Dropouts pose huge drain on economy

Dropouts pose huge drain on economy

June 4th, 2011 by Adam Crisp in News

Document: Education and the Economy

High school dropouts are costing Chattanooga and other Tennessee metro areas big bucks.

A new study suggests dropouts' diminished earning power is robbing the local economy of millions of dollars.

If the region's class of 2010 reduced its number of dropouts by half, those students collectively would earn $9.9 million more in an average year than they would without diplomas, according to the Alliance for Excellent Education, a Washington, D.C.-based education advocacy organization.

"The best economic stimulus is a high school diploma," Bob Wise, president of the Alliance for Excellent Education and former governor of West Virginia, said in a news release.

"From the individual student to the bank branch manager, new car salesman or Realtor, everyone wins when more students graduate from high school," he said.

Roughly 2,100 high school students dropped out during the 2010 school year in the Chattanooga Metropolitan Statistical Area - Hamilton, Marion and Sequatchie counties in Tennessee and Catoosa, Dade and Walker counties in Georgia, according to the study, which was funded by State Farm Insurance.

If that number was cut by 50 percent, the group would have spent $17 million more on homes by the midpoint of their careers, the study states. They also would have created 70 new jobs, worth $12 million in economic growth through additional spending by their career midpoints, and would have spent $1 million more on automobiles and $6.9 million more overall during an average year.

"We have known for years that high school and college graduates tend to have better earning power than people without degrees," said Kirk Kelly, the testing and accountability officer for Hamilton County Schools. "This underscores that dropouts are a community problem."

Though Chattanooga's unrealized spending robs about $600,000 from the regional sales and payroll tax base, the costs are even higher elsewhere across Tennessee.

The Memphis MSA misses out on $4.3 million in tax revenue annually, and Nashville $3.2 million in tax revenue because of its large dropout rate, according to the study. Knoxville was not rated.

In Memphis, cutting the dropout rate in half would have created $79 million in home purchases by the midpoint in the graduates' careers, the study states, and their increased spending power could have fueled another 350 jobs.

With half as many dropouts, Nashville students collectively would have spent $68 million by their career midpoints, and they could have created 300 more jobs with their higher wages.

In addition to spending more because they earn more, 45 percent of the new Chattanooga-area graduates likely would continue on to some type of postsecondary education, the study reports. However, only about 270 students, or 26 percent of these new graduates, are expected to complete their studies.

The study makes no mention of other costs, such as dropouts' increased likelihood to be on public assistance or to go to jail, but Hamilton County's Kelly said those costs are significant, too.

"If you look at the cost to educate a student per year, it's far less than the cost to incarcerate," he said. "It's always much better to educate and graduate students than it is for them to drop out."