The Economic Benefits of Raising Graduation Rates

At a time when unemployment rates are still sky-high and state budgets are gasping for air across the nation, the Alliance for Excellent Education has released a series of reports that propose a solution.  According to the reports, if we want to generate new jobs, increase tax revenues and provide a boon to the limping housing market and automobile industry, we should focus efforts on increasing the graduation rate. Projections from the nationwide report suggest that increasing the graduation rate by 50% would lead to:
  • $7.6 billion in increased earnings
  • $5.6 billion in increased spending and $2 billion in increased investments
  • 54,000 new jobs
  • $713 million in increased state tax revenue
Though this news is encouraging, it should be noted that, like all economic projections, this report is based on a set of assumptions.  In this case, the assumption is that some percentage of the newly graduating population will also attend and graduate from college.  The Alliance has attempted to account for the fact that these new graduates are less likely than current graduates – who are not receiving dropout prevention supports – to go to college; however, their predictions necessarily involve some degree of guesswork since we don’t have accurate measures of the impact that effective dropout prevention programs have on increasing college attendance and retention. That being said, there is evidence to suggest that the crux of their argument – that increasing the graduation rate has a positive economic impact – remains true.  Other research has shown that, compared to high school dropouts over the course of their lifetimes, high school graduates, on average[1]:
  • earn $303,000 more in wages;[2]
  • pay $64,000 more in income taxes;
  • will spend over $247,00 more in cash and in-kind transfers;
  • incur $5,500 less in social costs – or costs affiliated with social services and prisons;[3] and
  • earn $1.76 million more as college graduates than as high school graduates. [4]
Regardless of which numbers you look at, the message to states seems to be the same.  Though it may be difficult to predict the exact economic impact, the long-term benefits of successful high school graduation programs outweigh the upfront costs.  As states look to balance their budgets by making cuts in education spending, they would do well to keep this message in mind. Note: This blog post was originally authored under the auspices of the National High School Center at the American Institutes for Research (AIR). The National High School Center’s blog, High School Matters, which ran until March 2013, provided an objective perspective on the latest research, issues, and events that affected high school improvement. The CCRS Center plans to continue relevant work originally developed under the National High School Center grant. National High School Center blog posts that pertain to CCRS Center issues are included on this website as a resource to our stakeholders.

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