Effects of Graduation Rates on Kentucky’s Economy

Have you looked at the latest UK Retention Update that the Office of Student Success recently sent out? Take a look – and then read what is happening across the state when we do not meet our goals of collaboration, both internally and across bridges we’ve crafted with our secondary and higher education partners.

The Center for Business and Economic Research (CBER) of the UK Gatton College of Business and Economics was commissioned by Kentucky’s Council for Postsecondary Education (CPE) to examine the implications of education across the Kentucky economy. The findings that CBER presented to the CPE earlier this month are a clear reminder that we are all better off when UK’s undergraduate student success initiatives work out the way we plan them to do.

Chris Bollinger

Dr. Christopher R. Bollinger, CBER, UK Gatton College of Business & Economics

Dr. Christopher Bollinger, Gatton Professor of Economics at University of Kentucky, presented the CBER findings at the CPE’s November meeting. Their study used data on Kentuckians from the American Community Survey (ACS), the Behavioral Risk Factor Surveillance System (BRFSS), the Uniform Crime Reports (UCR), the Bureau of Labor Statistics (BLS), and the Bureau of Economic Analysis (BEA). Seven outcomes were examined in the study: income and earnings, employment, state income tax revenues, Medicaid, health, crime, and participation in the Supplemental Security Income (SSI) and Supplemental Nutrition Assistance Program (SNAP) programs.

Overall, the results of the CBER study show that the present educational attainment levels in Kentucky cost the state in myriad ways. According to the 2013 ACS estimates, approximately 21.5% of Kentuckians have a Bachelor’s Degree or higher, while the U.S. average sits at 28.8%; similarly, 7% of Kentuckians have earned an Associate’s degree, while the U.S. average is 8%. If Kentucky were to obtain the same average education levels as the U.S., per capita earnings would rise by over 3.5% and over 4,600 Kentuckians would move off unemployment rolls.

If Kentucky education levels were raised to meet the current U.S. levels, the state income tax revenues would rise by as much as $500 million, helping to ease state budget crises. For example, Bollinger posits that families headed by a person with a Bachelor’s degree make up only 13% of households, but contribute 25% of the total state income tax revenue — and the state’s 9% of families headed by someone with graduate or professional degrees contribute 22% of total state income tax revenue (see Figure 1: Relative Share of Households and Income Tax Revenue from “How to Raise State Revenue without Raising Taxes”).

According to Bollinger, Kentuckians earn 29% more with an Associate’s degree and 51% more with a Bachelor’s degree (see the Figure 1: Project Earnings from “Education Pays Everywhere!”).

In addition, increasing education throughout the state would save over $200 million in Medicaid expenditures, further easing state budgets and allowing legislators to use those resources for the benefit of the citizens of the Commonwealth. If Kentuckians with a high school diploma obtained their college degree, Bollinger predicts that the rate of Medicaid eligible adults could move from 29% to 20% (see Figure 1: Education and Medicaid Eligibility Rates in “Impact of Education on Medicaid Eligibility”). Achieving a higher education level would save the state approximately $3 million in costs associated with crime. It would also move over 5,000 Kentucky families off food stamps and over 20,000 adults off SSI.

According to the studies by the CBER staff, the unemployment rate for college graduates is 4.8% lower than for high school graduates. In the Urban Triangle — the geographic area between Lexington, Louisville and Covington — the unemployment rate for college graduates is 5% lower, while in Eastern Kentucky it is 5.5% lower! Perhaps more importantly, education has profound effects on labor force participation. Labor force participation for high school graduates ranges from a low of 54.4% in Eastern Kentucky to 73.7% in the Urban Triangle. But the labor force participation for college graduates is 77% in Eastern Kentucky and 83% in the Urban Triangle. College graduates are more likely to have jobs and more likely to keep their jobs through hard economic times (see Figure 2: Labor Force Participation from “Want a Job? Get a College Degree”).

See all the briefs developed for the CPE in the list below (from the CBER website):

  • “Want a Job? Get a College Degree” (Oct 2015 .pdf file)
  • “How to Raise State Revenue without Raising Taxes” (Oct 2015 .pdf file)
  • “Education Pays Everywhere!” (Oct 2015 .pdf file)
  • “Impact of Education on Medicaid Eligibility” (Oct 2015 .pdf file)
  • “Education for Your Health” (Oct 2015 .pdf file)
  • “Crime and Punishment and Education” (Oct 2015 .pdf file)
  • “Moving People Off SNAP Through Education” (Oct 2015 .pdf file)
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About UK Student and Academic Life

Undergraduate Education is now recreated within the Division of Student and Academic Life in the Provost's Office at the University of Kentucky.
This entry was posted in College/Career Readiness, Retention, Target Success Students, Transfer, UK Connect Students and tagged , , , . Bookmark the permalink.

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