1.4 The High Social Costs of Educational Failure

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The last lesson mentioned that, on average, about a third of California’s students do not finish high school. Averages are useful but dangerous abstractions. Imagine that you are in a Starbucks when Bill Gates walks in.

On average, you just became a billionaire. Right?

In order to make sense of averages, it is useful to find meaningful subgroups within a data sample. In the Starbucks example, we can probably refine our understanding by taking Bill Gates out of the sample – he is clearly an outlier. But that still would give us a flawed understanding of the wealth in front of the counter vs. behind the counter.

Let’s leave the coffee shop and return to education. The classic symptom of educational failure is when a student stops coming to school. Students that “drop out” are not random – they are disproportionately African American and Latino, and they disproportionately come from low-income families. (Persistent, systematic differences in educational attainment by ethnicity, income or gender are known as achievement gaps, a subject much studied in California by Education Trust-West.)




In the dry, neutral language of social science: low educational attainment is correlated with various social costs, including unemployment, low taxable earnings, homelessness, crime, and poor health.

It’s pointless to be neutral, though. When children don’t get the education they need, everyone loses. The cost of failure is enormous, and a variety of scholars have tried to quantify it.

In 2009 the RAND Corporation evaluated the likely average long-term benefit to taxpayers when a student graduates from high school rather than dropping out, adjusting for gender and ethnicity. When a black male graduates rather than dropping out of high school, RAND estimates that on average taxpayers benefit to the tune of about $294,000.

Work by McKinsey found similar effects, characterizing achievement gaps as the economic equivalent of a “permanent national recession.”

In 2011 the NAACP issued a report, Misplaced Priorities, to “track the steady shift of state funds away from education and toward the criminal justice system.” In 2012, the White House Council for Community Solutions commissioned research in a similar vein, coining the rather optimistic term “opportunity youth” for youth aged 16-24 who are neither in school nor working. The report slices and dices the data about the massive direct and indirect costs to society associated with this segment. The report estimates that in the aggregate, opportunity youth burden our economy’s balance sheet to the tune of approximately $5 trillion just in lost taxes and direct costs. That was trillion, with a “T,” in case you missed it.

Taxpayers are not the only ones to benefit, of course, when an at-risk student persists in school. The biggest beneficiary is the student. Even leaving crime out of it, the personal stakes of educational attainment are huge. According to year after year of data from the US Census Bureau, economic prospects improve dramatically with every additional year of educational attainment.

The College Board updates its ambitious Education Pays report every three years. According to the 2013 report, “during a 40 year full-time working life, the median earnings for bachelor’s degree recipients without an advanced degree are 65% higher than the median earnings of high school graduates.”

Wage chart

Chart Source: “Education Pays” Copyright © 2013. The College Board. www.collegeboard.com.


As in the coffee shop, averages can lie. The Education Pays report does a good job of sketching the broad systematic variations. For example, at any given level of educational attainment, earnings for women and minorities lag earnings for white men. In 2010, Full Circle Fund (the sponsor of Ed100.org) released a set of policy recommendations under the one-word title “EACH.” The focus was on creating new policies that support thinking about education in terms of each student instead of in terms of averages, or even subgroups.

Discussion prompts:

  • Does education have a formal role in preventing expensive social problems? Should it?
  • If schools can take actions that effectively prevent social problems, should they receive more funding?
  • Is it fair to spend more money on “at risk” youth? Independent of fairness, is it good policy?

Next: Wishfulness – 1.5 Wishful Thinking


3 Responses to “1.4 The High Social Costs of Educational Failure”
  1. Arun Ramanathan says:

    This is a great post. There’s been a lot of controversy lately in the press and academia about the benefits of higher education, but as this post shows, the numbers don’t lie. The salary premium associated with even a few years of higher education is substanital. And even a high school education affords a significant advantage in the job market. California’s challenge is moving beyond the increasingly stale rhetoric of the past twenty years into a recognition that addressing achievement and opportunity gaps for the students of color and poor students who are the bulk of our student population will require sacrifices on all sides of the political spectrum. It will mean more money and real reform. One without the other will just reinforce the status qou.

    • Michael Rebell says:

      This is important data. I would add to it the fact that the number and percentage of children living in poverty in the U.S., which is already huge, is growing. It will soon hit 25%. This is the highest percentage of childhood poverty of any industrialized country in the Western and Asian worlds ( Finland and Denmark have childhood poverty rates of 3-4%. Poverty breeds dropouts, among other things. So investments in education must ensure not only that all students have meaningful educational opportunitites, but also that the vital needs of children from poverty backgrounds for early childhood services, health, extended time and family support are met.

  2. jeffcamp says:

    Via email from Russell Rumberger: A study published by the California Dropout Research Project found that one group of 20-year dropouts is responsible for $46 billion in economic losses to the state. See http://cdrp.ucsb.edu/dropouts/pubs_reports.htm#1


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