Monday, March 24, 2008

The Costs and Benefits of Schooling

The first session I attended at AERA was an overview of a recent book, The Price We Pay. The book was published by a team of noted economists as an attempt to quantify the benefits of schooling to society and conduct a cost-benefit analysis of some education reforms with proven track records.

They concluded that a person who drops out of high school pays about $100,000 less in taxes (in today's dollars) over the course of their lifetime than does a person who completes high school (only high school, not college) and that, overall, each high school dropout costs the country about $209,000 in lost taxes, welfare, court costs, etc.

Given this figure, they look at how much various interventions cost per additional student that graduates from high school and find that most cost about 1/3 of the amount that society benefits from their graduation. I didn't read the book -- I only heard a 90 minute summary of it -- so I'm not sure exactly what they take into account, but two things that would bias these estimates jumped into my head.

1.) They only look at the additional benefits from the students who graduate from high school that otherwise would not have. What about the students who attended college or graduated from college that otherwise would not have? Taking this into account might mean that their estimates were biased downward -- that there are more benefits than they thought to the interventions.

2.) A shift of a couple percentage points probably wouldn't affect the benefits of a high school education much, but a large increase likely would. If, say, half as many students dropped out each year then it's likely that the benefits of graduating from high school would be smaller. This would mean that their estimates were biased upward -- that the benefits of the interventions were not as large as they thought.

Henry Levin assured a questioner who raised a similar issue that they had taken a lot of things into account and that their estimates were very complex, so it's quite likely that these concerns are addressed in the book. Especially without having read the book I hesitate to believe that these estimates can possibly be very precise, but I think there is some value to them nonetheless. I think a financial analysis of the costs and benefits of school interventions is valuable information to have before making a decision. That said, Henry Levin made sure to emphasize at the very beginning that the primary reason for helping the poorest children is a moral one rather than a financial one.

Also: perhaps the most notable tidbit I gathered from the session was the projection that in 2020 the workforce will be less educated than the workforce in 2000. I had always assumed that the number of people attending college was and will continue to steadily increase, but I had noticed in previous research that the % of 25-29 year olds with a bachelor's degree in 2006 is actually lower than it was in 2000. Given the changing demographics of the country, Marta Tienda concludes that this trend will continue into the future.

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