Executive Summary: The Economic Impact of the Achievement Gap in America’s Schools

McKinsey’s report, The Economic Impact of the Achievement Gap in America’s Schools, examines the dimensions and economic impact of the education achievement gap.  While much controversy exists on the causes of the gap and on what the nation should do to address it, the full range of the achievement gap’s character and consequences has been poorly understood.

This report examines the dimensions of four distinct gaps in education: (1) between the United States and other nations, (2) between black and Latino students and white students, (3) between students of different income levels, and (4) between similar students schooled in different systems or regions.

The report finds that the underutilization of human potential as reflected in the achievement gap is extremely costly. Existing gaps impose the economic equivalent of a permanent national recession—one substantially larger than the deep recession the country is currently experiencing. For individuals, avoidable shortfalls in academic achievement impose heavy and often tragic consequences via lower earnings, poor health, and higher rates of incarceration.

To access the full report, please click here.

INTRODUCTION:

The extent to which a society utilizes its human potential is among the chief determinants of its prosperity. In the United States, one focus of concern in this regard has been the existence of a so-called achievement gap in education between certain groups of students and others. While much controversy exists on the causes of the achievement gap, and on what the nation should do to address it, the full range of the achievement gap’s character and consequences has been poorly understood. For one thing, important dimensions of four distinct achievement gaps —(1) between the United States and other nations; (2) between black and Latino students and white students; (3) between students of different income levels; and (4) between similar students schooled in different systems or regions—have not always been clarified and documented. In addition, while great emphasis has been placed on the moral challenges raised by the achievement gap, its economic impact has received less attention.

Given our longstanding work on the factors that influence national productivity, and the perceived urgency of understanding opportunities to improve the US economy’s performance, McKinsey & Company believes it is timely to bring together, in one place, a set of analyses that shed light on the price of current educational practices. This study builds on excellent work done by many researchers in the field, while also reflecting the angle of vision and expertise of McKinsey’s Social Sector Office, which serves school systems in the United States and around the world.

This report finds that the underutilization of human potential in the United States is extremely costly. For individuals, our results show that:

• Avoidable shortfalls in academic achievement impose heavy and often tragic consequences for individuals, via lower earnings, poorer health, and higher rates of incarceration.
• For many students (but by no means all), lagging achievement evidenced as early as fourth grade appears to be a powerful predictor of rates of high school and college graduation, as well as lifetime earnings.

For the economy as a whole, our results show that:

• If the United States had in recent years closed the gap between its educational achievement levels and those of better-performing nations such as Finland and Korea, GDP in 2008 could have been $1.3 trillion to $2.3 trillion higher. This represents 9 to 16 percent of GDP.
• If the gap between black and Latino student performance and white student performance had been similarly narrowed, GDP in 2008 would have been between $310 billion and $525 billion higher, or 2 to 4 percent of GDP. The magnitude of this impact will rise in the years ahead as demographic shifts result in blacks and Latinos becoming a larger proportion of the population and workforce.
• If the gap between low-income students and the rest had been similarly narrowed, GDP in 2008 would have been $400 billion to $670 billion higher, or 3 to 5 percent of GDP.
• If the gap between America’s low-performing states and the rest had been similarly narrowed, GDP in 2008 would have been $425 billion to $700 billion higher, or 3 to 5 percent of GDP.

Put differently, the persistence of these educational achievement gaps imposes on the United States the economic equivalent of a permanent national recession. The recurring annual economic cost of the international achievement gap is substantially larger than the deep recession the United States is currently experiencing. The annual output cost of the racial, income, and regional or systems achievement gap is larger than the US recession of 1981–82.

While the price of the status quo in educational outcomes is remarkably high, the promise implicit in these findings is compelling. In particular, the wide variation in performance among schools and school systems serving similar students suggests that the opportunity and output gaps related to today’s achievement gap can be substantially closed. Many teachers and schools across the country are proving that race and poverty are not destiny; many more are demonstrating that middle-class children can be educated to world-class levels of performance. America’s history of bringing disadvantaged groups into the economic mainstream over time, and the progress of other nations in education, suggest that large steps forward are possible.

The balance of this summary report is organized into three sections. First, the report shares key findings on the international, racial, income, and systems-based gaps facing the United States. Next, the report assesses the economic impact of these gaps for the economy as a whole and for individuals. Finally, the report notes potential implications of the work and suggests areas for further study.

To access the full report, please click here.

To access the the supporting materials for the Achievement Gap Report, please click here.