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REL Midwest Ask A REL Response

Beating the Odds

September 2017


What are the economic and social impacts of the achievement gap?


Following an established Regional Educational Laboratory (REL) Midwest protocol, we conducted a search for research reports on the economic and social impacts of the achievement gap. For this response, we used the following definition of “achievement gap” from Karoly (2015): “differences in academic performance across groups of students defined by race-ethnicity, socioeconomic status, and geographic location.” For details on the databases and sources, keywords and selection criteria used to create this response, please see the Methods section at the end of this memo.

Below, we share a sampling of the publicly accessible resources on this topic. The search conducted is not comprehensive; other relevant references and resources may exist. We have not evaluated the quality of references and resources provided in this response, but offer this list to you for your information only.

Research References

Alliance for Excellent Education. (2010). The economic benefits from halving the dropout rate: A boom to businesses in the nation’s largest metropolitan areas. Washington, DC: Author. Retrieved from

From the ERIC abstract: “Few people realize the impact that high school dropouts have on a community’s economic, social, and civic health. Business owners and residents—in particular, those without school-aged children—may not be aware that they have much at stake in the success of their local high schools. Indeed, everyone—from car dealers and realtors to bank managers and local business owners—benefits when more students graduate from high school. Nationally, more than seven thousand students become dropouts every school day. To better understand the various economic benefits that a particular community could expect if it were to reduce its number of high school dropouts, the Alliance for Excellent Education (the Alliance), with the generous support of State Farm, analyzed the local economies of the nation’s fifty largest cities and their surrounding areas. Using a sophisticated economic model developed by Economic Modeling Specialists Inc., an Idaho-based economics firm specializing in socioeconomic impact tools, the Alliance calculated economic projections tailored to each of these metro regions. These projections estimate the gross increase in important local economic factors such as individual earnings, home and auto sales, job and economic growth, spending and investment, tax revenue, and human capital based on two scenarios: (1) Reducing by half the number of local students from the Class of 2008 who failed to graduate with their class; and (2) Reducing by one thousand the number of local students from the Class of 2008 who failed to graduate with their class. This paper presents the findings for each of the forty-five metropolitan areas that together encompass the nation’s fifty largest cities, as well as aggregated findings across these areas. These findings are powerful reminders that entire communities are impacted by the educational outcomes of their youth, and they underscore the notion that the best economic stimulus package is a high school diploma.”

Alliance for Excellent Education. (2006). Healthier and wealthier: Decreasing health care costs by increasing educational attainment. Issue brief. Washington, DC: Author. Retrieved from

From the ERIC abstract: “This brief argues that higher educational attainment improves a student’s future income, occupational status, and social prestige, all of which contributes to improved individual health. The brief cites several reasons why, including the fact that Americans with higher educational attainment have more insurance coverage, individuals who lack health insurance receive less medical care and have poorer health outcomes, and lower education levels generally lead to occupations with greater health hazards. The analysis shows that states could save over $17 billion nationally, a savings that could be earned for each class of students who graduate high school rather than drop out. This potential public benefit is just one among a multitude of positive results that would accrue to society if America’s educational system successfully educated all of its students—instead of allowing over a million youth to drop out without a diploma each year. A citizenry that is not only healthier, but also wealthier and wiser, is an asset that every state, and the country as a whole, needs.”

Auguste, B., Hancock, B., & Laboissiere, M. (2009). The economic impact of the achievement gap in America’s schools. New York, NY: McKinsey & Company. Retrieved from

From the abstract: “‘The economic impact of the achievement gap in America’s schools’ examines the dimensions and economic impact of the education achievement gap. While much controversy exists on the causes of the gap and on what the nation should do to address it, the full range of the achievement gap’s character and consequences has been poorly understood.

This report examines the dimensions of four distinct gaps in education: (1) between the United States and other nations, (2) between black and Latino students and white students, (3) between students of different income levels, and (4) between similar students schooled in different systems or regions.

The report finds that the underutilization of human potential as reflected in the achievement gap is extremely costly. Existing gaps impose the economic equivalent of a permanent national recession—one substantially larger than the deep recession the country is currently experiencing. For individuals, avoidable shortfalls in academic achievement impose heavy and often tragic consequences via lower earnings, poor health, and higher rates of incarceration.”

DeBaun, B., & Roc, M. (2013). Saving futures, saving dollars: The impact of education on crime reduction and earnings. Washington, DC: Alliance for Excellent Education. Retrieved from

From the ERIC abstract: “The nation could save as much as $18.5 billion in annual crime costs if the high school male graduation rate increased by only 5 percentage points, a new report from the Alliance for Excellent Education finds. This report examines and builds upon research that links lower levels of educational attainment with higher rates of arrests and incarceration.”

