The Benefits to Taxpayers from Increases in Students - RAND ...

Educational Attainment and Public Revenues and Costs 75
with getting only some college. Even for the highest-risk population subgroups of black
and Hispanic men, a bachelor’s degree results in just a small increase in incarceration
savings over some college. This is consistent with the human capital theory of education,
as high school dropouts have the lowest skill set and demand the lowest wages in
the labor market, and therefore have the highest financial incentive to commit crime.
Costs of Increased Education
Achieving an increase in educational attainment will require higher spending to provide
the additional education. We assume that the costs of raising a person’s education
level equal the current national average operating costs per student at each level of
education. We use the national average cost per student in high schools as our estimate
of the public cost of additional high school education. We use the national average
public cost per FTE student in public two-year colleges as our estimate of the cost to
taxpayers of providing college education for two years following high school graduation.
We use the national average public cost per FTE student in public four-year colleges
as our estimate of the cost taxpayers would incur to provide education in college
after the first two years. We assume that the average costs are independent of student
characteristics.
Net Benefits from Increased Educational Attainment
The net benefit to taxpayers of increased educational attainment equals the sum of the
benefits we have considered in our study minus the costs of providing the additional
education. We have focused on only those benefits for which data are readily available:
increases in the public budget through increased tax revenues, reductions in spending
on social support and insurance programs, and reductions in public spending on
the corrections system. The estimates presented below understate the net benefits of
increased educational attainment to the extent that the benefit categories we did not
consider due to lack of data would produce additional savings.
Both the costs of providing additional education and the benefits are incurred
in the future. The costs are incurred in the first few years after an individual decides
to continue his or her education, while he or she is in school. Taxpayers do not realize
the benefits of increased educational attainment until future years, when the moreeducated
individuals pay more in taxes, place fewer demands on social support programs,
and do not engender incarceration costs. Hence, we discount both the costs
of increased educational attainment and the benefits occurring in the future to the
present (i.e., the time investment begins). Because much of our data are for 2002, we
discount all monetary amounts to 2002.
For this analysis, all costs and benefits are treated as incremental and relative to
the respective baseline of the increase in attainment. For instance, if we want to assess