How much does it cost to produce a “proficient” fourth-grade student? Several studies now focus on the dollars spent, as well as the opportunities lost, in the quest for improved student achievement.

In 1998, Herbert Walberg, visiting scholar at the Hoover Institution, wrote The Cost of a Proficient Student. Walberg used the results of the 1998 National Assessment of Educational Progress reading exam and average per-pupil spending in North Carolina to calculate a “proficiency price” per fourth-grade reading student. In the spring of 2003, Education Next published a kind of turnaround on Walberg’s idea. The Eduction Next article “Lost Opportunity,” by Eric Hanushek, measures the dollar value of economic growth we have missed, as a nation, for failing to raise proficiency since the mid 1980s. Hanushek calculates the loss at $450 billion in 2002 alone, more than total K-12 expenditures annually in the United States.

Dollar costs and efficiency

A proficient fourth-grade student, according to Walberg, is one whose NAEP scores place him or her in the proficient or above categories. Twenty-nine percent of North Carolina’s fourth-graders were proficient in reading in 1998. In 2002, 32 percent earned proficient scores.

Walberg calculated the dollar cost for each student who reached the proficient mark. Stated in 2002 prices, Walberg’s study reveals that North Carolina spent $103,981 for each fourth-grader that was reading-proficient in 1998.

But the state’s fourth-graders performed better on the 2002 test, raising questions about what North Carolinians paid to produce a proficient student on the latest NAEP exam. Calculations of the kindergarten-to-fourth-grade cost of public education for the most recently tested students show that North Carolina spent about $33,688 per pupil in five years. Spreading this cost over the 32 students per hundred who actually achieved reading proficiency, the public cost of each proficient student was $105,275 in 2002, according to calculations by the North Carolina Education Alliance.

Even with improved achievement, North Carolina’s schools appear to be less cost-effective in 2002 than in 1998, when measured by NAEP achievement standards.

Lost opportunity

Hanushek considered the problem of school effectiveness from a national perspective in “Lost Opportunity.” His study compared potential economic growth since 1983-84, to actual economic growth up to the present.

The mid-’80s starting point corresponds to the appearance of A Nation At Risk, the blueprint for education reform that was supposed to revolutionize the American education system.

Hanushek’s premise in 2003 is that the failure to reform K-12 education in the 1980s has left us with an economic gap between our potential and where we are instead. If proposed school reforms were carried through, the United States would have gained a “reform dividend” that would more than pay for annual public education expenditures in the nation today, Hanushek said. Because reforms didn’t occur, the dividend represents a lost opportunity.

Quality, growth, and potential

“In good part because of the Risk report, it is now generally recognized that students’ cognitive skills are a crucial dimension of educational quality,” Hanushek writes. More than one study concludes that advanced education leads to substantially increased earnings.

“The conclusions of this emerging body of research are clear: Education quality, as measured by test scores, is positively related to the earnings of individuals, national productivity, and economic growth,” he says.

Academic achievement is an indicator of better cognitive skills all around, and that is significant, Hanushek says. Besides the link between earnings and personal standards of living, Hanushek identifies several “positive spillovers” we can associate with higher academic achievement.

The spillovers, or “externalities,” improve the quality of the growth that occurs, he says.

Examples of quality changes that come with better cognitive skills are higher rates of invention, improvements in production methods, and faster introduction of new technology, according to the author. But do qualitative changes translate into economic activity? They can, according to Hanushek and Dennis Kimko.

The reform dividend

Kimko and Hanushek devised a model that correlate changes in potential economic growth with changes in test performance. They found a significant correlation between changes in test scores and changes in Gross Domestic Product in the United States. Data for their study came from the Third International Mathematics and Science Study, using 1995 and 1999 test results. If reforms were instituted at the time of the original Risk report, they conclude, the gain in scores each year would have amounted to a 1 percent difference in GDP by the beginning of the 1990s.

“We find that a difference of one standard deviation in test performance is related to a 1 percent difference in annual growth rates of per-capita gross domestic product (GDP)” they said.

One percent annually doesn’t sound like much, but the compounding effect is significant. In 2000, they report, GDP per capita was $34,950 annually. With an annual growth rate of 1 percent, average per-capita income in 2050 would be $57,480, “more than a 50 percent increase over the period.”

The $450 billion “reform dividend” represents a GDP level 4 percent higher in 2002 than was actually realized. Even though increasing scores by 0.12 standard deviations per year would have been required, the authors think that it was “within the bounds of expectation,” especially in the United States. The 2002 Index of Economic Freedom, published by the Heritage Foundation, ranks the United States fourth in the world in economic freedom and economic potential.

TIMSS and North Carolina

The Third International Mathematics and Science Study conducted exams in math and science in 1995 and 1999. The United States participated as a nation, and in 1999, North Carolina was one of 13 U.S. jurisdictions to participate as well.

North Carolina eighth-graders tested in six science areas — life, earth, physics, chemistry, environment, and scientific inquiry. The sample included 3,097 students from 67 schools. Students from North Carolina ranked 12th among 13 participating states on the tests.

TIMSS data for eighth grade math shows United States students at the bottom of the pack among seven participants—Australia, Czech Republic, Hong Kong SAR, Japan, Netherlands, and Switzerland— in the 1999 TIMSS Video Study. Japan led the group in both years. Compared to the U.S., the Japanese spent triple the amount of instructional time on new concepts, and about half the instructional time on practicing new concepts, and on reviewing old ones.

These results show that despite increasing education budgets at the state and national levels, we have missed an opportunity, according to Hanushek.

“In other words, we need to look for ways other than merely increases in expenditure or reductions in class size if we are going to enhance the quality of our education system.”

If Hanushek is correct, further delay in education reform will have “significant implications for both individual and aggregate success.”

Palasek is a policy analyst at the North Carolina Education Alliance and assistant editor at Carolina Journal.