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Education / Accountability

Leaving a Trillion Dollars on the Table

By Michael Q. McShane on Apr 27, 2016

In recent years, Missouri’s economic growth has been anemic. While nationwide states have averaged 2.0% growth in GDP since 2009, Missouri has only averaged 0.7%.  Many forces affect economic growth, but a fascinating new article by Eric Hanushek, Jens Ruhose, and Ludger Woessmann shows just how large of a role education plays in the equation. What’s more, it shows the potential economic gains from improving Missouri’s education system.

Missouri currently sits near the middle of state rankings of educational achievement. According to Hanushek and colleagues, if Missouri improved its level of educational achievement to that of Minnesota, the top performing state, it would generate $1.065 trillion dollars in state GDP over the average life of a child born today. Yes, you read that right: Trillion with a “t.”

A key paragraph:

“The results of this exercise again suggest the importance of knowledge capital for state economic prosperity. We find that differences in achievement and attainment account for 20 to 35 percent of the current variation in per-capita GDP among states, with average years of schooling and achievement levels making roughly even contributions. In a sense, this estimate is surprisingly large, because both labor and capital are free to move across states—and thus tend to equalize rewards to workers with different skills. But our results are quite consistent with those obtained from similar analyses of the role of student-achievement levels in explaining differences in economic performance across countries (see “Education and Economic Growth,” research, Spring 2008).”

Missouri has serious fiscal crises looming on the horizon. Our pension systems are underfunded.  Our age-dependency ratio (the ratio of those who pay into our social services to those who receive them) is slated to grow from 61% in 2010 to 77% by 2030. If we don’t grow our economy, we are going to be forced to make some difficult and unpleasant financial choices. 

Improving our education system offers a way out. Rather than raising taxes or taking part in economic development shell games, we can actually help people become more productive and create more real, lasting wealth. And, if the authors of this article are right, our education system can be the engine of that economic growth.

If you’re interested in how we can improve Missouri’s schools, check out the education section of our 20 for 2020 document.

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About the author

Michael Q. McShane

Senior Fellow of Education Policy

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