Lower Education Levels Cost Kentucky and Citizens Over $900 Million Annually
FRANKFORT, Ky. (Oct. 27, 2015) — Kentucky’s lower education levels cost the state and citizens over $900 million annually, according to a study conducted by the University of Kentucky’s Center for Business and Economic Research (CBER) for the Council on Postsecondary Education.
“While it’s widely known that a college degree increases personal earnings, employment and improves health, this report makes very clear that raising educational attainment levels of our workforce generates tremendous benefits to our economy and makes a significant positive impact on the state’s treasury and taxpayers,” said council President Bob King.
The study examined seven outcomes of education across the Kentucky economy—state income tax revenues, income and earnings, employment, Medicaid, health, crime, and participation in the federal Supplemental Security Income (SSI) and Supplemental Nutrition Assistance Programs (SNAP).
The report found that increasing educational attainment to the national average would generate up to a $903 million annual gain in new revenue and savings in Kentucky for the areas studied. Of that amount, up to $500 million would be generated annually in state tax revenues and $200 million per year would be saved from the reduction in Medicaid expenditures.
Businesses and citizens would save a projected $200 million annually in the reduction of health care costs associated with chronic disease and over $3 million annually through a reduction in the costs of crime.
Per capital earnings would rise by over 3.5 percent and over 4,600 individuals would move off unemployment if Kentucky obtained the same average education levels as the nation.
Other benefits of reaching the national average include moving 33,000 households off of food stamps and over 20,000 adults off Supplemental Security Income, which would generate a cumulative cost savings of $100 million per year for these federal programs.
“This research clearly demonstrates the critical relationship between education attainment and areas that directly affect the lives of individual Kentuckians and the state as a whole," said Dave Adkisson, president and CEO of the Kentucky Chamber of Commerce. “The work underscores the critical importance of raising education levels to ensure a higher quality of life for citizens and the overall progress of our state.”
“This study validates what we know in our hearts to be true: that, in every imaginable respect, an investment in higher education is a game-changer for the Commonwealth. What no research can begin to measure, though, is the hope that higher education brings to Kentucky families, its ability to lift the human spirit and its capacity to turn dreams into reality,” said President Michael Benson, Eastern Kentucky University.
To get to the national average, Kentucky would need a 1 percent increase in the number of individuals with an associate degree and a 5 percent increase in bachelor’s degrees or higher.
Key highlights are listed below.
Earnings
‒ Higher education not only pays in the urban triangle, but in the other regions of the state—eastern, western and south central. In the urban areas, an associate degree adds 27 percent to an individual’s earnings over a high school diploma and a bachelor’s degree adds 52 percent, if Kentucky raised educational attainment to the national average. In the three other regions combined, the premium would be 29 percent for an associate degree and 46 percent for a bachelor’s degree.
‒ Statewide, the projections show that family earnings increase by 56 percent where the householder has earned a bachelor’s degree, compared to a householder with a high school diploma. The family earnings premium for a householder with an associate degree is 29 percent.
‒ Per capita earnings would increase 3.5 percent if Kentucky reached the national average in educational attainment levels, moving Kentucky up from 47th to 43rd in per capita earnings compared to other states.
Employment
‒ The total number of unemployed would drop by over 4,600 individuals if Kentucky reached the national average in educational attainment levels.
Health
‒ Kentucky businesses and citizens could save almost $200 million in health care costs and increased worker productivity by reducing illness-related absences if educational attainment levels rose to the national average.
Medicaid
‒ Kentucky could reduce Medicaid expenses by $200 million annually if educational attainment levels were at the national average.
Crime
‒ Higher education, and specifically the percent of the population with a bachelor’s degree, is associated with lower crimes rates.
‒ Increasing educational attainment to the national average would reduce the costs of crime to citizens and businesses by $3 million annually.
Supplemental Nutrition Assistance Programs (SNAP) and Supplemental Security Income (SSI)
‒ The number of individuals using food stamps would drop by 2 percent, or over 33,000 families, if Kentucky achieved the national average in education levels.
‒ Increasing the education levels of Kentuckians can reduce expenditures on the SSI and SNAP by over $100 million a year.
‒ For adults under the age of 65, having a college degree drops predicted SSI participation rates by half.
“The findings from CBER’s new research reaffirm the Prichard Committee for Academic Excellence’s long-held position that education provides the path to a larger life, not only for each citizen, but for Kentucky as a whole,” said Brigitte Blom Ramsey, executive director, Prichard Committee for Academic Excellence.
“Greater educational attainment leads not only to better employment outcomes, higher earnings and more tax revenue, but also lower crime, less chronic disease and lower demand for public service programs. The data clearly support strategic investments in a high-quality educational system – from early childhood through postsecondary – which are certain to yield a significant return to the Commonwealth of Kentucky,” she said.
The reports are available at http://www.cpe.ky.gov/info/.