Saturday, April 30, 2011

Economic Effects of Dropping Out of High School or College



By: Dianne Heath

High school students generally drop out because of the effects of abuse, poverty, emotional issues, cognitive deficiencies and lack of support. College students are more likely to drop out due the impact of declining mental health, financial issues or the readiness to begin their professional career. The job market has grown tremendously competitive therefore the economic effects of dropping out of high school or college are more severe now than ever.
A lack of a high school diploma or college degree can reduce your earning potential.
Lower Wages
Students who drop out of high school or college are often restricted to positions with lower pay and are trapped in dead end jobs. They also more likely start at the very bottom of the career ladder since many upper-level positions require specialized skills and evidence of education. A study conducted in 2006 by the U.S. Bureau of the Census reports that high school dropouts earned an average of $17,299 annually compared with $26,933 earned annually by high school graduates. Marguerite Kondracke, president and CEO of America's Promise states that “Each year dropouts represent $320 billion in lost lifetime earning potential.” Unfortunately employees with only basic skills are viewed as expendable. Since many dropouts do not have specialized skills and are at the entry level positions, consequently, they are also more vulnerable to more frequent and longer instances of unemployment. The U.S. Department of Labor revealed in 2003, that high school dropouts have a 72 percent greater chance of being unemployed than high school graduates. Unless the dropout obtains education or learns a valuable skill, he runs the risk of being limited in his professional growth. Lower wages can cause dropouts to accrue massive debt, depend on government assistance, become the target of fraudulent businesses and live paycheck to paycheck. Many are a few paychecks away from being homeless and unable to support themselves. The lack of funds limits the amount of money that could be used to invest, start a lucrative business and save for the future, continues the cycle of poverty. In effect, upward economic mobility is severely stunted.
The high demand for advanced skills such as computer engineering excludes dropouts from the job market. 
Skills Gap
The skills gap between graduates and dropouts is substantial unless the former student acquired skills or developed his talent outside the classroom. Many upper-level professional careers require a combination of computer skills, the ability to teach, critical thinking skills, the capability to analyze complex text and/or apply theories. Since many drop outs lack in these skills this has a mass negative effect on U.S. productivity and global competitiveness. Finding qualified employees is often a major source of frustration and concern for companies. Andersen from the National Association of Manufacturers reports, “Experts project that, recession or not, by 2020 the U.S. will face a dramatic shortage of employees with the kind of skills necessary for U.S. business to compete in a complex, technology-drive global market. Experts also agree that we will face a labor shortage that may make the 1990s pale by comparison.” Many of these skills can only be nurtured during high school and college. The external motivation, honest feedback and competition in a classroom setting are conductive for encouraging students to attain the highest skill level. Also many industries need proof of skills through a degree and certifications. Those who drop out may never get the hands-on experience needed to learn these skills and obtain such a position. This phenomenon further perpetuates the wage gap between diploma and degree earners and dropouts.
College teaches students business etiquette, professionalism and networking techniques.

Diminished Networking Opportunities
Once a student drops out of high school or college, the chances of connecting with like-minded individuals, attaining mentors or networking with industry leaders are reduced. The best method to gaining opportunities is through visibility and making a quality impression on the people you have relationships with. Kevin Fogarty in “Hired! Landing a Job in Today’s Finance Industry” states, “Nothing is better than a personal reference to make a candidate credible to a potential employer or point a candidate to an opening that might not have been advertised.” School offers students the chance to practice social interaction with academics and professionals. Dropouts lose the opportunity to learn characteristics employers value which decrease their knowledge on how to be an attractive candidate for employment, inclusion in networks or venture capital. If these former students have no exposure then industry leaders and potential employers have no chance to experience the dropout’s possible stellar talent, glowing personality or specialized skills. For example, students are able to obtain internships, that are not widely advertised, through their high school or college. Students get the chance to showcase their skills and turn the internship into a prestigious full-time job. Many drop out of school due to lack of support or positive role models at home. However school can provide a positive role model and well-informed adviser. School also provides the platform to form friendships with knowledgeable motivated students that lead others to opportunities. Also, many profitable companies began with educated friends who decided to pool their skills together on a start-up. 