Duncan, G., & Murnane, R. (Eds.). (2011). Whither opportunity?: Rising inequality, schools, and children’s life chances. New York, NY: Russell Sage Foundation. Retrieved from

From the ERIC abstract: “As the incomes of affluent and poor families have diverged over the past three decades, so too has the educational performance of their children. But how exactly do the forces of rising inequality affect the educational attainment and life chances of low-income children? In ‘Whither Opportunity?’ a distinguished team of economists, sociologists, and experts in social and education policy examines the corrosive effects of unequal family resources, disadvantaged neighborhoods, insecure labor markets, and worsening school conditions on K-12 education. This groundbreaking book illuminates the ways rising inequality is undermining one of the most important goals of public education—the ability of schools to provide children with an equal chance at academic and economic success. The most ambitious study of educational inequality to date, ‘Whither Opportunity?’ analyzes how social and economic conditions surrounding schools affect school performance and children’s educational achievement. The book shows that from earliest childhood, parental investments in children’s learning affect reading, math, and other attainments later in life.”

Note: REL Midwest was unable to locate a link to the full-text version of this resource. Although REL Midwest tries to provide publicly available resources whenever possible, it was determined that this resource may be of interest to you. It may be found through university or public library systems.

House, E. A. (2009). The high cost of Wisconsin’s dropout rate. School choice issues in the state. Indianapolis, IN: Friedman Foundation for Educational Choice. Retrieved from

From the ERIC abstract: “This study presents the public costs of high school dropouts in Wisconsin. It examines how dropouts in the state dramatically impact state finances through reduced tax revenues, increased Medicaid costs, and high incarceration rates. It also examines just how much high school dropouts cost Wisconsin’s taxpayers each year, and how much could be saved through increasing the state’s graduation rate. Though Wisconsin boasts one of the nation’s highest graduation rates, there is still room for improvement. The achievement gap between races in the state is staggering, as 86 percent of white students earn high school diplomas while only 44 percent of African Americans and 48 percent of Hispanic students graduate. This cohort of dropouts costs Wisconsin hundreds of millions of dollars each year.”

Karoly, L. A. (2015). Economic impact of achievement gaps in Pennsylvania’s public schools. Santa Monica, CA: RAND. Retrieved from

From the ERIC abstract: “This study documents the magnitude of the gaps in student performance for public school students in Pennsylvania and estimates the economic consequences of those education performance gaps. Although Pennsylvania is one of the top-scoring states on the 2013 National Assessment of Educational Progress (NAEP) on average, the achievement gaps between students classified by race-ethnicity, economic status, and parent education are among the largest in the country. For eighth-grade reading and math, the share of white students in Pennsylvania achieving proficiency or above exceeds the share for African-American and Latino students by as much as 24 to 38 percentage points, depending on the assessment and subject. There are equally large differences in student achievement based on family economic status and parent education, as well as sizeable gaps in performance across school districts. If race-ethnic or socioeconomic achievement gaps were eliminated, average achievement scores for Pennsylvania would match Massachusetts’ result (the top-scoring state on the NAEP) and likely place the state among the top-scoring countries internationally. The study applies several methods to value the cost of existing gaps in terms of current economic performance and to value the benefits that would accrue in the future from closing current gaps. Notably, race-ethnic academic achievement gaps amount to an estimated annual cost of $1 billion to $3 billion in lost earnings, which equates to 6 to 15 percent of the earnings for African-American and Latino workers. If student performance gaps based on race-ethnicity or family economic status were closed for future cohorts, each annual cohort in Pennsylvania would gain $3 billion to $5 billion in present-value lifetime compensation and nonmarket benefits. These social gains from closing race-ethnic gaps equate to approximately $83,000 to $125,000 in present-value dollars per African-American and Latino student”

Lynch, R. G., & Oakford, P. (2014). The economic benefits of closing educational achievement gaps: Promoting growth and strengthening the nation by improving the educational outcomes of children of color. Washington, DC: Center for American Progress. Retrieved from

From the ERIC abstract: “Our nation is currently experiencing growing levels of income and wealth inequality, which are contributing to longstanding racial and ethnic gaps in education outcomes and other areas. This report quantifies the economic benefits of closing one of the most harmful racial and ethnic gaps: the educational achievement gap that exists between black and Hispanic children and native-born white children. The report reviews data on growing inequality, demographic changes, and intensifying global economic competition; it describes factors that cause educational achievement gaps, and offers public policies that could help close them. Even from a very narrow budgetary perspective, the tax revenue gains this study forecasts suggest that investments to close racial and ethnic achievement gaps could amply pay for themselves in the long run.”

