The Economic Impact of the Achievement Gap in America's Schools

Ben Hoffman

McKinsey & Company
April 2009

Consulting giant McKinsey's new report on the achievement gap might not turn many heads in education-policy circles. But the company's reputation, combined with the report's economic findings, might just help thrust education more fully into the national consciousness. In fact, the report received play from The New York Times' Tom Friedman prior to its release (see here).

The study consists of three sections. The first details four worrisome achievement gaps: the international gap between the U.S. and other advanced nations; the racial gap between white students and students of color; the income gap between students from high- and low-income families; and the systems-based gap between neighboring classrooms, schools, districts, and states. The second portion examines the consequences of these gaps.

The implications for individuals, such as lower career earnings, a higher probability of incarceration, a less healthy lifestyle, and lower civic engagement, are widely known, but the impact on our nation's economy has been less explored. Using models that assume varying levels of progress between 1983's A Nation at Risk (see here) and 1998 (presumably, this 10-year gap between 1998 and 2008 was to let graduates filter into the working world, and thus effect GDP), McKinsey estimates that the racial, class, and systems gaps have each cost the U.S. about $300 billion to $700 billion (two to five percent of our GDP). But the international achievement gap delivers the real economic whammy: if the U.S. raised student achievement levels to those of high-performing nations like Finland and Korea, the "U.S. GDP in 2008 would have been between $1.3 trillion and $2.3 trillion higher, representing 9 to 16 percent of the GDP." In comparison, the U.S. lost 6.3 percent of its GDP in the fourth quarter of 2008.

The good news, according to the report's final section, is that schools matter profoundly. Additionally, there's good news for Ohio's Latino students: they are scoring equal to and better than students in 21other states, highlighting that racial gaps are being addressed. If we can correct things like inequities in teacher quality and school funding and commit to investing in and utilizing better data, conclude the authors, we can make progress in closing gaps whose effect has been a "permanent national recession." You can find the report here.