Measuring the economic impact of high school dropouts

“Between October 2002 and October 2003, about 460,000 young people (in the United States) dropped out of high school. The labor force participation rate for dropouts (59.3 percent) was considerably lower than the participation rate for recent high school graduates who had not enrolled in college. Among recent high school dropouts, men were more likely than women to be participating in the labor force (65.6 versus 52.1 percent). The unemployment rate for high school dropouts was 30.8 percent in October 2003.”

We all know that economic opportunity is linked to education, and shown in the above statement from a 2004 report by the Bureau of Labor Statistics, high school dropouts are less likely to be in the labor force, and more likely to have higher rates of unemployment when they are in the labor force.

It follows that high school dropouts make less money than those who finish high school and go beyond to post-secondary education. Estimates are that the average high school dropout in New Hampshire (ages 25 to 34) made an annual income of $23,499 in 2002. A high school graduate in New Hampshire in the same age group in 2002 made 22 percent more — $28,856. Those in the Granite State with some college or an associate degree made $32,633. A Granite State resident with at least a college degree made $51,444 — double the annual earnings of a high school dropout. Those with advanced degrees had average annual earnings of $67,817, nearly three times the annual earnings of a New Hampshire high school dropout.

The good news is that not every high school dropout stays out of school. National research shows that of those that drop out at least once, 43 percent earn a high school diploma in two years, another 20 percent by eight years. Most of those diplomas are high school equivalencies, also called GEDs.

New Hampshire is part of that national trend — about 2,000 GEDs were awarded each year in New Hampshire from 1996 through 2004.

The bad news is that even those who get a GED are less likely to pursue more education than someone who graduates from high school in the usual way.

National data shows that 37 percent of U.S. dropouts still do not have a high school diploma or GED after eight years. According to an Education Week study among U.S. high school sophomores with relatively strong cognitive skills, 20 percent who earned a GED went on to complete at least two years of college, while 64 percent of high school graduates went on to complete at least two years of college.

Other research shows that GED recipients are less likely to secure a college degree, less likely to return to college after a year, will hold on to a job for a shorter time, will earn less in annual salary and hourly wages and work fewer hours and are more likely to leave military service after three years than high school graduates.

Clearly, a GED and a high school diploma are not viewed as equivalents in the workplace.

High school dropouts, probably because of their reduced earnings potential, create other costs to society. According to one study, estimated tax revenue loss from U.S. males aged 25-34 who dropped out is $944 billion, with cost increases to public welfare and crime at $24 billion. Dropouts comprise 75 percent of U.S. state prison inmates and 59 percent of U.S. federal prison inmates. High school dropouts are 3.5 times more likely to be arrested in their lifetimes than high school graduates. The U.S. death rate for those with less than 12 years of education is 2.5 times that of those with 13 or more years or education.

Higher educational attainment also leads to more stable families. Out-of-school young women are more likely to have children out of wedlock. A more positive attitude in teenagers toward school has been significantly related to fewer non-marital births. And, according to the National Center for Health Statistics, there are three times as many marriages among college graduates as among high school dropouts.

About the only thing a lack of education seems to be good for is lottery sales. High school dropouts spend four times as much on lottery tickets as do college graduates.

A study of the economic impact of dropouts in New Hampshire, presented at a recent youth conference, used these national statistics and New Hampshire-specific annual earnings to look at the following question: What if we could keep an additional 1,000 New Hampshire teenagers in high school each year, making sure they earn a high school diploma?

The results were surprising: If New Hampshire could keep 100 more teenagers in school each year, over 10 years:

• Those 1,000 high school graduates would average higher earnings ($12,000 more) every year.

• New Hampshire personal income would increase by $165 million

• New Hampshire state and local tax revenue would increase by $20 million

• New Hampshire unemployment rates, crime rates and literacy costs would all decline

• New Hampshire would be healthier and families more stable. nhbr

Economist Dennis Delay is director of special projects for the Workforce Opportunity Council of New Hampshire.