No, it's not hole in the banking system. It's the incremental $2T worth of GDP our education system could provide. McKinsey & Company released an very interesting report detailing the economic impact of the various education gaps between the U.S. and other countries and within the U.S. itself.
McKinsey quantifies the effects on GDP from closing various achievement gaps:
McKinsey quantifies the effects on GDP from closing various achievement gaps:
- Closing the racial gap between black and white students generates $310-525B in GDP
- Closing the low-income to high-income gap is worth $400-670B
- Bringing the worst-performing states up to the levels of high-performing states is $425-700B
Closing these gaps (note that they are not additive - the total impact of closing all three would less than the sum of the three) could generate a substantial boost to GDP -- enough to easily offset losses from the current economic slowdown for example. If the U.S. was solely able to address these gaps, it would be a tremendous accomplishment.
What factors then contribute to the achievement gap? First, it should be noted that the data show the gap almost indisputably exists. The Department of Education tests students from across the nation through the National Assessment of Educational Progress. Scores in core subjects including math and reading show substantial gaps between white and black students.
Studies show a range of factors could contribute to this gap, from funding differences to cultural differences to parent involvement. Regardless, something needs to be done to address that gap.
But what happened to that $2 trillion mentioned in the headline? That is the gap between the U.S. and other nations (actually, McKinsey estimates the gap at between $1.3-2.3%). Despite high per-pupil spending, the U.S. consistently lags OECD countries in education performance.
Both gaps -- within the U.S. system and compared to other nations -- scream for meaningful education reform. With the price tag attached to the outcome (somewhere between one and three trillion dollars), the U.S. needs to make wise investment decisions to capture this potential GDP. This is an important frame of reference. Expenditures on education, wisely structured, need not be considered spending, but rather investment. In this case, an investment in future GDP growth, lower incarceration rates, fewer health problems, and the resulting benefit to society through GDP growth, improved tax revenues and lower public expenditures.
A key question is what separates investment from spending. Investments should be based on the expenditures that are expected to have a return of that capital in the future. Not all expenditures would qualify. Consider one easy example: if teachers received substantial increases in pay, it would likely entice more qualified applicants to the field. However, many existing qualified applicants would simply be paid more. In the latter category, the teachers benefit more than students do. Investments in education should be structured to avoid windfalls to any group of participants (teachers, administrators, contractors and suppliers, etc.) that would not deliver commensurate returns. This would argue, for instance, not simply increasing teacher wages, but changing the way teachers are paid to incentivize better teaching and attracting teachers who believe they would do such a good job they could earn substantial bonuses. It is not that higher teaching pay wouldn't improve outcomes -- it is just that that same money could improve outcomes even more if structured wisely.
Thus, items like performance pay, charter schools, and directed spending on specific programs (like early childhood development) would be viewed more favorably through this investment lens. They may not work, and educators need to play an important role in designing them, but with $2 trillion at stake every year, the time has come for the U.S. to start considering how to invest in schools, not simply fund them.
What factors then contribute to the achievement gap? First, it should be noted that the data show the gap almost indisputably exists. The Department of Education tests students from across the nation through the National Assessment of Educational Progress. Scores in core subjects including math and reading show substantial gaps between white and black students.
Studies show a range of factors could contribute to this gap, from funding differences to cultural differences to parent involvement. Regardless, something needs to be done to address that gap.
But what happened to that $2 trillion mentioned in the headline? That is the gap between the U.S. and other nations (actually, McKinsey estimates the gap at between $1.3-2.3%). Despite high per-pupil spending, the U.S. consistently lags OECD countries in education performance.
Both gaps -- within the U.S. system and compared to other nations -- scream for meaningful education reform. With the price tag attached to the outcome (somewhere between one and three trillion dollars), the U.S. needs to make wise investment decisions to capture this potential GDP. This is an important frame of reference. Expenditures on education, wisely structured, need not be considered spending, but rather investment. In this case, an investment in future GDP growth, lower incarceration rates, fewer health problems, and the resulting benefit to society through GDP growth, improved tax revenues and lower public expenditures.
A key question is what separates investment from spending. Investments should be based on the expenditures that are expected to have a return of that capital in the future. Not all expenditures would qualify. Consider one easy example: if teachers received substantial increases in pay, it would likely entice more qualified applicants to the field. However, many existing qualified applicants would simply be paid more. In the latter category, the teachers benefit more than students do. Investments in education should be structured to avoid windfalls to any group of participants (teachers, administrators, contractors and suppliers, etc.) that would not deliver commensurate returns. This would argue, for instance, not simply increasing teacher wages, but changing the way teachers are paid to incentivize better teaching and attracting teachers who believe they would do such a good job they could earn substantial bonuses. It is not that higher teaching pay wouldn't improve outcomes -- it is just that that same money could improve outcomes even more if structured wisely.
Thus, items like performance pay, charter schools, and directed spending on specific programs (like early childhood development) would be viewed more favorably through this investment lens. They may not work, and educators need to play an important role in designing them, but with $2 trillion at stake every year, the time has come for the U.S. to start considering how to invest in schools, not simply fund them.
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1 comment:
Incentives based on performance are an ideal solution. The problem is that the unions will not allow them.
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