Massive economic gains for states that invest in student achievement
Fifty-state effort could increase GDP by $76 trillion over next 80 years

April 6, 2016—When Congress passed the Every Student Succeeds Act in December, it returned the responsibility of public school improvement to the states. In a new article for Education Next, Eric Hanushek of Stanford University, Jens Ruhose of Leibniz University Hannover, and Ludger Woessmann of the Ifo Center for the Economics of Education at the University of Munich find that if states take advantage of this opportunity and invest in school quality, they can reap economic gains of up to $76 trillion over the next 80 years by bringing their student achievement up to the level already achieved the nation’s top state, Minnesota.

Since 1970, the gap between the poorest and wealthiest states’ Gross Domestic Product (GDP) has widened considerably, from $5,000 to nearly $12,000 per capita. Hanushek et al. attribute this widening, in part, to states’ differing levels of knowledge capital, measured as workers’ educational attainment combined with their test-score performance. Knowledge capital indicates the skill-level and earning potential of a state’s labor force.

Hanushek et al. calculate massive economic gains over the next 80 years for states that invest now in school improvement (see figure).

• If all states improved schools enough to increase student achievement to the level of the nation’s top state, Minnesota, the overall gains would be $76 trillion, or more than four times the current national GDP. By 2095, the GDP would 36 percent larger than without these school-quality improvements.
• If each state instead meets the achievement level of the best state in its region, gains would still amount to roughly $35 trillion, more than twice the nation’s current GDP.
• If each state achieved basic level academic proficiency over a 10-year period, something akin to achieving the goals of NCLB, gains would equal about $32 trillion.
• If some states choose to improve independently of others, Hanushek et al. estimate overall gains of approximately $46 trillion.

To estimate the impact of knowledge capital on GDP, Hanusek et al. compare the rate of GDP growth from 1970 to 2010 with the average knowledge capital of a state’s workers. For their calculations of economic impact, the authors estimate the expected growth of a state’s economy if the current knowledge capital of workers were to remain unchanged and compare this growth path to the one that would be achieved with better schools.

The impact of a better educated population is not immediate, as it takes time for students to finish their education, to enter the workforce, and to realize their full potential. Therefore, the authors have discounted future gains to their present value, so that any near-term gains are given more weight than gains in the more distant future. The authors’ projections also account for interstate migration and foreign immigration, as well as the gradual improvement of workforce skills over time.

School improvement efforts can benefit individuals’ earnings and balance state budgets, says Hanushek. “As the skills of today’s students improve, the skills of tomorrow’s workers advance. Realizing these gains does require a sustained commitment on the part of a state’s political leaders. But if we are to achieve prolonged economic growth in our nation, we have no choice but to strengthen the skills of our people.”

To receive an embargoed copy of “It Pays to Improve School Quality: States that boost student achievement could reap large economic gains” or to speak with Eric Hanushek, please contact Jackie Kerstetter at jackie@alessicommunications.com. The article will be available Wednesday, April 20 on www.educationnext.org and will appear in the Summer 2016 issue of Education Next, available in print on May 23, 2016. Detailed data for each state, including an interactive graphic, are available upon request.

Learn more about the research and findings in a virtual press conference with Dr. Eric Hanushek on Tuesday, April 19 at 12PM EST. Register to participate here: https://app.smartsheet.com/b/form?EQBCT=2bfcb2d680d148369236a62c91787075.

About the Authors: Eric A. Hanushek is senior fellow at the Hoover Institution at Stanford University and research associate at the National Bureau of Economic Research. Jens Ruhose is an economist at Leibniz University Hannover. Ludger Woessmann is professor of economics at the University of Munich and director of the Ifo Center for the Economics of Education.

About Education Next: Education Next is a scholarly journal committed to careful examination of evidence relating to school reform, published by the Hoover Institution at Stanford University and the Harvard Program on Education Policy and Governance at the Harvard Kennedy School. For more information, please visit www.educationnext.org.