A long term strategy for job creation must include a plan to strengthen K-12 education. Economists have long recognized the positive relationship between an investment in education and a strong economy. An educated citizenry leads to increased productivity, economic growth,
and good jobs.

Globalization Strikes Michigan
• A High Stakes Car Race. The United Auto Workers’ strike focused attention on the decline in sales of American-made automobiles in the Unites States. Since 1996, both General Motors’ (GM) and Ford’s market share of U.S. sales have fallen about 10 percent. These decreases have been accompanied by a double in market share by Toyota and Honda (non-American car manufacturers).

• Low Skills. The Japanese are surpassing Americans in auto sales and in education. Toyota has just recently passed GM as the number one car maker in the world, while Japanese 15-year-olds outperformed their American counterparts in math and science in a 2003 assessment.

• Graduation Struggle. As other industrialized countries increase their numbers of college-educated workers, America is falling behind. As recently as 1998, the U.S. ranked first in percentage of 25-34 year olds with a bachelor’s degree, but by 2004 it had dropped to 5th. According to one analysis, “If recent trends continue, the United States will rank 9th by
2007, 13th by 2009, and 18th by 2019. In another 12 years most of the world’s industrialized democracies will have surpassed the United States in bachelor’s degree attainment.“

• Changing Economy. The Bureau of Labor Statistics projects that through 2014 over half of all new jobs will require at least some college. Of the 30 fastest growing jobs through 2014, four out of five will require some postsecondary education or training. 6 By 2020, the nation may face a shortage of more than 14 million workers with these skills.

Education Pays Huge Economic Dividends
• Personal Income. Simply put, the longer you stay in school and the more you learn, the more money you will make as an adult. Individuals with less than a high school diploma earn an average income of $17,299; whereas individuals with a bachelor’s degree earn an average income that is more than three times as high ($52,671). Higher scores on standardized achievement tests also contribute to higher earnings:
• Several recent studies suggest that boosting student achievement scores by a standard deviation increases future earnings by 12 percent.

• One recent study found that students who made substantial test score gains in mathematics during high school had higher earnings than their peers seven years later. “The high correlation between test scores and socioeconomic status suggests that one way to improve the skills and productivity of those at the bottomof the socioeconomic ladder is to improve their test scores.”

• Greater Output. If America could raise t he skills of it s student s t o t he middle of the pack of European nations over the next decade, our Gross Domestic Product (GDP) would grow by an additional five percent over 30 years. That would mean an extra $1.5 trillion in 2037 alone—more than triple what we currently spend on K-12 public education. Over a 50-year period, this increase in skills would yield incomes that are an additional 64 percent higher.

• Greater Productivity. Increasing the education level of workers by one year increases national economic growth by five to 15 percent and increases productivity by 8.5 percent in manufacturing and 12.7 percent in non-manufacturing industries.

• Greater Savings. If one third of all Americans without a high school education were to get more education, the savings would range from $3.8 billion to $6.7 billion in family assistance, $3.7 billion in Food Stamps, and $400 million in housing assistance.

Improving Education Leads to Savings for Taxpayers
• Cost of Drop Outs. The poverty rate for families headed by dropouts is more than twice that of families headed by high school graduates. Each cohort of dropout s costs the U.S. $192 billion in lost income and taxes. Adding just one additional year of schooling for those students would recoup nearly half those losses.

• Cost of Remediation. Just at the community college level, families spend $283 million annually to pay for remedial courses every year, and taxpayers foot an additional $978 million. Counting lost productivity because students who take remedial courses are much less likely to earn a degree, poor preparation costs $2.3 billion annually.

Greenspan and Bernanke Agree
• In a September 24, 2007 speech to the U.S. Chamber of Commerce, Ben Bernanke, the Chairman of the Federal Reserve spoke about the economic necessity of investing in education:
“ Education fundamentally supports advances in productivity, upon which our ability to generate continuing improvement in our standard of living depends. If we are to successfully navigate such challenges as the retirement of he baby-boom generation, advancing technology, and increasing globalization, we must work diligently to maintain the quality of our educational system where it is strong and strive to improve it where it is not.”

• In his new book, The Age of Turbulence, Alan Greenspan writes about the economic consequences of a weak education system:
“ A dysfunctional U. S. elementary and secondary education system has failed to prepare our students sufficiently rapidly to prevent a shortage of skilled workers and a surfeit of lesser-skilled ones, expanding the pay gap between the two groups. Unless America’s education system can raise skill levels as quickly as technology requires, skilled workers will continue to earn greater wage increases, leading to ever more disturbing extremes of income concentration.”

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Strong American Schools, a project of Rockefeller Philanthropy Advisors, is a nonpartisan campaign supported by The Eli and Edythe Broad Foundation and the Bill & Melinda Gates Foundation promoting sound education policies for all Americans. SAS does not support or oppose any candidate for public office and does not take positions on legislation.