Investment in Education Wise for Economy, Report Shows

As state and local governments make tough funding choices with tight budgets, a new Economic Policy Institute (EPI) report shows adequate and effective funding of education is the best way to achieve faster growth, more jobs, greater productivity, and more widely shared prosperity.

Smart Money: Education and Economic Development draws on research to show how increased investment in preschool, primary and secondary education, and colleges provides concrete returns to economic development through increases in productivity, learned skills, technology and workers' average earnings.

At a time when the knowledge-based economy demands increasingly higher skills to stay competitive, support for well resourced schooling and training is key, the report states. This strategy also is an important tool for advancing economic equality, it adds.

Smart Money notes that many state and local governments have, for example, cut education and other services while investing in programs such as tax incentives to lure companies like Wal-Mart with expectations of an economic boom. The problem is that local resources are often shortchanged and some of the companies attracted by these programs provide mostly low-income jobs that ultimately do not improve the local job market or worker livelihood.

"If our goal is an economic climate that provides good jobs, decent living standards, entrepreneurial workers and a competitive edge over other countries, then investing in education is the single most important thing we can do," says author William Schweke, research director for the nonprofit Corporation for Enterprise Development (CFED). "Education should be thought of in terms of productivity, innovation, and the growing of wealth."

Smart Money examines nearly 180 studies that show the relationship between education investment and quality and economic development, emphasizing, for example, how schools provide not just greater knowledge but also an improvement of the lives of current and future workers. Some of the report's findings include:

• Those with less than a high school diploma saw their mean family income decline by 14 percent between 1979 and 1995, but college graduates' mean income rose 14 percent.
• A Bank of America and United Way report found the public saves $7.16 for every original dollar invested in high quality child care.
• A state's economic performance correlates to past investments in such areas as education, according to a state report card assessment by CED. Eight out of 11 states with the highest grades for local investment received an "A" or "B" in overall economic performance.
• Community colleges help to increase salaries. Men and women with an associate's degree earn 18 percent and 23 percent more, respectively, than their counterparts who are high school graduates. And,
• The corporate Committee on Economic Development found that investing $4,800 per child in preschool education can reduce teenage arrests by 40 percent.

Among its recommendations to invest wisely in education, Smart Money suggests: reforming state tax codes and business tax incentive programs so that corporations provide a fair share of revenue for education and other local services; investing more state and local money in community and technical colleges, which can provide training and skills to students and older workers who must keep up with new technologies and requirements in the job market; and investing more in early childhood education.

Smart Money is available for purchase from EPI, a nonprofit think tank, at http://www.epinet.org/.