October 24th and 25th at Alfred Lerner Hall, Columbia University
The Labor Market Consequences of an Inadequate Education
Presenter:
Summary:
“The income and tax revenue losses associated with a lack of high school completion are already large… While it is difficult and expensive to improve educational attainment among those at-risk of not completing high school, as a society it will also become increasingly costly not to.”
- A high school dropout earns about $260,000 over a lifetime than a high school graduate and pays about $60,000 less in taxes.
- Annual losses exceed $50 billion in federal and state income taxes for all 23,000,000 U.S. high school dropouts ages 18-67 -- enough to cover the annual discretionary expenditures of the U.S. Department of Education.
- America loses $192 billion – 1.6% of GDP -- in combined income and tax revenue losses with each cohort of 18 year olds who never complete high school. Increasing the educational attainment of that cohort by one year would recoup nearly half those losses.
“Education is the traditional route to upward mobility in the United States . High school has been a necessary (but not sufficient) pre-requisite for making it in America .”
- In 1964, a high school dropout earned 64 cents for every dollar earned by an individual with at least a high school degree. In 2004, the high school dropout earned only 37 cents for each dollar earned by an individual with more education.
- The average high school dropout earns about $12,000 per year, nearly one-half earned by grads and one third earned by those with more than a high school diploma.
- The mean rate of return (individual earnings) for one year of schooling is estimated at between 10 and 20 percent. A range of studies have shown that this link is causal – that additional schooling, rather than any innate superiority of ability possessed by those who earn more money, is the primary cause of increased income.
- Only slightly more than one half of dropouts are employed, vs. 69% of those with just a HS diploma and nearly 75% with at least a high school diploma. High school dropouts work more than 2 fewer months per year than HS grads and nearly 3 fewer months than HS grads plus.
- High school dropouts are about one half as likely to have a pension plan or health insurance through their job as those whose highest level is a diploma.
- Earnings growth increases with an individual''''s educational attainment which exacerbates earnings losses associated with dropping out of high school observed among younger workers.
On average, high school dropouts pay approximately $1,300 per year in federal income taxes, $300 per year in state income taxes and $1,800 per year in Social Security taxes for a total of about $3,400. This is one half the contributions made by HS grads and nearly one third of grads plus.
The Labor Market Consequences of an Inadequate Education