Economic Implications of a Dropout

South Carolina faces a potentially troublesome future with the rate of high school dropouts in the state, particularly in the current economy. The implications of this trend not only influence the immediate earning potential of a dropout, but reach far into the future with implications for public welfare.

The Bureau of Labor Statistics has shown that high school dropouts earn an average under $20,000 annually (female dropouts age 25-34 earn less than $15,000) compared to their high school graduate counterparts who earn $28,800. The average annual income for an adult with a bachelor’s degree jumps to $46,300. Over the course of a thirty year working career, a college graduate with a bachelor’s degree will earn almost $750,000 (with no adjustments for inflation) more than a high school dropout.

The differences in the income levels between the college graduate and high school dropout are significant, particularly when considering the impact of the lessened tax rates on public services and infrastructure.

Income

South Carolina does not tax the first $2,670 of federal taxable income. For amounts over $2,670, South Carolina’s graduated tax rate is 3-7 percent of taxable income (SC Tax Commission, 2009). The individual income tax brackets are adjusted annually for inflation. When comparing the tax revenues collected from a dropout with those of a college graduate, the economic implications for South Carolina are significant. These lowered tax rates result in shortfalls for our economy in the form of our highways, hospitals, libraries, schools and all publicly funded infrastructure and services. The income gap situation becomes exacerbated when the higher income earners begin to bear more of the financial burden for the same services consumed by the entire population. Over time, the shortfall will likely be made up by other means, or face costly deficits.

The income earned by high school dropouts, between the ages of 25-34, was roughly 1.4 billion dollars annually. Compared to high school graduates (no college included) who earned 4.8 billion, the resulting gap amounts to 3.4 billion dollars. At a tax rate of 5 percent, the unrealized tax revenue amounts to more than 170 million dollars annually for South Carolina.

Personal Property

In South Carolina, personal cars, light trucks and motorcycles are assessed at 6% percent of market value for tax year 2008. If you own a $10,000 car today, for example, based on an average millage rate, your annual property tax would be about $173.40.

Although South Carolina’s “property tax relief” law means homeowners are exempt from all property taxes levied for school operating purposes on a legal residence, there are further economic implications for reduced property tax rates that counties collect given the evidence that a dropout earns far less and is statistically more likely to pay less in property taxes.

Again, the reduced tax revenues that counties and cities depend on for services and infrastructure are compromised due to the disparity between the earning potential of a dropout compared to a graduate.

Income Gap

The implications of this income gap reach far into the future with implications for all South Carolinians and our public welfare. In addition to the gap that persists between lower and higher levels of achievement (the primary indicator of dropping out of school), there is a proportional gap in income levels between the dropout and the graduate. This income gap will likely widen as we recover from a recession and those in poverty remain at their current levels due to unemployment, underemployment or insufficient training/education.

Solutions

A review of the related literature has identified numerous measures to address the dropout rate in schools. Only a few of the more distinct suggestions show the urgency with which public policy makers might act in order to relieve the burden for future generations of South Carolinians.

Research indicates numerous effective processes and strategies that can be implemented to curtain the tide of dropouts. Among the suggestions are: parents/guardians need to be better engaged with their children’s education; colleges and universities must better prepare those entering the teaching profession; high schools need refined and rigorous curricula with highly qualified teachers implementing improved instruction and assessment; schools need additional appropriate alternatives for those students who are not on the traditional diploma track and for those students who are chronic disruptions to teaching and learning; schools need to be administered by leaders capable of attracting and retaining successful faculty. Finally, policy makers must institute greater urgency and implement necessary changes to our public schools-South Carolina’s future depends on it.

Advertisement