New study details impact of dropout rate on Twin Cities metro economy

A new study out today highlights the lost earnings potential of high school dropouts and the resulting impact of those lower incomes on state economies like Minnesota’s.  

If the local dropout rate had been cut in half for the Class of 2008, for example, the Twin Cities metro economy would see more than a $100 million boost in annual economic activity as these students hit their mid-career earnings stride, according to a Washington, D.C.-based policy institute focused on improving high schools.

In the past, the Alliance for Excellent Education has estimated that dropouts from the Class of 2008 will cost the entire state of Minnesota nearly $4 billion in lost wages over their lifetimes. In its report today, the group estimates that 10,300 metropolitan area students from the Class of 2008 dropped out before graduating.

Reducing that number by 50 percent for that single high school class would result in significant economic benefits for the Twin Cities metro economy by the time those graduates hit the midpoint of their careers, such as:

  • $108 million increase in annual gross product (total goods and services produced);
  • $86 million in increased annual earnings;
  • $57 million in annual spending and $22 million in annual investing, which would be enough to support 650 new jobs;
  • $14 million in increased annual state and local tax revenue;
  • $6 million in additional annual vehicle purchases;
  • $256 million in increased home sales;
  • 68 percent of these new graduates likely pursuing some type of postsecondary education.

Nationally, 600,000 students in the Class of 2008 dropped out before graduation in the 45 top metropolitan areas studied, according to the report. That translates into more than $4 billion in lower annual earnings at midcareer, and more than $5 billion in a lower annual gross domestic product.

The purpose of the study was “to demonstrate, regardless of whether you have a child in school, regardless of political affiliation, everyone has a direct economic stake in how well a child does in high school,” said Bob Wise, president of the Alliance for Excellent Education and former governor of West Virginia. “The best jobs program is a diploma, so we chose to focus on the impact of just one high school class,” he added. “If you add each additional class, you can see the great economic impact reducing high school dropout rates can have on a region.”

The study, sponsored by State Farm Insurance, is titled “The Economic Benefits from Halving the Dropout Rate: A Boom to Businesses in the Nation’s Largest Metropolitan Areas.” In a press release accompanying the report, the group urges Congress to reauthorize the No Child Left Behind Act (NCLB) .

Statistics on dropout rates differ
Statistics on dropouts vary, but the rates used in the study were estimated by the Editorial Projects in Education Research Center, which is part of Education Week. While state-reported numbers tend to show higher graduation rates, the Alliance claims that “poor definitions and inconsistent implementation [in reporting] have resulted in a range of confusing graduation rate calculations” among federal, state and private estimates. It claims that “independent researchers have confirmed that many more of the nation’s youth are dropping out during high school than had been reported, and they have issued estimates that most experts agree are far more accurate than those of most government sources.” (You can check out University of Minnesota research here.)

The Alliance estimates that Minnesota high schools graduate 79 percent of incoming freshmen after four years, compared with the state estimate of a 91 percent graduation rate.

Reauthorization of NCLB was due in 2007 but has yet to occur, which worries the group. “For every year that Congress fails to address the unique challenges faced by high schools through a reauthorization of [the law], approximately 1.3 million students across the nation will drop out of school,” the Alliance said in its release.

Wise said that reauthorization is important to direct attention to the 1,700 high schools nationwide that he describes as “dropout factories” that account for half of all dropouts in the nation and two-thirds of all dropouts of color.

Wise credited NCLB for improving learning outcomes in the nation’s elementary schools but said that shortcomings in the law’s design and implementation have meant that these gains have not been repeated in middle and high schools. The Alliance’s 2009 publication “Reinventing the Federal Role in Education” examines these flaws and advocates reauthorizing the Elementary and Secondary Education Act as a way to ensure that all students graduate from high school prepared for college and career.

Included on the Alliance board is Michael O’Keefe, Minnesota commissioner of Human Services during the Ventura administration and former president of the Minneapolis College of Art and Design.

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