Rumberger, R. W.,& Losen, D. J. (2016). The high cost of harsh discipline and its disparate impact. Los Angeles, CA: Civil Rights Project—Proyecto Derechos Civiles. Retrieved from

From the ERIC abstract: “School suspension rates have been rising since the early 1970s, especially for children of color. One body of research has demonstrated that suspension from school is harmful to students, as it increases the risk of retention and school dropout. Another has demonstrated that school dropouts impose huge social costs on their states and localities, due to lost wages and taxes, increased crime, higher welfare costs, and poorer health. Although it is estimated that reducing school suspension rates in Texas would save the state up to $1 billion in social costs, only one study to date has linked these two bodies of research. The current study addresses some of the limitations of that study by (1) estimating a stronger causal model of the effects suspension has on dropping out of school, (2) calculating a more comprehensive set of the social costs associated with dropping out, and (3) estimating the cost of school suspensions in Florida and California, and for the U.S. as a whole. The results show that suspensions in 10th grade alone produced more than 67,000 dropouts in the U.S. and generated social costs to the nation of more than $35 billion. These results are undoubtedly conservative, since the California and U.S. estimates were limited to 10th-grade students, while the Florida estimates were limited to 9th-grade students. Thus, they did not capture the effects of suspensions in earlier grades.”

Swanson, C. B. (2009). Cities in crisis: Closing the graduation gap. Educational and economic conditions in America’s largest cities. Bethesda, MD: Editorial Projects in Education. Retrieved from

From the ERIC abstract: “The condition of America’s high schools stands as a central concern among both educators and policymakers. Independent research has revealed a state of affairs in which three in ten students fail to finish high school with a diploma and in which barely half of historically disadvantaged minority students graduate. This report, a successor to 2008’s ‘Cities in Crisis,’ takes stock of high school graduation in the nation’s 50 largest cities and their broader metropolitan areas. The report considers progress made or ground lost during the past decade. Although the scale of the dropout crisis remains troubling, it is noted that the majority of the nation’s largest cities have seen improvements in their graduation rates over this period and that some of those gains have been substantial. The report also maps the intersection between education and the economy, as it relates to the impact of schooling on the key economic outcomes of employment, income, and poverty. In today’s world, finishing high school is generally considered a bare-minimum prerequisite to function successfully in many aspects of adult life, particularly those associated with achieving financial security and career advancement. This analysis concludes that a high school diploma may offer its greatest benefit by opening doors to further education and training, which in turn afford additional opportunities.”

Additional Organizations to Consult

The Alliance for Excellent Education –

From the website: “The Alliance for Excellent Education is a Washington, DC—based national policy, practice, and advocacy organization dedicated to ensuring that all students, particularly those who are traditionally underserved, graduate from high school ready for success in college, work, and citizenship. The Alliance focuses on America’s six million most at-risk secondary school students—those in the lowest achievement quartile—who are most likely to leave school without a diploma or to graduate unprepared for a productive future.”

Midwest Achievement Gap Research Alliance –

From the website: “The Midwest Achievement Gap Research Alliance will leverage data from state education agencies and other key stakeholders for two purposes:

  1. To increase the region’s capacity to access, conduct, interpret, and make sense of achievement gap research.
  2. To support the use of achievement gap research in decision making at the state and local levels.”


Keywords and Search Strings

The following keywords and search strings were used to search the reference databases and other sources:

  • impact “achievement gap”

  • impact descriptor: “achievement gap”

  • economic impact “achievement gap”

  • social impact “achievement gap”

  • “achievement gap” crime

  • “achievement gap” health

  • “achievement gap” income

Databases and Search Engines

We searched ERIC for relevant resources. ERIC is a free online library of more than 1.6 million citations of education research sponsored by the Institute of Education Sciences (IES). Additionally, we searched IES and Google Scholar.

Reference Search and Selection Criteria

When we were searching and reviewing resources, we considered the following criteria:

  • Date of the publication: References and resources published over the last 15 years, from 2002 to present, were include in the search and review.

  • Search priorities of reference sources: Search priority is given to study reports, briefs, and other documents that are published or reviewed by IES and other federal or federally funded organizations.

  • Methodology: We used the following methodological priorities/considerations in the review and selection of the references: (a) study types—randomized control trials, quasi-experiments, surveys, descriptive data analyses, literature reviews, policy briefs, and so forth, generally in this order, (b) target population, samples (e.g., representativeness of the target population, sample size, volunteered or randomly selected), study duration, and so forth, and (c) limitations, generalizability of the findings and conclusions, and so forth.
This memorandum is one in a series of quick-turnaround responses to specific questions posed by educational stakeholders in the Midwest Region (Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio, Wisconsin), which is served by the Regional Educational Laboratory (REL Region) at American Institutes for Research. This memorandum was prepared by REL Midwest under a contract with the U.S. Department of Education’s Institute of Education Sciences (IES), Contract ED-IES-17-C-0007, administered by American Institutes for Research. Its content does not necessarily reflect the views or policies of IES or the U.S. Department of Education nor does mention of trade names, commercial products, or organizations imply endorsement by the U.S. Government.