Costs and Benefits to Society
High school and college dropouts have a higher chance of feeling depressed and hopeless about their situation and turning to destructive coping mechanisms or survival techniques. This can lead to unsavory behavior such as drug use, criminal activity, alcoholism, unhealthy habits and unwanted pregnancies. These destructive habits can have major economic costs to society. The Center for Labor Market Studies found in 2009 that high school dropouts were 63 times more likely to be institutionalized than college graduates. Wall Street Journal notes that high school dropouts make up 75 percent of state prison inmates. State budgets can be drained by funding for entitlement programs. The report “Decreasing Health Care Costs by Increasing Educational Attainment,” explains that if the 2006 high school students had graduated then the U.S. could had saved $17 billion in Medicaid and expenditure in these youth’s lifetime. States with a large amount of high school dropouts have more difficult time attracting business, research companies and increasing productivity. For example research by Cecilia Rouse, professor of economics of public affairs at Princeton University shows that if the high school dropouts would had graduated, Colorado’s economy would had grown by $4.2 billion and California by $40 billion. 

In some instances dropping out of school can result in individual wealth and pump billions into the economy through entrepreneurship. The lack of opportunities and safety net from dropping out of school can spur innovative ideas and motivate dropouts to start a meaningful business. The industry that a dropout may desire to obtain a position in may be restricted. Therefore the dropout may attempt to gain entry into the industry by creating their own opportunities through becoming a self-made expert and business owner. In other instances students may purposefully drop out of college to invest time in their start-up idea. Two examples of dropouts who became successful entrepreneurs, according to a CNBC report, include David Geffen, who founded Asylum Records, Geffen Records and co-founded DreamWorks, and Jack Taylor, who founded Enterprise Rent-A-Car. These entrepreneurs have provided billions of dollars worth of jobs and benefits to society through innovation.

The Economic, Social and Educational Challenges that Community Colleges Face

References:
  • U.S. Bureau of the Census. (2006). Income in 2005 by educational attainment of the population 18 years and over. Table 8. Washington, DC: U.S. Government Printing Office.
  • Fields, Gary (2008). The Wall Street Journal. The High School Dropout’s Economic Ripple Effect.
  • Lehr, C. A., Johnson, D. R., Bremer, C. D., Cosio, A., & Thompson, M. (2004). Essential tools: Increasing rates of school completion: Moving from policy and research to practice. Minneapolis, MN: University of Minnesota, Institute on Community Integration.
  • Andersen. (2001). National Association of Manufactures. The Skills Gap 2001.
  • Fogtary, Kevin (2008). The Ladders. Hired! Landing a Job in Today’s Finance Industry.
  • Sum, A., Khatiwada, I., McLaughlin, J., et. Al (2009). Center for Labor Market Studies. The Consequences of Dropping out of High School.
  • Healthier and Wealthier: Decreasing Health Care Costs by Increasing Educational Attainment,‖ (Washington, DC: Author, 2006).
  • Rouse, C. E. (2005). “Labor market consequences of an inadequate education.” Paper prepared for the symposium on the Social Costs of Inadequate Education, Teachers College Columbia University, October 2005.
  • Deutsch, Donny. CNBC. The World’s Richest College Dropouts.

12 comments:

Sarah Allen said...

Thought provoking post, and very true. Thanks for sharing.

Sarah Allen
(my creative writing blog)

D. Heath said...

@ Sarah Allen! Thank you for reading :) Another aspect that I didn't mention was the vulnerability to exploitation. Many are so trapped at their jobs that they have to accept abuse from their boss.

Anonymous said...

I know more college graduates than not who cannot even find minimum wage work right now. Not too mention they cannot pay back student loans. You cannot get out from under those. Not even bankruptcy will remove the debt obligation of student loans.

Heck, even Suze Orman has been discouraging people lately from taking on student loans because they are probably not going to get decent employment (or any employment) and therefore will not be able to pay back the loans. Who has 50-100k cash to get a 4 year degree? Scholarships and grants would be helpful, but they are not plentiful anymore due to budgets being cut to the bone nationwide.

One of the bigger call centers in my state is full of call takers that are 50/50 high school graduates and people with degrees (many have Master's degrees). Regardless they all take calls for $11.00 per hour, just to have a job.

I don't think anyone has any more advantage over the other in this economy.

Anonymous said...

One more thought.....

Oddly enough, I know of someone who has a GED (dropped out at 16 and got GED much later in life)and he could ALWAYS find work, even before he got the GED. Good paying work. Go figure...

