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“BEST ECONOMIC STIMULUS IS A HIGH SCHOOL DIPLOMA”: New Alliance Study Finds Lowering the High School Dropout Rate Boosts Job Creation, Home Ownership, Automobile Sales, and Economic Growth

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“The report underscores the notion that the best economic stimulus package is a high school diploma.”

Cutting the dropout rate in half in the nation’s fifty largest cities will result in a significant increase in job growth, home ownership, and automobile sales, among other economic benefits, according to a new study from the Alliance for Excellent Education.

“The report underscores the notion that the best economic stimulus package is a high school diploma,” said Alliance President Bob Wise. “If the U.S. is to improve its competitiveness in the global economy, it must have an education system that meets the fast-growing demand for high-level skills.”

The study, The Economic Benefits from Halving the Dropout Rate: A Boom to Businesses in the Nation’s Largest Metropolitan Areas, notes that 600,000 students from the Class of 2008 dropped out of high school in the nation’s fifty largest cities. Individually, these dropouts will face the harsh consequence of significantly fewer economic opportunities throughout their lifetime. And, according to the report, these dropouts also represent an enormous missed economic opportunity to businesses in these areas.

According to the report, if just half of the 600,000 students had graduated from high school, they would have seen $4.1 billion in combined additional earnings in the average year and boosted tax revenue by $536 million each year. With their higher incomes, these new graduates would likely have bought homes worth $10.5 billion more than what they would likely spend without a diploma and spent an additional $340 million each year on vehicle purchases. They also would likely have spent an additional $2.8 billion and invested an additional $1.1 billion each year.

Thanks to this increased spending and investment, the nation’s fifty largest cities—and the forty-five metro areas that surround them—would likely see an increase of 30,000 new jobs and $5.3 billion in economic growth by the time these new graduates reach the midpoint of their careers.

“That’s a jobs package that everyone should be able to get behind,” Wise said.

Wise also underscored that it was not enough to simply graduate more students; these new graduates need to graduate prepared for college and careers. He noted that while 65 percent of the new graduates will likely continue to pursue some type of education after high school, only 17 percent will earn an associate’s degree, bachelor’s degree, or higher.

The table below outlines the benefits that would likely result from reducing the dropout rate by 50 percent in the selected metropolitan listed.

Metro Area Combined Additional Earnings (average year) Additional Spending and Investment (average year) Increased Home Sales (by midpoint of career) Increased Auto Sales (average year) Additional Jobs Supported (by midpoint of career) Increase in Gross Regional Products (by midpoint of career) Increased State and Local Tax Revenues (average year)
Atlanta $38 million $26 million (spending)
$9 million
(investment)
$87 million $3 million 300 $46 million $5 million
Boston $78 million $52 million (spending)
$21 million (investment)
$279 million $7 million 450 $99 million $9 million
Chicago $211 million $147 million (spending)
$57 million
(investment)
$577 million $18 million 1,750 $290 million $25 million
Dallas/Fort Worth/ Arlington $197 million $143 million
(spending)
$54 million
(investment)
$304 million $15 million 1,700 $277 million $19 million
Houston $165 million $120 million
(spending)
$44 million
(investment)
$257 million $13 million 1,150 $218 million $16 million
Los Angeles/ Long Beach $575 million $390 million(spending)
$151 million
(investment)
$1.8 billion $42 million 4,700 $772 million $79 million
Miami $212 million $157 million(spending)
$55 million
(investment)
$480 million $19 million 1,950 $295 million $16 million
New York City $537 million $343 million
(spending)
$137 million
(investment)
$1.1 billion $44 million 3,050 $657 million $92 million
Philadelphia $125 million $83 million
(spending)
$32 million
(investment)
$294 million $10 million 900 $159 million $18 million
Washington, DC $157 million $99 million
(spending)
$43 million
(investment)
$275 million $11 million 750 $179 million $22 million

 

The economic model used to estimate these economic benefits was developed by the Alliance for Excellent Education with the generous support of State Farm® and in partnership with Economic Modeling Specialists Inc. It is based on graduation rates calculated by Editorial Projects in Education and forecasts the economic benefits for U.S. Census-defined metropolitan statistical areas (MSA), each of which consists of a central urban area and the surrounding geographic area if it has strong social and economic ties to that city. The forty-five MSAs include the fifty largest cities in the country.2 Five of these cities share a region with another.

“As a business leader I’m committed to a quality education for all children and to strengthening the vitality of our communities,” said Edward B. Rust Jr., chairman and chief executive officer of State Farm®. “The new findings from the Alliance for Excellent Education conclusively demonstrate that graduating from high school has significant positive economic and financial consequences for the business community and not just for the individual getting the education. Assuring that all of our students graduate from high school with the skills necessary to compete in a global economy is something all businesses—small and large—should see as a priority.”

Findings from the report were released at a January 12 event in Washington, DC that featured Bob Wise, Ed Rust, and Alma Powell, chairwoman of America’s Promise Alliance. Video from that event, as well as statistics for each of the forty-five metropolitan areas included in the study, is available here.

 
2 The report includes detailed findings for each of the forty-five largest metropolitan areas in the United States: Albuquerque, Atlanta, Austin, Baltimore, Boston, Charlotte, Chicago, Cleveland, Colorado Springs, Columbus, Dallas-Fort Worth-Arlington, Denver, Detroit, El Paso, Fresno, Honolulu, Houston, Indianapolis, Jacksonville, Kansas City (MO), Las Vegas, Los Angeles-Long Beach, Louisville, Memphis, Miami, Milwaukee, Minneapolis, Nashville, New York City, Oklahoma City, Omaha, Philadelphia, Phoenix-Mesa, Portland (OR), Sacramento, San Antonio, San Diego, San Francisco-Oakland, San Jose, Seattle, Tucson, Tulsa, Virginia Beach, Washington, DC, and Wichita.

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Every Child a Graduate. Every Child Prepared for Life.