The Complications of Educational Returns in Rural America

The latest paper from ROCI, our rural ed-reform task force, is a totally fascinating study of the economic “return on schooling,” how much do individuals in a given location benefit financially from higher educational attainment. Although it focuses on Idaho, its lessons are applicable everywhere.

Image from http://visualoop.com/blog/1930/how-to-measure-the-return-of-education

Image from http://visualoop.com/blog/1930/how-to-measure-the-return-of-education

In “Economic Returns to Education in Idaho,” Paul A. Lewin and Willem J. Braak begin by calculating that, in the US, an additional year of education currently provides an average return of about 7.7 percent for full-time workers.

Good news for sure, but things get more and more interesting the deeper you dig.

Between 1929 and 1977, Idaho’s per capita income was near the national average. The recessions of the early 1980s and late 2000s briefly decreased the state’s income level, and the recoveries never returned the state to its original growth path. By 2014, Idaho’s per-capita income was one of the nation’s lowest.

Is education the cause?

Idaho ranks 46th in the nation in the percentage of high school students going on to college, and its graduation rate from four-year institutions of higher education is among the lowest in the nation.

You might not be surprised, then, to learn that Idaho leads the nation in minimum-wage workers. As the authors note, “Increasing investment in advanced education at the state level would therefore seem a logical step.”

But—and here begin the real complications—Idahoans with a college degree also earn significantly less than their peers elsewhere.

So Idaho finds itself in a chicken-egg situation. Improve educational attainment without improved employment opportunities inside Idaho, and the state might risk investing in a strategy that merely exports talented young Idahoans to bordering states. Recruit new businesses to the state first, and employers will find too few skilled workers.

Lewin and Braak take several important side trips in the paper, for example, diving into the interaction of education, compensation, and various industries within the state, and studying the effects of in- and out-migration.

But the final part of the paper focuses on the “creative class” angle, essentially arguing that a more educated citizenry not only attracts jobs and amenities but also fosters innovation, which then produces more education and jobs, and so on. To date, this has largely been an urban phenomenon, so the implications for a rural state are quite challenging.

If you care about education and/or economic development in rural America, this paper is absolutely worth the read. You’ll walk away eager to learn more about your area of interest’s educational attainment, collection of industries, income rates, and “return on education.”

What you learn is likely to surprise you, and I bet you’ll look at your future work differently.