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April 14, 2008

Long Term Prosperity Linked to Education

Far too often, our worry about the short term state of the economy prevents us from focusing on the long term. That’s too bad because it is the long term state of affairs, not the short run that we have most ability to influence.  The most important issue looming for Indiana and the nation as a whole is education.  Here is the fate of a representative group of ten 18-year-olds.  

Four years ago, our ten Hoosier students entered high school.  One could not read.  As of this spring, he and one or two others are no longer in school, having dropped out due to pregnancy, illiteracy or behavior problems.  Two more are going to college out of state, or have joined the military.  Between three and four more are going to one of our fine four- ear universities in Indiana.  The remaining two or three kids will soon enter the labor force without college experience, though they are very likely to further their education either through employer sponsored training, or at Ivy Tech.  The prognosis for the economic health of these groups is very different.  

The drop-outs are essentially finished.  For every high school drop-out who will become economically self sufficient, there are dozens who will always need public assistance.  As far as labor markets are concerned, these folks are worth far less than a third world worker, but cost far more.  In Indiana, this problem is both rural and urban, and for many communities is a looming disaster.  The best outcome we can really hope for is that they won’t have children and that they stay out of jail (both costly endeavors for taxpayers).  This is a harsh diagnosis to be sure but the truth nonetheless.  

Of the five or six who go to college or the military, only three will eventually finish a four-year degree but the remainder will have picked up job skills along the way.  These are the “above average” folks who will have family incomes above the median. They are the future taxpayers.  We have done a lot for these kids.  We’ve spent perhaps $120,000 of taxpayer dollars on their education, and are subsidizing college.  And for the students who fall by the wayside we did even more.   The five “below average” folks, are going to receive more government services than they pay for.  But the top half of students will have made the most of any assistance they received.   

The two or three who don’t go to college are a huge untapped resource and the ones where public involvement makes the most difference. Here, the investment in technical and community colleges could have a highly salutary effect.  

The real effect of globalization is simply that an increasing number of us are in global labor markets.  How we make the most of this challenge will be the subject of next week’s column.

Link to this commentary: https://commentaries.cberdata.org/118/long-term-prosperity-linked-to-education

Tags: education, personal income and wealth


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Hicks earned doctoral and master’s degrees in economics from the University of Tennessee and a bachelor’s degree in economics from Virginia Military Institute. He has authored two books and more than 60 scholarly works focusing on state and local public policy, including tax and expenditure policy and the impact of Wal-Mart on local economies.

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