Education

America's Schools: Graduation Rates Are Better Than You Think


America's Schools: Graduation Rates Are Better Than You Think

Photograph by Klaus Vedfelt/Getty Images

(Corrects the name of the university where Helen Ladd is a professor)

Say the graphic below represents a broad-based equity index. Would you think the index says the stock market it represents is a dog, or a buy? The index only recently returned to its level of four decades ago. A dog, right? Then again, after bottoming out around 1996 to 2000, the market has made an impressive comeback. Perhaps it’s a momentum play, a buy.

Here’s the thing: The chart doesn’t represent the performance of a stock, but America’s high school graduation rate, courtesy of the Federal Reserve Bank of Cleveland. Knowing that, how do you read the chart? (The average freshman graduation rate is an estimate of the percentage of high school students who graduate within four years of beginning the ninth grade.)

Is the graph a measure of despair, since over four decades all we’ve managed to do is get back to where we were in 1974? We all know America’s schools are terrible, right? Or are the more recent gains signs of a heartening rebound, a harbinger of a much brighter education future? My bet is on the latter. “This is positive news,” says Jonathan James, a research economist at the Cleveland Fed. “It will establish a better starting point for increasing human capital.”

The numbers are striking. During the 2009-10 school year, 78.2 percent of high school students got their diploma on time, up from 73.9 percent in 2002-03. All ethnic groups have shown improvement. The performance of Hispanic students stands out, with a nearly 8 percentage point gain from two years earlier. The estimated graduation rate for black students was up nearly 5 percentage points over the same period. The trend suggests that aggregate efforts such as the school accountability movement, the Bush administration’s No Child Left Behind, the Obama administration’s Race to the Top, and other initiatives are translating into progress.

The improved performance should pay off for both individuals and society. For instance, the internal rate of return on graduating from high school compared with dropping out is more than 50 percent, according to calculations by economists James Heckman of the University of Chicago, Lance Lochner of the University of Western Ontario, and Petra Todd of the University of Pennsylvania. Researchers have convincingly shown that a higher high school graduation rate leads to lower crime rates, healthier lives, and greater civic participation down the road.

Earning a high school diploma also encourages teenagers to apply for college. Many teens are anxiously waiting for the last of their college acceptance letters to arrive right now, a spring rite of passage that has expanded with time. Over the past 10 years the number of high school graduates going on to college has averaged 67.2 percent a year, vs. a 63.3 percent annual pace from 1992 to 2001 (and 56.7 percent from 1982 to 1991). For the first time in U.S. history more than 30 percent of American adults have a bachelor’s degree. It’s a safe bet that with improved high school graduation rates the figure will swell in coming years.

Students (and their parents) have responded to the poor economy and lousy job prospects by staying in school. Business loves to complain about a lack of qualified workers. Guess what: Students are making investments in boosting their human capital—from high school to postsecondary education—and this will be a boon to enterprise when the economy gains genuine momentum and the job market tightens. (Yes, that day is coming; it may even be on the horizon.)

The numbers also suggest U.S. education isn’t in crisis. Since the release of the scathing 1983 report A Nation at Risk: The Imperative for Educational Reform (PDF), conventional wisdom has given schools an F. American students routinely fall short on international tests, teacher unions and public schools are monuments to mediocrity, and so on: You know the litany of ills. The counter evidence never seems to dissipate the overwhelming gloom. It should. For example, Diane Ravitch, a research professor at New York University’s Steinhardt School of Culture, Education, and Human Development, points out that U.S. schools with less than 10 percent low-income students outperformed the top-scoring schools of Finland, Japan, and Korea.

The failing grade is also suspect for a simple, materialistic reason: the dynamism the U.S. economy has displayed since 1983. Think Silicon Valley. Private-sector productivity growth. The wealth created by an increasingly networked economy. The praise foreign executives seem to shower on the American workforce (at least in my experience). Despite all our economic problems and societal shortfalls, U.S. gross domestic product per capita has risen from $15,000 in 1983 to $48,112 in 2011 (in current dollars). And during that time schools get a failing grade? “The notion has been that all U.S. schools are failing ever since the Nation at Risk report,” says Larry Cuban, professor emeritus at Stanford University’s Graduate School of Education. “I think this is false. Lots of schools have been doing well for years.”

In other words, the discussion about education reform should shift from widespread condemnation to a more targeted, nuanced conversation. Schools with large populations of students from low-income, disadvantaged households are struggling. A focus on addressing poverty-stricken schools changes the nature of the discussion. It calls for investing not only in the classroom but in after-school and summer programs, early childhood education, and school-based health services and social services. A good review is Education and Poverty: Confronting the Evidence (PDF) by Helen Ladd, a professor of public policy and economics at Duke University. It’s also where the economic payoff from public-policy dollars is the greatest.

Don’t get me wrong: We’re far from nirvana with schools. While it’s welcome that more students are graduating and fewer students are dropping out, the numbers don’t tell us anything about the quality of the education and the risks of social promotion. I’ve never met a parent (including myself) satisfied with their children’s school, and that’s OK. Nevertheless, why not celebrate some good news about our education system for a change—and then roll up our sleeves to do even better?

Chris_farrell
Farrell is contributing economics editor for Bloomberg Businessweek. You can also hear him on American Public Media's nationally syndicated finance program, Marketplace Money, as well as on public radio's business program Marketplace.

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