Reducing School Drop-Outs Can Save Millions

...Class of 2007 dropouts
would earn an additional
$6.7 BILLION over their
lifetimes if they completed
high school.

James J. Heckman, a Nobel laureate, writes that a 5 percent increase in male high school graduation rates is estimated to save Alabama $82 million in annual incarceration costs and crime-related expenditures. If that same 5 percent not only graduated but went on to college at the same rate as typical male high school graduates, their average earnings would accrue an additional $43 million annually. If just one year’s high school dropouts could be converted to high school graduates, Alabama households would have an additional $6.7 billion in accumulated wealth over the lifetime of the students from the graduating class. [1]

The Alliance for Excellent Education reports the impact of a 5 percent increase in male high school graduation rates on crime reduction and earnings: [2]

  • Annual Crime-Related Savings of $367 million
  • Annual Additional Earnings of $16 million
  • Total Benefit to State Economy of $383 million

The median income of Alabama families headed by high school dropouts declined by nearly a third between 1974 and 2004. As wages decline, less revenue exists to pay for education and social services and the state’s economy slows. The Alliance for Excellence in Education estimated that Alabama’s dropouts from the Class of 2007 would earn an additional $6.7 billion over their lifetimes if they completed high school. [3]

A decrease in the dropout rate by two percent sustained at that annual rate of improvement over two decades would gain the state more than $190 million in government savings and revenues. If the state also increased by two percent annually the number of high school dropouts who return to get a diploma, the net gains would approach $400 million (SEF). [4]

If Alabama’s dropouts from the Class of 2006 had graduated instead, the state could have saved more than $245 million in Medicaid and expenditures for uninsured care over the course of these young peoples’ lifetimes.[5]

If Alabama high schools and colleges raised the graduation rates of Hispanics, African-American and Native American students to the levels of white students by 2020, the potential increase in personal income would add more than $2.1 billion to the state economy. [6]

Increasing the graduation rate and college matriculation of male students in Alabama by only 5 percent could lead to combined savings and revenue of almost $53 million each year by reducing crime-related costs. [7]

References

  1. National Institute for Early Childhood Education Research. The Heckman Equation, James J. Heckman, Henry Schultz Distinguished Service Professor of Economics at The University of Chicago, a Nobel Laureate in economics and an expert in the Economics of Human Development.
  2. Saving Futures, Saving Dollars: The Impact of Education on Crime Reduction and Earnings
  3. Alabama’s High School Dropout Rate, Alabama Training Institute, page 3
  4. Alabama’s High School Dropout Rate, Alabama Training Institute, page 3
  5. Alabama’s High School Dropout Rate, Alabama Training Institute, page 3
  6. Alabama’s High School Dropout Rate, Alabama Training Institute, page 3
  7. Alabama’s High School Dropout Rate, Alabama Training Institute, page 3

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