D. Heath said...

@Anonymous Hello! You have made an excellent point :) In the future I'm going to write another post about whether the costs of college are worth it ( in fact I already have some sources to use). I mentioned entrepreneurship so that people could see that they could create their own success if they do drop out. I also tried to emphasize that the lack of skills was a major barrier. But if a drop out sat down and learned coding, then they could have similar opportunities as a graduate. Or if they bonded with industry leaders then this could lead them to even more opportunities than a college graduate. The Great Recession is deeply hurting everyone, however studies show that it is hitting people without college degrees the most, especially high school/college dropouts. I believe that the lack of connections could be the cause. You also have to think about why people drop out. If a person dropped out because they were severely depressed, pregnant, on drugs then their chances of being able to recover financially would be less than a person that dropped because they were ready to work. Resilience level makes the difference between a successful person and an unsuccessful person. Also, a person's psychological well-being, social support and skill level are major determinants of success. Thank you for commenting!! You made an great analysis and shared a personal experience that provided a balanced view on this issue.

Anonymous said...

I look forward to a future post on the subject.

Entrepreneurship is definitely the key to unlock more doors these days. It was the exact way in which the country bounced back after 1929....through Entrepreneurs.

However, many of us were raised with the old stand-by that you have to work for someone else, get a paycheck where all taxes and benefits are deducted, hopefully get a pension. There is not a lot of ambition in people due to this basic premise that we all must do the 9-5 grind.

Even successful internet/affiliate marketers, writers or even brick and mortar Entrepreneurs get a lot of smack from people asking when they are going to "get a job"

Doing your own thing is discouraged by the masses and that is why over 44 millions people will "make do" with food stamps and others will just collect unemployment while the masses tell them to keep looking for a "job".

I think a lot of people could not handle being their own boss, but I also think that a lot of people could open themselves up to a whole new world if the they could see beyond what they have always been taught.

This is another reason why so many people go to college. They are expected to go. Like it is the end all be all. Obviously, to be a doctor or lawyer, etc....you need college. But, many go and yet still have no real direction or desire. It can make for a lot of frustration. Pay/owe tens of thousands and still not know what to do with your life.

I read somewhere that the majority of the world's most successful and even wealthiest people did it without college. In some cases without high school.

I would never advocate not finishing at least high school, but the point is.....there are many different paths one can take that can lead to success. If a person really wants success.

D. Heath said...

@ Anonymous
For many however college can help you find your direction. Many modern entrepreneurs were college dropouts. So they got the knowledge they needed, realized that this is not what they wanted to do and left. All of our experiences help us become the people that we are. I just think that many colleges are taking advantage of this through their high prices. I would feel uncomfortable if all of the rich people went to college and all of the poor & middle people had to find some other way to make it without having access to a professional career. Entrepreneurship is not as easy as it seems. You need the contacts, money, experience. However you must attend college with an entrepreneurial mindset or it will be a waste of time.

Sophia said...

Great post,
I found this article in the Atlantic a couple days ago which deals with a similar issue
http://www.theatlantic.com/business/archive/2011/05/college-students-deserve-to-know-what-degrees-will-pay/239364/
Basically, college students should know what their diplomas are worth

Entrepreneurship really is amazing in how it's taking hold. Unfortunately, the American school systems aren't reflecting this adequately.

Also, I've found out recently that you don't need a high school diploma to go to a good university. Shocking, I know. I'm going to do a full post on it later but yeah.

Basically, I loved your post, keep it up!
gulabie.blogspot.com
I follow back!

D. Heath said...

Thanks for the link! We are definitely in strange times. On one hand you may need a bachelors degree to gain access to the hidden jobs (networks) while on the other hand that degree may do nothing for you. College is a gamble, that's why having an entrepreneurship approach to college is so important. Thank you for your comment, because I do love them and respond to them, lol!!
Off the check out and follow your blog...

Bailey said...

Our technical high schools are providing some new opportunities for high school students and adults. Children are being introduced to trades and because of an forced upgrade in academics they still have the option of college. These students do have career options many college graduates lack.

Marketable skills and talents are important. A college diploma that provides neither is not always an investment, it can be a financial liability if it comes with huge debt and few earning opportunities.

I do think high schools and colleges do need to focus on employment. There are too many colleges that turn out students with no idea how to turn a diploma into a career or even a basic job.

Just for the record I have two degrees. So I do believe in higher education. I however carried no debt for either and had more flexibility when work was not readily available in my field.

Anonymous said...

is this a journal?, i just need to know because i need to write a sentence outline about the effect of high school drop out and i like this article i would like to use this as a reference

Dianne Heath said...

Well, this website started out as a blog and I'm the only editor. I did use research when I wrote this, so I guess use discretion if you want to reference this article. I'm glad you found it helpful!