Thursday, April 23, 2009

McKinsey: Bad schools cost us $2.3 trillion

It's a constant refrain in education circles that spending on schools is an investment in the future. Better educated people earn more and live healthier, more productive lives. We know this through extensive social science research, and in fact, even know income numbers in terms of averages for people who score in different quartiles on standardized tests.

But we don't talk about the converse very often: By that logic, bad schools are extremely expensive in terms of producing far lower returns than one should expect. This is the equivalent of keeping your money in a 0% interest savings account at one bank, rather than going next door to one offering 2% or so for the same level of risk.

This week, McKinsey's Social Sector Office released a report quantifying exactly how bad our returns are in terms of lower expected earnings and the like. You can read the report here. Among the findings:

* If the USA closed the achievement gap on international tests between better scoring countries such as Finland and South Korea, our GDP could be $1.3-$2.3 trillion higher. This is the equivalent of 9-16% of GDP.

* If the USA closed the achievement gap between black and Hispanic students and white students, our GDP could be 2-4% higher ($310-$525 billion).

* If the USA closed the achievement gap between low income students and other students, our GDP could be 3-5% higher ($400-$670 billion).

* If low performing US states did as well as high performing US states, our GDP could be $425-700 billion higher.

* And lest anyone think it's all about money, the USA spent more per earned point on international tests than other countries (though McKinsey still notes that in general poor districts in the US spend less than richer districts and also do less well -- not universally, a la Washington DC -- but in general).

These are interesting numbers because as of late March, the current recession was expected to knock about 3.4% off GDP, and only the most bearish economists are putting it into double digits. So if our lousy schools are giving us annual returns of 9-16% less than we could expect, this is like being in a "permanent national recession," as McKinsey says.


The Princess Mom said...

This assumes, of course, that "eliminating the achievement gap" means raising all children to the same level of achievement, not forcing all children down to the lowest common denominator of skills and knowledge. As we've seen with NCLB, it's much easier to keep the higher-achieving students back to erase the "gap" than it is to bring the lower-achieving students up to a higher standard.

Anonymous said...

I've got to read this study more carefully but it is strikes me as fairly bizarre. Instead of comparing the U.S. with exotic Finland and South Korea and urging we reach their level of achievement, they might have compared us with our neighbor Canada, where educational and equality performance is very similar to that which is found in Finland and South Korea. Is there some sort of economic nirvana up there north of the border, caused by the fabulous performance of their students, that I somehow missed? No, I didn't think so.

Anonymous said...

Princess Mom is right. Our county trotted out a gushing press release last year about closing the much decried "achievement gap." After closer examination, some savvy parents quickly concluded that the high achieving students were not achieving at a consistent rate. Wow! Push down the high achieving kids, do little for them, and voila, the achievement gap starts to narrow. Brilliant! Shame on the Washington Post for tooting the school's horn.

Remember the comment a parent wrote here how her principal told her, "your child has killer scores. What more do you want?" And she thought, an education would be nice.

And what is your school district doing about brilliant twice exceptional children? Are they doing everything they can to match potential with performance? Don't bet on it. Who's going to bleed for a child who is drowning, struggling furiously to make B's in an advanced class? You tell them it takes her eight hours to complete homework, all weekends too, she's up way past midnight and she's still not done, and they shrug. It's an advanced class. She's getting B's (just barely, she's hanging on for dear life).

We spend all that money bringing the bottom up and assume a kid who's gifted is just going to figure it out all by herself.

It's a Potemkin education. What kind of society keeps their best talent back and works furiously to push the bottom up? I'm not impressed by this study. It's just more of the same.

Taia said...

Consider a post on this interesting Bill Gates article.

Anonymous said...

Can we get someone to estimate the cost to the economy of "wasting our brightest young minds"? My guess is that the return on the investment would be pretty impressive, and we know several things that do work.

Getting *everyone* up to speed will require a rather more significant investment...

Líber said...


No encuentro el artículo "McKinsey:Bad schools cost us $2.3 trillion" en link que pusieron, y tampoco en la página de McKinsey. ¿Alguno de ustedes lo tendrá en pdf? Mi correo es

Saludos desde Mexico City

Davidson Institute Staff said...

Hello Liber,

The link to the PDF in this post has been fixed. Thank you for your interest!

El vínculo con el PDF en este puesto ha sido corregido. Gracias por tu interés!