The Monetary Value of Economic and Racial Justice in Postsecondary Education: Quantifying the Potential for Public Good
Author: Carnevale, Anthony P.
Date: 2021-05-00
Type: Reports - Research
Subjects: Cost Effectiveness,Equal Education,Educational Attainment,Ethnicity,Gender Bias,Racial Bias,Social Bias,Role of Education,Income,Taxes,Economic Impact,Correctional Institutions,Institutionalized Persons,Public Health,Expenditures,Adults,Debt (Financial),Student Loan Programs,Whites,Minority Groups,Academic Degrees,Correctional Rehabilitation,Welfare Services,Low Income Groups,Wages,Postsecondary Education,Family Structure,Critical Thinking,Thinking Skills,Citizen Participation,Authoritarianism,Diversity,Consciousness Raising,Empowerment,Psychological Patterns

In this report, we present the results of a thought experiment in which we estimated the potential costs and benefits to society of achieving equality in educational attainment and related workforce outcomes by race/ethnicity, class, and gender. We conducted this thought experiment to clarify the role that education can play in reducing inequality. While education has significant value that cannot be measured in monetary terms, we focused in our analysis on monetary outcomes such as earnings, tax revenue, and effects on GDP, along with secondary effects on incarceration costs, public health expenditures, and other public programs, using a stepwise analysis to simulate what would happen if various income, racial or ethnic, and gender equity gaps were closed. We first measured the effect of closing attainment gaps by earnings and race within the population so that low-income adults (those without earnings and those in the bottom 40 percent of earnings) matched the educational attainment of adults in the top 60 percent of earnings, and so that adults from underrepresented racial and ethnic groups matched the educational attainment of White adults. We then examined the marginal gains that would be possible if, in addition to closing attainment gaps, we were able to eliminate federal student loan debt for new completers of college credentials. After exploring the gains that could be possible based on increases in attainment and elimination of student debt for low-income additional credential holders, we conducted a stepwise analysis to estimate the earnings gaps that would remain between White men and other race/gender groups at various equity thresholds. For example, we estimated the wealth gaps that would remain after accounting for new potential cumulative savings (accrued as a result of closing earnings gaps), with the constraint that only 55 percent of wealth on average currently comes from self-generated earnings. By focusing on savings as a first step to accumulating wealth, we were able to analyze wealth at the individual level and build a proxy link between education, earnings, and overall wealth accumulation. We found that simply equalizing attainment by earnings and race/ethnicity would result in 30.5 million more people earning a college credential (a certificate or an associate's degree or above), bringing the total share of Americans with a college credential to 63 percent. We found that reaching this target would have an initial cumulative cost of at least $3.97 trillion, but would create annual benefits to society of more than $956 billion in increased tax revenue, increased GDP, reduced public health expenses, reduced criminal justice expenditures, and reduced reliance on public support programs. The personal benefits of these gains translate to $1.03 trillion in additional annual earnings, corresponding with a $3.17 trillion increase in potential cumulative savings over the course of workers' remaining careers. If we were able to equalize attainment without creating additional debt for new low-income completers, the increase in potential cumulative savings would rise even higher, to $3.76 trillion. It's tempting but inaccurate to interpret these numbers as suggesting that the investment we describe here would pay off in slightly more than four years. Our thought experiment assumes that all costs and benefits are realized immediately, but the harsh reality is that neither costs nor benefits would occur instantaneously. In fact, constraints related to capacity, readiness, and efficiency suggest that even in the best-case scenario--in which substantial systemic reforms allowed more low-income students and students from underrepresented racial/ethnic backgrounds to enroll and succeed in the postsecondary education system--it would take at least 34 years just to fill the gaps at various levels of educational attainment. In this scenario, annual benefits would begin to exceed annual costs after more than nine years and would continue to grow until the annual public benefit reached the maximum of $956 billion annually. Even after equalizing attainment, gaps in earnings and wealth could still take generations to close due to unrelenting inequalities in the workforce, the role of intergenerational transmission in maintaining wealth gaps, and deep structural inequalities maintained over hundreds of years though discriminatory policy and practice. Substantial sustained investment will be required for postsecondary education to realize its full potential to contribute to the public good. [For the executive summary, see ED612642.]