A Far Too Simple ROI Calculation for K12 Investment
For every dollar the state invests in each student, it gets back…
[Disclaimer: there are probably enormous errors or lapses in my calculations and theory, but this is Medium, just leave your respectful disagreements in the comments, and we’ll discuss.]
Remember when performance-based pay for teachers was all the rage? Capitalists would say something like, “Every other industry is paid based on performance, so it should work for teachers, too.”
There were so many things wrong with that argument, and since I haven’t seen much about it in the news lately, it must have gone away. For right now, I’ll highlight one major problem with the logic: very few people are directly reimbursed based on performance. In fact, I can only think of a few professions that work that way: salespeople, and people in the service industry (although I’m actually opposed to tipping and in support simply paying them more). Everyone else is compensated based on the return on investment for their position.
So yes, let’s pay teachers based on the return on investment. Forget all the sappy warm-and-fuzzy reasons we educate our youth and accept the fact that by putting money in, we get money out. Let’s start with those lovely numbers you saw in some kind of careers class in middle or high school, the average wages for different levels of education in the United States:
- High school dropout: $25,600
- High school degree: $35,300
- Associate’s degree: $41,500
- Bachelor’s degree: $59,124
- Master’s degree: $69,700
- PhD/Prof. degree: $87,200
Now let’s assume that you work for about 45 years, paying an average state income tax rate of 7.5%. Average wage X 45 years X .075 tax rate =
- High school dropout: $86,400
- High school degree: $119,137.50 (+ $32,737.50)
- Associate’s degree: $140,062.50 (+ $20,925)
- Bachelor’s degree: $199,543.50 (+ $59,481)
- Master’s degree: $235,237.50 (+ $35,694)
- PhD/Prof. degree: $294,300 (+ $59,062.50)
In other words, it’s worth a little over $32,000 to the state to get a kid to not drop out of high school. These numbers are a rough estimate of how much money the state earns back on income tax alone.
Consider this: the average amount spent per pupil in the United States is $10,700 annually. So from kindergarten to 12th grade, the state invests almost $140,000 in a single student. It seems like a lot, and it is $20,000 over the ROI for a high school graduate.
You might also be thinking that the state doesn’t make all of that back, considering people move around. It’s true, about a third of adults live in a different state than the one they grew up in, but that means a third of the adults in your state came from another state, so it all kinda evens out, doesn’t it?
There are other financial factors, too, ones that I’m not nearly smart enough to calculate. But hey, at least I’m smart enough to consider them:
- Aside from income tax, those people will be buying property and spending other money in that state.
- The more educated a person is, the less likely they are to go to prison, which apparently costs $31,286 per inmate, per year. With less than a high school diploma, there’s over a 4% chance you’ll be in prison. That’s less than 1.5% if you do graduate high school, and barely over 0 if you graduated college.
- The more education you have, the more likely you are to have a family, and the more money you’ll have to raise that family, and the more likely your kids are to become educated, so the investment never really ends.
- We’re not even including federal income tax, which has too many variables to average the ROI. But you could probably just assume that for every dollar the state invests in education, it’s worth it to the country to match.
The moral of the story is, it doesn’t take a whole lot of math to recognize that we’re getting a pretty nice return on our investment in educating our kids. Maybe we should pay teachers accordingly?
