More education trumps lower taxes

Terrific study by Noah Berger and Peter Fischer for the Economic Policy Institute entitled A Well-Educated Workforce Is Key to State Prosperity. Sound familiar? That four-year degree attainment is increasingly what determines which states and regions are prosperous has been the central tennant of Michigan Future’s work for years.

Berger and Fisher use median wage as their metric for prosperity/higher standard of living. We have used per capita income and lately private sector employment earnings per capita as our metrics that best measure state prosperity today and tomorrow. But no matter which metric you use the findings are the same: college attainment is the best predictor of a state’s standard of living.

Berger and Fisher found: “Overwhelmingly, high-wage states are states that have a well-educated workforce, … . The correlation is very strong and there are very large differences between median hourly wages in states with well-educated workforces and hourly wages in states with less-well-educated workforces (as measured by the share of workers who have at least a bachelor’s degree). … There are no states with a relatively well-educated workforce and relatively low wages and virtually no states with low levels of education and relatively high wages. There are two outliers: Alaska and Wyoming. Their locations on the graph suggest that states with valuable natural resources and a very limited number of people may be able to offer reasonably high wages without a well-educated workforce.” (Emphasis added.)

What about taxes, the current lever of choice in Michigan and most states to drive economic growth? Comparing median hourly wage and state and local taxes as share of personal income, Berger and Fisher found: “no clear relationship between state taxes (as a share of state personal income) and median wages. Higher-tax states appear to have slightly higher median wages, but that correlation is not significant.”

They conclude:  “States can build a strong foundation for economic success and shared prosperity by investing in education. Providing expanded access to high quality education will not only expand economic opportunity for residents, but also likely do more to strengthen the overall state economy than anything else a state government can do. …

States would do well if they focused their resources on their historic role as the guarantors of high quality education for all, while broadening the scope of that role to include universal preschool and other early childhood education programs, and beginning to view high quality postsecondary education and training as the standard for all students. In most states that would mean reversing recent cuts to, and even elimination of, publicly funded preschool, and declines in public investments in postsecondary education. From 1990–1991 to 2009–2010, real funding per student at public colleges and universities declined 26 percent, and the share of state personal income going to higher education fell 30 percent, while tuition at four-year institutions more than doubled and at community colleges rose 71 percent (Quinterno 2012). Instead of improving access to higher education in response to the needs of a changing economy, most states have restricted it.”




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