Study Measures High Cost of Dropouts

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Study Measures High Cost of Dropouts

Special Report - October 25, 2007
High dropout rates among North Carolina high school students cost the state $169 million annually in lost tax revenue, lower earning power, and increased public assistance expenses, according to a new study commissioned by Parents for Educational Freedom in North Carolina (PEFNC). The report, released by the Milton and Rose D. Friedman Foundation on October 24, addresses the economic implications of dropouts in the Tar Heel State. The latest data from the North Carolina Board of Education and State Department of Public Instruction show that dropout rates have risen for the past three consecutive years, with a record 22,180 students dropping out of high school during the 2005-06 school year.

Noting that only 11 states have a larger percentage of adults lacking a high school diploma than North Carolina, the report states that high school dropouts earn an average of $10,400 less than graduates, are twice as likely to be unemployed, and face “a much greater risk” of relying on public assistance programs like Medicaid and food stamps. The report also concludes that total earnings of working age North Carolinians in 2005 would have been $7.5 billion higher if all high school students had graduated. As such, North Carolina’s high dropout rate results in an estimated $713 million loss each year in state income and sales tax revenue due to the reduced average income of dropouts. Dropouts are also twice as likely to be incarcerated.

In order to curb high dropout rates, the PEFNC report suggests implementing a school choice program in North Carolina, which would create “improved competitive incentives” and boost public school graduation rates. According to the report, increasing the enrollment of private schools by just 3.9 percent would mean as many as 5,483 fewer public school dropouts each year and between $12 and $24 million more in annual tax revenue.