Eliminating Racial and Socioeconomic Performance Gaps for Pennsylvania Students Could Have Boosted Economy by $44 Billion

Closing race-ethnic achievement gaps going forward would increase the annual lifetime earnings of each yearly group of Pennsylvania students by \\$1.4 billion to \\$3.4 billion (in present value dollars). In addition, researchers estimate closing gaps in graduation rates would present substantial benefits to the larger society through reduced social costs such as crime and welfare.

“When subgroups of students do not achieve their full potential in terms of academic achievement or educational attainment, there is a significant cost to the economy,” said Lynn Karoly, lead author of the study and a senior economist at RAND, a nonprofit research organization. “Our estimates show that when school performance gaps are closed, individuals can benefit from higher lifetime earnings, society can gain from reduced social costs and the economy can experience higher rates of economic growth.”

The RAND study, which documents the magnitude of the gaps in performance for public school students in Pennsylvania and estimates the economic consequences of those gaps, is believed to be the first of its kind at the state level.

The study relied on standardized tests of reading and math administered in eighth grade as part of the Pennsylvania System of School Achievement, along with data on reading and math assessments in eighth grade from the 2013 National Assessment of Educational Progress, to compare Pennsylvania students with those in other states. Results from the 2012 Programme for International Students Assessment of 15-year-olds in reading and math were used to determine how Pennsylvania students are likely to compare with students in other developed countries. Student graduation rates were measured by the four-year adjusted graduation rate for Pennsylvania and other states.

Although Pennsylvania ranks relatively high among U.S. states in average student performance, gaps in test scores and graduation rates based on student race-ethnicity and socioeconomic status are among the widest nationally. African American and Latino students, about one-fourth of all eighth grade public school students in Pennsylvania, are behind their white counterparts in proficiency on average by as much as 24 to 38 percentage points.

Students from economically disadvantaged families, about 40 percent of all eighth grade public school students, are behind in proficiency by 20 to 26 percentage points on average. The proficiency gaps are equally large when comparing students whose parents have a college degree versus those who parents have less than a high school education. Gaps in four-year graduation rates reach 17 to 19 percentage points by race-ethnicity and 14 percentage points by family economic status.

The RAND study calculates how much higher average state standardized test scores or graduation rates would be if subgroup differences by race-ethnicity or socioeconomic status were eliminated by bringing low performing groups up to the average of the higher performing group. These calculations show the biggest gains in average test scores or high school graduation rates from closing economic status gaps compared to closing race-ethnic groups, with gaps based on parent education in between.

Other findings from the study include:

• Closing the gap in graduation rates between poor and wealthier students would result in a 5 percentage-point gain in statewide graduation rates, from 86 to 91 percent.
• Closing the gap between white students and their African-American and Latino peers would increase average statewide reading scores on the National Assessment of Educational Progress exam by 6 scale points, from 272 to 278, or close to the level of Massachusetts, the top performing state.
• RAND projects that Pennsylvania would likely rank among the top group of developed countries in both reading and math in the Programme for International Students Assessment test scores if racial-ethnic or economic status gaps were closed.

The RAND study projects that if race-ethnic academic achievement gaps had been closed in 2003, the base year of the study, the Pennsylvania GDP would have been higher one year later by \\$1 billion to \\$2 billion, or 0.2 to 0.4 percent of actual GDP in 2004. Ten years after the base year, with the compounded effect on economic growth, GDP in 2013 would have been \\$12 billion to \\$27 billion higher — a gain of 2 to 4 percent over actual 2013 GDP. Alternatively, if gaps due to family economic status had been closed in 2003, the study projects that GDP 10 years later would have been \\$22 billion to \\$44 billion higher — a gain of 3 to 7 percent.

Although recommending steps to close achievement gaps was not within the scope of the study, Karoly said that current research supports making investments in early childhood programs, after-school and summer programs that extend the learning day and stem summer learning loss, and youth development programs designed to prevent school dropout.

Support for this study was provided by Temple University, the William Penn Foundation and the Greater Philadelphia Chamber of Commerce Regional Foundation.

This research was conducted by RAND Education, a division of the RAND Corporation. Its mission is to bring accurate data and careful, objective analysis to the national debate on education policy.