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Reports & Research

March 24, 2011

Study Finds Increasing High School Graduation Rate Boosts Job Creation, Home Ownership, and Car Sales

Cutting the high school dropout rate in half for just one class would likely lead to billions of dollars in increased earnings, provide a boost to home and automobile sales, and create more than 50,000 new jobs nationwide, according to a ground-breaking new study released this week by the Alliance for Excellent Education. The study also includes specific results for California, which are listed below.

“The best economic stimulus is a high school diploma,” said Bob Wise, president of the Alliance for Excellent Education and former governor of West Virginia. “From the individual student to the bank branch manager, new car salesman, or realtor, everyone wins when more students graduate from high school.”

These findings, contained in “Education and the Economy: Boosting the Nation’s Economy by Improving High School Graduation Rates,” demonstrate, for the first time, the economic benefits the nation—as well as each state—would likely see if its number of high school dropouts was cut in half. This publication, which was made possible through the support of State Farm®, builds on the Alliance’s previous work examining education and the economy and provides clear evidence that in an information-age economy, education is the only currency.(To access the national findings as well as findings for individual states, visit the Alliance’s website at http://www.all4ed.org/publication_material/EconStates.)

“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 benefits 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.”

Summary of National Findings

Nationwide, an estimated 1.3 million students dropped out from the Class of 2010 without earning a diploma. Cutting this number in half would yield 650,000 “new” high school graduates who would likely make additional contributions to the nation’s economy by: 

  1. Spending $19 billionmore on home purchases than what they would likely spend without a diploma;
  2. Supporting 54,000 new jobs and increasing the gross domestic product by as much as $9.6 billionby the time they reach the midpoint of their careers;
  3. Earning $7.6 billion more in an average year, compared to their likely earnings without a high school diploma;
  4. Spending an additional $5.6 billionand investing an additional $2 billion in an average year;
  5. Boosting state tax revenues by $713 millionin an average year; and
  6. Spending an additional $741 million in an average year purchasing automobiles.

After earning a high school diploma, it is worth noting, 43 percent of these new graduates would likely continue on to some type of postsecondary education. However, only about 173,000 students, or 27 percent of all new graduates are expected to complete their studies. Boosting the share of new high school graduates who complete postsecondary programs to 60 percent—President Obama’s goal for the nation—would increase the number of postsecondary graduates to nearly 400,000.

Summary of Findings for California

In California, an estimated 199,400 students dropped out from the Class of 2010 without earning a diploma. Cutting this number in half would yield 99,700 “new” high school graduates who would likely make additional contributions to the nation’s economy by: 

  1. Spending $4.5 billionmore on home purchases than what they would likely spend without a diploma;
  2. Supporting 8,700 new jobsand increasing the gross state product by as much as $1.9 billionby the time they reach the midpoint of their careers;
  3. Earning $1.4 billionmore in an average year, compared to their likely earnings without a high school diploma;
  4. Spending an additional $1 billionand investing an additional $394 million in an average year;
  5. Boosting state tax revenues by $167 million in an average year; and
  6. Spending an additional $131 millionin an average year purchasing automobiles.

Additionally, 50 percentof these new graduates would likely continue on to pursue some type of postsecondary education, but only about 31,000students, or 31 percent, are expected to complete their studies. Boosting the share of new high school graduates who complete postsecondary programs to 60 percent — President Obama’s goal for the nation—would increase the number of postsecondary graduates to 59,800.

The dollar amounts included in the report represent the economic returns from cutting the dropout rate for only one high school class. Increasing the graduation rates for future classes would create cumulative benefits that would be exponentially greater.

“Decisions on how to close budget gaps—both nationally and in states—and build a strong economy must begin with ensuring better educational outcomes for the nation’s students,” said Wise. “There’s been a lot of talk about how budget deficits threaten our children’s future, but the best way to cut budget deficits is to cut dropout rates.”

According to data from the U.S. Census Bureau, a high school dropout earned an average of $21,023 in 2008, compared to $31,283 for a high school graduate and $58,613 for an individual with a bachelor’s degree. According to the most recent data from the U.S. Department of Labor, high school dropouts are over three times more likely to be unemployed than are college graduates.

The economic model used to generate this report was developed by the Alliance for Excellent Education in partnership with Economic Modeling Specialists, Inc.

Source:  Alliance for Excellent Education