K-12 schooling adds up: Less earning power means high school dropouts cost 7-county Milwaukee area $1.5 billion a year, economist's report says

BYLINE: Joel Dresang, Milwaukee Journal Sentinel

Aug. 30--SOUTH MILWAUKEE -- Together, the public schools of southeastern Wisconsin have a regional economic impact nearly as big as the University of Wisconsin-Madison, according to a report released Wednesday.

But even more important than the money they pump into the surrounding economy, the region's K-12 school districts can help Wisconsin catch up with Minnesota in earning power by building greater brainpower, said David J. Ward, founder and president of NorthStar Economics Inc.

Ward figures that the seven-county region's high school dropouts cost the area more than $1.5 billion a year, in lower income, lower taxes and increased service costs.

"That could be a key to fixing the economy of this area," Ward told staff at the School District of South Milwaukee. Ward presented research prepared for the Southeastern Wisconsin Schools Alliance, an advocacy group representing 33 school districts in Kenosha, Milwaukee, Ozaukee, Racine, Walworth, Washington and Waukesha counties.

A former finance professor and former chief academic officer for the UW System, Ward schooled the educators on an economy that increasingly values education. Whereas the 19th century centered on bigger and better farms, and the 20th century on bigger and better factories, Ward said, the 21st century is all about bigger and better ideas.

The gap between income for a high school graduate and a dropout has widened in the last 30 years, Ward said, with inflation-adjusted median family income dropping 31% for Americans without diplomas.

Over a working life of 50 years or so, the average dropout earns about $425,000 less than the average graduate, Ward said.

Including lost tax revenue and higher costs for health, safety and welfare services associated with lower-income families, the lifetime costs exceed $552,000 per dropout.

By those figures, the 144,000 southeastern Wisconsin residents older than 25 without high school diplomas represent an economic shortfall of $1.5 billion a year.

The region's public school students amount to about a third of Wisconsin's statewide enrollment. Those schools could play a huge role in improving the state's brainpower, Ward said, which should lead to greater earning power and help Wisconsin catch up with Minnesota.

Wisconsin and Minnesota were neck-and-neck in per capita income in 1965, Ward said, but 40 years later, Minnesota had the 11th-highest income nationally, while Wisconsin was 22nd. He also noted that Minnesota ranks 11th in percentage of college-educated workers, compared with 33rd for Wisconsin.

"We really need to concentrate and fix southeastern Wisconsin. It's a really big driver," Ward said. "If we can do that, we can really pick up some ground on Minnesota."

Ward's research is part of a campaign to get more people and policy-makers to consider schools an asset rather than a liability, said Jack Linehan, executive director of the Southeastern Wisconsin Schools Alliance.

The findings underscore the schools' role in economic development, which he said schools also rely on.

"New funding for schools can only come from an increasingly healthy economic environment," Linehan said. "Some of this data now helps clear the picture in educational leaders' minds about this connection."

NorthStar has calculated that the total economic impact of southeastern Wisconsin's school districts at $4.26 billion a year. That includes a direct impact of $2.22 billion, from spending on payroll and operations, as well as indirect benefits stemming from that spending.

A similar study by NorthStar on UW-Madison estimated the total economic impact of the state's flagship university at $4.7 billion a year.

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