The Fiscal Economic Consequences of Dropping Out of High School: Estimates of the Tax Payments and Transfers Received by Massachusetts Adults in Selected Educational Subgroups

Ishwar Khatiwada, Northeastern University
Joseph McLaughlin, Northeastern University
Andrew Sum, Northeastern University

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This report was published in January and February 2007. It was prepared for the Boston Private Industry Council, Boston, MA. by the Center for Labor Market Studies, Northeastern University, Boston, MA.

Abstract

Adults who leave school before graduating from high school with a regular diploma will experience a wide array of adverse labor market, economic, health, and social consequences over their entire lifetime. They will be employed less often, receive lower hourly wages, and earn far less than their better educated peers over their working lives. As a result of their higher levels of joblessness and lower annual incomes, adult dropouts will pay less in payroll and income taxes (state and federal) and receive considerably more cash and in-kind transfer assistance (food stamps, Medicaid health insurance, rental subsidies) from the state and federal government than their better educated peers. The fiscal consequences of dropping out of high school are, thus, likely to be quite substantial, especially in a state like Massachusetts where more dropouts are covered by the Medicaid system, health care costs are higher, and cash transfers are somewhat more generous than in the rest of the nation.