The Tax and Transfer Fiscal Impacts of Dropping Out of High School in Philadelphia

Katherine Wilczak

Neeta P. Fogg, Paul E. Harrington, and Ishwar Khatiwada
Center for Labor Market Studies, Northeastern University for Philadelphia Workforce Investment Board
January 2009

This report's lengthy title sums up its main point: that dropping out of high school isn't just a loss for the individual; it also imposes a fiscal burden on city, state, and federal governments. The authors compare the mean annual net contributions to public coffers (city, state, federal) of Philly dropouts, high school graduates, those with some college, and those with bachelors or advanced degrees, using indicators of employment and earnings, home ownership, property taxes, annual tax payments, receipt of monetary and other social services, and incidences and costs of incarceration. Here's the bottom line: each student who drops out of high school in the City of Brotherly Love costs the city, state, and federal government $580,000 over their lifetime. Even more worrisome, only 32 percent of the city's dropouts are currently employed--compared to 58 percent of high school graduates, 70 percent of those with some college, and 82 percent of those with a four year degree. Although the study was well executed, the findings are nothing new. Brookings published a similar (national) study in 2007, which found that if a year's worth of 18-year-old dropouts graduated from high school, federal and state governments would score an additional $156 billion over their working lives from income taxes paid on higher earnings. Unfortunately, the authors of this report offer no suggestions on how to solve the dropout problem. We can only hope that Philadelphia Mayor Michael Nutter and School Superintendent Arlene Ackerman have some tricks up their sleeves for their anti-dropout campaign, Project U-Turn. You can find the study here.