Eric Lerum

The Economic Impact of Education Reform Could Be Huge

The question of how much education reform can help improve the economy is a persistent one that many research and academic folks have endeavored to answer. Economic researchers Eric A. Hanushek, Ludger Woessmann and Jens Ruhose have made a recent attempt to do so, recently releasing a fascinating  working paper based on their studies of whether improving schools has an impact on a state’s economic conditions. Significantly, for this study, the researchers chose to measure improvement of schools in terms of learning gains reflected in standardized assessment results (i.e.,  National Assessment of Educational Progress (NAEP) scores, as opposed to previous research that measured whether schools were improving according to whether more of the population was completing more years of schooling (i.e graduation rates and level of college education). The researchers theorized that there is a difference between focusing on whether a person has completed a certain level of schooling and how well that person achieves—i.e., what they learn—through schooling. It’s an important point to clarify. For this study, the underlying premise is that if you want to know the extent to which improving education could positively impact state economies, measuring whether more students complete school is not nearly as informative or accurate as measuring whether more students increase their skills and knowledge. So what did they find? Their estimates are staggering—at the national level, the low end of the range equates to an increase of $32 trillion to the U.S. economy in 2095 by simply bringing the lowest-performing students in each state up to the “Basic” level on NAEP. At the high end, the U.S. economy could realize as much as $76 trillion if every state brought student performance up to the current performance level of the best state. And how did they do it? That’s a little more involved. The researchers came up with multiple scenarios reflecting different ways of projecting academic growth over the next 10 years, as measured by average score increases for eighth-grade mathematics on the NAEP assessment, and the impact of a higher-skilled future labor force on state GDPs over the next 80 years. The economic value for each state varies substantially given their size and respective starting positions in terms of achievement. For instance, in one scenario that considers improving student achievement by the approximate equivalent of one grade level (raising scores by one-quarter of a standard deviation), state-level gains would range from $83 billion in Vermont to over $16 trillion in California in 2095. A note of caution from the researchers also is worth mentioning: Because the U.S. population is highly mobile, the policy decisions of one state have implications for others as workers move and take their skills and knowledge (or lack thereof) with them. Thus, the authors assert it is in the best interests of all states to pursue education reform jointly. Think of it like this: As a nation of states, we’re only as strong as our weakest state. But when states approach reform individually and cannot count on the people moving in to have also benefitted from a stronger education system, the results decline by about 39 percent on average. This observation is particularly relevant in the era ahead, where federal oversight of educational improvement will be far less and each state will have greater latitude to chart its own course for improving schools. So what’s the takeaway if your eyes haven’t glazed over already? Reforming our education system does in fact have economic benefits, and those benefits are substantial—in fact, the value of the gains is greater than the current amount of money spent on K-12 education across the country. But these gains do not come automatically. Policymakers must make choices and investments in education that are likely to raise achievement significantly. Simply investing more in a system that is dysfunctional and not producing results—for instance, adding new programs without improving instructional quality—is unlikely to yield the higher-skilled workforce necessary to produce the desired economic impact. If states are willing to adopt policies with student outcomes in mind, however, their economies stand to benefit from hundreds of billions of dollars—enough to let education pay for itself and then some.
Eric Lerum is the vice president of growth and strategy for America Succeeds, where he leads the organization’s efforts to amplify the business leader voice in support of improving public education. Eric has over a decade of experience in strategic planning, partnership development, and advising state and local policymakers regarding public education issues. Most recently Lerum led the policy ...

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