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THE ECONOMIC LOSSES FROM HIGH SCHOOL DROPOUTS IN CALIFORNIA: New Study Pegs Annual Loss at $46.4 Billion

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“Until now, we knew very little about the economic costs of California’s dropout crisis,” said Russell W. Rumberger

The 120,000 students who did not graduate from California’s high schools in 2007 will cost California approximately $46.4 billion over the course of their lifetimes, according to a new brief by the California Dropout Research Project (CDRP). The brief, The Economic Losses from High School Dropouts in California, finds that the costs associated with dropouts stem, not only from lost tax revenue, but also from higher medical costs and the increased likelihood of a dropout being on welfare or committing a crime, compared to individuals who receive a high school diploma.

“Until now, we knew very little about the economic costs of California’s dropout crisis,” said Russell W. Rumberger, University of California-Santa Barbara professor of education and CDRP director. “These findings reveal severe economic consequences to the state and underscore the need for solutions to the dropout crisis.”

According to the study’s authors, Henry M. Levin, Columbia University professor of economics, and Clive Belfield, assistant professor of economics from Queens CollegeCity University of New York, California loses $46.4 billion—2.9 percent of the gross state product—for each group of Californians who reach age twenty without a high school diploma. The brief reports that there were more than four million people (ages eighteen to sixty-four) in California in 2005 who had not earned a high school diploma.

In the study, Levin and Belfield break down the costs associated from dropouts into several categories. For example, they find that high school graduates earn an average of $290,000 more during their lifetimes and pay $100,000 more in taxes than dropouts. Because of this income disparity, California’s state government loses $3.1 billion in state and local tax revenue for each year’s worth of dropouts. In addition, they find that California must spend an additional $2.5 billion for crime-related expenses, $400 million on food stamps, welfare, and other support, and $3.5 billion on health expenditures for each class of dropouts.

In a separate brief, The Return on Investment for Improving California’s High School Graduation Rate, Belfield and Levin perform a cost-benefit analysis to determine what it would take to ensure that more Californians earned a high school diploma. Using five interventions that range from preschool to high school and that have proven track records in raising the rate of high school graduation as models, Belfield and Levin determine that the cost of producing one additional high school graduate ranges from $37,810 to $131,000.

Compared to the benefits per high school graduate, which range from $53,000 (fiscal benefits to state and local governments) to $392,000 (total economic benefits to the state), Belfield and Levin conclude that each dollar invested in the five proven interventions generates a return of $2 to $4 in fiscal benefits to all levels of government.

Both studies are available at http://www.lmri.ucsb.edu/dropouts/.

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