It’s often argued that improving education will improve the nation’s economy. A new study from the National Bureau of Economic Research not only affirms this argument but also demonstrates just how big the economic effects of school improvement could be.
From the start, it’s clear that this paper differs from its predecessors. Previous studies examined human capital and its effect on states’ economic development by measuring school attainment (high school graduation). This one points out that attainment is an imperfect yardstick—it incorrectly assumes that increased levels of schooling automatically suggest increased levels of knowledge and skills. A better way to determine the relationship between education and economic value is to measure a different outcome: achievement. Since “no direct measures of cognitive skills for the labor force” exist, the authors craft their own. They start by constructing an average test score for each state using NAEP, then adjust the test scores for different types of migration (interstate and international among them) in order to offset the high mobility of the American population.
Hanushek, who has published multiple studies linking economic activity with enhanced educational output, offers several scenarios in his latest report. If every state improved to the level of Minnesota, the top-performing state from the past two decades, the U.S. economy would grow by $76 trillion by 2095 (the end of the projection period). Current low-performers would see gains of more than seven times their current GDP. Needless to say this level of growth is incredibly ambitious—and perhaps not as feasible as other possibilities.
A second scenario calculates that bringing all of the lowest-performing students up to the basic level of achievement (as defined by NAEP) “would have a noticeable impact on the distribution of earnings, and ultimately income, in the U.S.” That impact would total $32 trillion in economic growth by 2095. The drawback of this scenario, though, is that it assumes no “spillovers in quality” (score improvements) for students already scoring at basic or above.
The study also examines the effect of states improving to match the best state in their respective region, the improvement of all states’ scores by one-quarter of a standard deviation, and the improvement of all states to the levels of neighboring Canada or high-achieving Finland. Overall, the projected economic benefits of educational improvement are stunning. The authors predict that these estimated gains would, on average, pay for all K–12 education in states and yield extra returns. That sounds like one more reason why improving student achievement is so important (as if we needed another one).
SOURCE: Eric A. Hanushek, Jens Ruhose, and Ludger Woessmann, “Economic Gains for U.S. States from Educational Reform,” National Bureau of Economic Research (December 2015).
