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10/17/2008 12:00 AM  John Fitzgerald, Minnesota 2020 Investment in education is an investment in your pocketbook. Research conclusively shows that when Minnesotans invest in education, the result is a skilled workforce that creates a vibrant, robust economy despite the cost of the initial investment. That workforce and economy attracts more businesses which raises wages, creates jobs and brings the high quality of living Minnesotans demand. Consider these reports: In "The Effect of State and Local Taxes on Economic Growth,"1 L. Jay Helms studied the influence of fiscal variables on personal income in 48 states between 1965 and 1979. He found that a $1 increase in taxes for K-12 education produced an increase in personal income of $1.63; in other words, the benefit resulting from a tax increase dedicated to increased K-12 education funding outweighed the cost (i.e., higher taxes) by 63 percent. Over the last decade, the Minnesota's investment in elementary and secondary public school has fallen from $47 per every $1,000 of personal income to $39, a decline of seventeen percent, according to the U.S. Census Bureau. In 2005 and 2006, Minnesota ranked among the bottom ten states in the nation in public school spending per $1,000 of personal income. While a tax increase can create a drag on the economy, "certain public services (such as education) function roughly as benefit taxes, the negative influence of which may be outweighed by the value of the services provided," Helms wrote. In "Small Business Start-Ups in the United States,"2 Timothy J. Bartik found that an increase in taxes reduced the number of business start-ups, unless it went solely to public school funding and to fire protection and was funded by anything but an increase in the statewide general sales tax. Under those circumstances, Bartik found that small business start-ups increased and the economic climate of the community improved. Bartik's study also found that an educated workforce is essential to business start-ups. He found a one percent increase in high school graduates is estimated to increase starts by 3.5 percent. "The positive effect of the high school variable on small business starts can be interpreted in two ways," Bartik wrote. "A higher proportion of high school graduates could proxy for better labor quality. A second interpretation is that high school educated persons are more willing and able to take entrepreneurial risks." Similarly, in "Do Public Expenditures Improve Child Outcomes in the U.S.?"3 Kristen Harknett and others found that if a state increases by $1,000 the amount it spends on each student, it will see up to a 10 percent reduction in low scores on reading or math tests, a 15 percent reduction in the high school dropout rate and a 10 percent drop in the birth rate of teens between 15 and 19 years old. These figures are important because dropouts have been calculated to cost as much as $1.1 million per student in increased use of welfare, health care and law enforcement and decreased wages and tax payments. "Our findings suggest that a true cost-benefit analysis of returns in investments would likely show returns to child investments accruing over the longer term." Harknett wrote. Dry, scholarly, academic reports are often hard to decipher, but the message from these studies and others is clear: An investment in education creates a strong workforce and a vibrant economy, making the business climate robust and healthy. Arguments against investment in education hold no water. True business leaders know that the short term pain of higher taxes for education creates long-term gain. 1 Helms, L. Jay. 1985. "The Effect of State and Local Taxes on Economic Growth: A Time-Series-Cross-Section Approach." Review of Economics and Statistics 87: 574-82.
2 Bartik, Timothy J. 1989."Small Business Start-Ups in the United States: Estimates of the Effects of Characteristics of States." Southern Economic Journal 55(4): 1004-18. 3 Harknett, Kristen, Irwin Garfinkel, Jay Bainbridge, Timothy Smeeding, Nancy Folbre, and Sara McLanahan. 2003. "Do Public Expenditures Improve Child Outcomes in the U.S.? A Comparison Across Fifty States." Center for Research on Child Well-being Working Paper #03-02. | ||||||||||||||||||||
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