Earlier this week, Scioto Analysis released our most recent cost-benefit analysis. This time, we took a look at how increasing or decreasing school spending would impact Ohio’s students. School spending, like many other policy options that invest in young people, often have far-reaching effects.
Today, I wanted to look over five of the main effects that come with increased school spending.
Test scores
The most direct effect of increasing school spending is that it improves the academic performance of students in the form of higher standardized test scores. While a test score is not in and of itself a tangible benefit to our society, higher test scores are correlated with other benefits.
Despite the fact that standardized test scores are a blunt way of measuring any individual’s intelligence, we should expect that, all else being equal, raising test scores in the aggregate is a good thing. It is a sign that on average, students are gaining some amount of human capital that will make them better prepared for their adult lives.
Increased graduation and college matriculation
Researchers have found that increasing per-student spending during elementary and high school leads to higher rates of high school graduation and college matriculation. Functionally, this outcome is very similar to increased test scores.
From a human capital perspective, these effects have a much greater impact on an individual’s future employability. They can also have the impact of signaling human capital to employers in way that test scores would not on their own. Although these effects take a long time to start accruing benefits for society, we certainly expect that these early investments are worth it.
Increased wages
Higher graduation rates and college matriculation should lead to higher wages. This means students who are exposed to increased spending early on are expected to have higher wages as adults. These higher wages can significantly improve the quality of life for the people who earn them.
Additionally, the rest of society also benefits from these people earning more. An increase in wages means more income tax revenue for the government. If allocated efficiently, these new public resources can lead to even larger benefits for society as a whole.
Lower social costs
Another effect of people earning more is that they will be less reliant on other forms of non-wage income to get by. Researchers have found that people who graduate from high school are less likely to use government assistance programs, meaning resources can be allocated elsewhere to people who need them.
Additionally, researchers have found that high school graduates are less likely to be incarcerated. This means increasing the rate of high school graduation can lower direct costs in the criminal justice system, and prevent social costs associated with crime.
Intergenerational effects
Although our cost-benefit analysis did not address intergenerational effects, these could have a large impact on society as well. New research now confirms that increasing wages in one generation can significantly affect the lives of the next generation.
This means that the benefits from a policy like increased school spending can pay dividends for decades beyond those when the initial spending takes place. Investments that have intergenerational effects can be some of the most valuable policy options from a social perspective. They require patience, but their returns are often worth it.