The big education investment the government is passing up

August 6, 2012

Washington Post

Ever since the Census ended, government employment has been on a consistent decline, with 9,000 jobs lost in July alone. As a report from Adam Looney and Michael Greenstone of the Hamilton Project points out, these cuts could have major ramifications years in the future.

Take teachers. Research from Raj Chetty of Harvard and his co-authors estimates that a 33 percent reduction in class size leads to an increase in students' lifetime earnings of about $4,421 for every year the reduction takes place. But the number of teachers in public classrooms has plummeted by 220,000 between 2009 and 2011, which translates into a 5.9 percent increase in class size. That will result, Looney and Greenstone estimate, in a $49.3 billion loss in lifetime earnings for every year this class size increase lasts - or an almost $100 billion loss between 2009 and 2011 alone. The actual budget savings from these teacher cuts is only $11.8 billion per year.

Spending on teachers, then, has a return on investment of about 318 percent. It's hard to think of a private sector investment with that kind of bang for the buck. Among other things, this suggests that the teacher funding in bills like the American Jobs Act is a better deal than usually thought. The American Jobs Act included $30 billion to prevent teacher layoffs and encourage additional hiring, which, based on Chetty's study, would have resulted in $125.34 billion in additional lifetime earnings for the students affected.

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