Increased Per-Pupil Spending Yields Improved Educational Attainment and Higher Future Wages for Students from Low-Income Families



By 05/28/2015

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FALL 2015 / VOL. 15, NO. 4

Contact:
C. Kirabo Jackson: kirabo-jackson@northwestern.edu, Northwestern University
Rucker C. Johnson: ruckerj@berkeley.edu, University of California, Berkeley
Ashley Inman: ashley_inman@hks.harvard.edu, (707) 332-1184, Education Next Communications Office

Increased Per-Pupil Spending Yields Improved Educational Attainment
and Higher Future Wages for Students from Low-Income Families

How money is spent matters; school districts use unexpected increases more productively than they use other resources 

Unequal school spending between districts is frequently identified as a key reason for the wide achievement gaps between students of different socioeconomic and racial backgrounds in the United States. While past research has failed to provide a clear picture of how increased school spending impacts student learning, a new study appearing in Education Next finds that increased spending due to court-ordered school finance reforms positively affects both educational and economic attainment for children from low-income families. Researchers C. Kirabo Jackson, Rucker C. Johnson, and Claudia Persico find that increases in spending due to school finance reforms have strong, positive effects on high school completion, adult earnings, family stability, and the incidence of adult poverty.

The authors find that when per pupil spending increases by 10 percent in all 12 school-age years for students from low-income families:

• Years of completed education increase by 0.5 years;
• The probability of high school graduation increases by 10 percentage points;
• Adult hourly wages rise by $2.07 (in 2000 dollars), or 10 percent;
• Future family income increases by 17.1 percent (the authors note these effects may reflect increases in one’s own income, or increases in other family members’ income due to a higher likelihood of being and staying married.)
• The annual incidence of poverty in adulthood decreases by 6.1 percentage points;
• The likelihood of being married and never divorced increases by 10 percent.

Students from nonpoor families also benefited from spending increases, but by much smaller amounts. Based on their findings, the authors estimate that a 22 percent increase in per-pupil spending throughout all 12 school-age years is large enough to eliminate the education gap between children from low-income and nonpoor families. They write that “in relation to current spending levels (the average for 2012 was $12,600 per pupil), this would correspond to increasing per-pupil spending permanently by roughly $2,863 per student.”

The authors used an innovative approach to eliminate biases that may have influenced prior studies of the relationship between school spending and student educational attainment.  They found that court-ordered reforms, on average, reduced spending gaps between low- and high-spending districts.  When it became clear that certain kinds of reforms had systematic and predictable effects on certain kinds of school districts, then they could predict district-level changes based only on factors unrelated to other, confounding factors such as the local economy or the local commitment to education.  Their analysis demonstrates that predicted increases in spending were correlated with actual spending increases, and also with improved education results for students.

“How the money is spent matters,” the authors conclude. “Therefore, to be most effective, spending increases should be coupled with systems that help ensure spending is allocated toward the most productive uses.” In other words, using the funds to pay for lavish faculty retreats would not be expected to have a positive effect on student achievement.  Districts in their study that increased spending by 10 percent due to court-ordered reforms added 1.3 more days to the school year, increased base teacher salaries by 4 percent, and reduced student-teacher ratios by 5.7 percent.

Boosting Educational Attainment and Adult Earnings: Does school spending matter after all?” by C. Kirabo Jackson, Rucker C. Johnson, Claudia Persico is available now on http://educationnext.org and will appear in the Fall 2015 issue of Education Next.

About the Author
C. Kirabo Jackson is associate professor of human development and social policy at Northwestern University. Rucker C. Johnson is associate professor of public policy at University of California, Berkeley. Claudia Persico is a doctoral candidate in human development and social policy at Northwestern University.

About Education Next

Education Next is a scholarly journal published by the Hoover Institution that is committed to careful examination of evidence relating to school reform. Other sponsoring institutions are the Program on Education Policy and Governance at Harvard University, part of the Taubman Center for State and Local Government at the Harvard Kennedy School, and the Thomas B. Fordham Foundation. For more information about Education Next, please visit: http://educationnext.org.




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