Closing Achievement Gaps Increases Economic Growth and Reduces Income Inequality

A new study that examined a Gonski-type social equity goal in the United States has found that closing the educational achievement gap between rich and poor would significantly increase economic growth and raise government revenues. It would also reduce income inequality by raising the lifetime earnings of the poorest children.

The results of the study demonstrate that investments targeted at raising academic achievement and narrowing achievement gaps between advantaged and disadvantaged students generate large returns in the form of increased economic growth. It found that if average mathematics and science scores in the US were raised to those of the most advantaged quarter of students Gross Domestic Product (GDP) would be $4 trillion larger by 2050, an increase of 10 per cent.

It also found that the investment would more than pay for itself by generating increased federal and state government revenues with government revenues increasing by $5.3 trillion. The additional revenues would be generated because GDP would be larger and families would be earning more income and paying taxes on their additional income.

The study found that the lifetime earnings of students from the lowest socio-economic quartile would increase by 22 per cent. They would also increase for the second and third socio-economic quartiles by 17 and 9 per cent respectively.

As the report states:

The potential economic gains described above illustrate in stark terms the waste of human talent and opportunity that we risk if achievement is not raised and gaps are not narrowed. [p.16]

The study was published by the Washington Centre for Equitable Growth last month. It used the mathematics and science results from the OECD’s 2012 Programme for International Student Assessment (PISA) to estimate the economic effects of increasing the test scores of the bottom three quartiles of socio-economically disadvantaged US students so that they match the PISA test scores of the most advantaged quartile of US students. It found that such a change would raise the US PISA average to the third best among the OECD countries, behind only South Korea and Japan. In 2012, the average US mathematics score was 27th out of 34 OECD countries and 20th for science.

The scenario modelled by the study is similar to the long-term goal of the Gonski report on school funding that differences in educational outcomes should not be the result of differences in wealth, income, power or possessions and that the average results for different social groups of students should become similar over time. Whilst Australia has significantly higher average results than the US, it also has large achievement gaps between rich and poor. Reducing these gaps could also lead to a significant increase in economic growth and government revenue in Australia and reduce income inequality.

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