helped 19 students acquire a high school diploma. The combined operating budget of both the HISET and high school diploma programs totaled $55,427.
  7. 7. - 2015 budget for HISET (supplies, testing, wages, ect) = $51,920 - In 2015 Franklin County Adult Education assisted 24 students in obtaining their HISET - 2015 budget for high school completion program (supplies, testing, wages, ect) = $3,507 - In 2015 Franklin County Adult Education assisted 19 students in obtaining high school diplomas By multiplying the annual social cost of a NHSG by the number of HISET and diploma completions then subtracting the annual budget from the total we find that in 2015 this program alone generated $345,147.24 in social benefit. - ((Cost of NHSG*number of HISET 2015)-(HISET and HS diploma annual budget))= ($9,315.68*43)-($55,427)= $345,147.67 Combined return on investment for the HISET and high school diploma program can now be calculated by dividing the economic impact it generates by the budget spent to execute the program. The results are compelling; in 2015 Franklin County Adult Education’s HISET department generated a return of 623% - (Benefit generated/annual budget)=(345,147.67/55,427)=6.23 With a combined annual budget of $55,427 for the HISET and HS diploma programs and $9,315.68 of social benefit for each additional graduate the program would only have to graduate 6 students each year to generate enough social benefit to break even. After 6 graduates, the break even point, each additional graduate adds 16.8% to the program’s return on investment. - $55,427/$9,315.68=5.95 annual graduates needed to “break even” - $9,315.68/$55,427=16.8% increase in ROI for each graduate after “break even” point In other words every $1 spent on the HISET program in 2015 generated $6.23 in returns to the county via increased earnings, increased tax contributions, and decreased chance of incarceration. These benefits extend beyond the short term and will continue to pay dividends into the future as the community continues to reap the rewards of increased tax revenue each
  8. 8. year. The findings of this research clearly indicate that much is to be gained by empowering motivated NHSGs with the resources to further their education and improve their lives and the communities in which they live. Sources Population Data - http://www.metasalary.com/statedata.php?id=Franklin%20County,%20ME - http://quickfacts.census.gov/qfd/states/23000.html Income Data - http://www.metasalary.com/statedata.php?id=Franklin%20County,%20ME - Giovannini, Marina. 2013. Cost Benefit Analysis of High School Diplomas/GEDs Unemployment Data - http://www.maine.gov/labor/cwri/cps.html Prison Data - http://muskie.usm.maine.edu/justiceresearch/Publications/DataBook2014/2014_Maine_ Crime_and_Justice_Databook.pdf - http://www.maine.gov/legis/opega/GOC/GOC_meetings/Current_handouts/6-8- 12/Final%20CPP%20Info%20Brief%206-8-12.pdf - http://www.vera.org/files/the-price-of-prisons-fact-sheet-ME-revised-072312.pdf

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