Pathways to Prosperity Blog Series: How Education and Job Training Boost Productivity

December 20, 2017
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The Colorado Fiscal Institute recently defined shared” prosperity to mean that everyone has the opportunity to become economically successful and that as Colorado continues to grow, all people are equitably reaping the benefits of economic expansion. However, this can only be achieved when we break the barriers that prevent our communities, particularly communities of color, from achieving economic success. One way to promote both economic efficiency and strong economic growth is by investing in education and job training.

K-12 education

Access to a quality K-12 education is beneficial for students, parents, and their communities. When we invest in our schools, particularly those in low-income neighborhoods, we’re investing in smaller class sizes, after school programs, the arts and more school materials for each student. These investments can mean more opportunities for students to get better paying jobs and to give back to their communities, helping others thrive.

A study by Northwestern University and University of California, Berkeley investigated the long-term effects of increased funding on students who attended high-poverty schools between 1955-1985, before they began their K-12 education. According to the findings, schools that received a 10 percent increase in per-pupil funding were associated with better economic outcomes for their students. This translated into 10 percent higher individual earnings and 17 percent higher incomes throughout students’ lives. Furthermore, the study found that the increase in school funding was linked to a 4 percent increase in base teacher salaries, an increase in 1.4 more school days per year and a 6 percent decrease in teacher-student ratios, all things proven to help children succeed.

A quality education isn’t only beneficial for students and families. Countless research and studies show a strong correlation between quality education and a state’s economic growth. For example, a 2013 report by the Economic Policy Institute (EPI), found that a well-educated workforce, in particular workers with a college degree or more, is key to a state’s increase in productivity. Evidence from the report shows that between 1979-2012, states that saw an increase in the number of adults with at least a college degree had a cumulative growth in productivity. During this same time period, states that had an increase in productivity saw an increase in worker compensation. EPI found that overall a well-educated workforce is what actually drives a state’s economy and attracts high-wage employers, not tax cuts for businesses as trickle down theories incorrectly suggest. This report strengthens the argument that public investments, notably those in education, are the driving force behind sustained economic growth for communities and states.

These and countless other studies show that by properly funding schools, especially high-poverty schools, we are investing in our students, families, teachers and the entire surrounding community. Unfortunately, today Colorado ranks among the lowest, 39th among all states, in terms of per pupil spending in K-12 education. The local share of K-12 funding has fallen significantly since the 1980s, and the state now spends nearly $2,147 less per pupil than the national average. Largely as a result of our unique constitutional restraints, funding for K-12 and higher education continues to lag in Colorado and our students and the economy are paying the price.

Source: Public Education Finances 2013 from U.S. Census Bureau Published 2015

 

Higher education

The benefits of a quality K-12 education are compounded by access to a higher education.  In 2016, the median household income for a Colorado high school graduate was $31,515 while the median income for a graduate with a bachelor’s degree was $51,136. In other words, for every dollar a college graduate earned, a high school graduate only earned 62 cents.

To clarify further, people with two and four-year college or graduate degrees earn substantially more than people with a high school degree, further enhancing people’s economic mobility. According to the Pew Charitable Trusts, students who grow up in the poorest 20 percent of households and who have access to a college education are 2.5 times more likely to have an income that places them in the top 60 percent of earners later on in life. This is especially important for Black and Latino students who have made significant strides in higher education but continue to fall behind their White counterparts in enrollment and completion of a higher education degree.

Further, attainment of a higher education degree is linked to different rates of unemployment. As reported by the Bureau of Labor Statistics, unemployment rates for people without a high school diploma (7.7%) are much higher than for individuals with only a high school diploma (5.3%), and are drastically higher than for those who hold a bachelor’s degree or higher (2.5%).

However, similarly to K-12 education, higher education funding in the state has also seen large cuts throughout the years, particularly during the Great Recession. Today, Colorado ranks 48th when it comes to state support per each full-time college student.

 

Job training programs

Job training programs are another important public investment which increase productivity and make a state’s workforce more enticing for businesses. These programs are a vital resource for workers who weren’t able to receive higher education but want to get certified in a specific field. According to the Center for American Progress, workers who receive training tailored for a specific skill or job earn more than $300,000 more in wages in a lifetime. Examples of jobs that require skills training include licensed practical nurses, carpenters, plumbers, and biomedical equipment technicians to name a few. Cost-effective investments in job training can provide workers the opportunities to secure a job in any of these in demand professions as reported by the Colorado Center on Law and Policy (CCLP). This is especially true for workers who do not have a post secondary education. CCLP’s “State of Working Colorado Report,” found that in 2016 about 13 percent of the labor force had a high diploma while another 7.2 percent had less than a high school education.

Many states, including California, Iowa, Kentucky, Connecticut and others have already created and invested in job training programs to support workers. For example, these states and many others have turned to apprenticeships as a way to address the gap in job specific skills. Iowa for instance, established the Apprenticeship and Training Act in 2014 which appropriated $3 million annually to the apprenticeship program training fund. These funds support grants to apprenticeship program sponsors to help cover the costs of classroom supplies, job equipment, and new locations for training. As Colorado’s economy continues to grow and wages continue to stagnate, it is important to look at innovative ideas from neighboring states who are creating programs to address the needs of the workforce and the growing racial wealth divide.

Access to quality education, whether it is K-12, higher education, or job training programs, is associated with higher wages, higher employment and lower dependence on public benefits. It allows students the opportunity to have more economic mobility and contribute more to Colorado’s economy. Therefore, investments in schools and job training are crucial to our state’s economic growth. If we don’t address the barriers to funding and accessing schools, people can’t invest in their education, which is one of the most important factors in increasing productivity and creating wide shared economic prosperity.

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Tune into our next blog “Investments in Infrastructure Bring High Returns” where we will discuss in greater detail how investments in infrastructure increase productivity and shared prosperity.  

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