Investing in “Opportunity Youth”

by Tony Monfiletto, Executive Director, New Mexico Center for School Leadership

Lately we’ve heard a lot about the economic case for early childhood education.  The return on investment for high quality education for three and four year-olds is pennies on the dollar.  It’s a powerful sentiment that I happen to share.  However, I think there’s an equally compelling argument for investing in adolescents, particularly the disengaged. 

In 2012, Henry Levin and Clive Belfield wrote an article entitled, “The Economics of Investing in Opportunity Youth.”  It’s a thorough analysis of the cost of the 17 percent (1 out of every 6) young people between the ages of 16 and 24 who are not in school and do not have a job (sometimes referred to as “opportunity youth”.  It’s a thorough analysis that that examines the fiscal consequences of increased government services and lost income for these young people.  The data is compelling when you consider the impact on any young person.  But, it’s shocking when you think about what it means for an entire community.

The authors estimate that the cost of government services for these young people will be roughly $230,000 over their lifetime and the social cost is just over $700,000 (mostly in lost wages).  These numbers are high but not surprising since we all know that the employment prospects for high school dropouts are dismal.  The real insight comes when they examine the impact on an entire community.  The numbers quickly run into the hundreds of millions and even billions of dollars for some communities.  In Memphis and Washington DC the cost is more than $1.4 billion for a single cohort of young people and $6.7 trillion for the entire country.

The tricky thing about their analysis is that it rests on assumptions about what could be.  They project a cause and effect scenario that cannot be proven.  I follow the logic, but it’s still speculation.  Macro-economic views like theirs are necessarily broad in scope so I decided to take some time to think about their analysis in a local context.   I applied their assumptions to ACE Leadership High School and the network of schools that we intend to create over the next five years.

The Leadership High School Network (LHSN):

Roughly 80 percent of the young people we serve in the LHSN are either off track to graduation or they have dropped out of school and returned to earn their diploma.  We have focused our approach to learning in the context of high growth sectors of our local economy (Architecture, Construction and Engineering , Health Care, and Technology so far).  It is not a narrow vocational style training.  Instead, we provide an education built on developing their adaptability and problem solving skills so that they will be vertically and horizontally mobile in their careers.  We teach school from 9:00 am to 9:00 pm and we serve students from 14-24 years old and our mission is to transition every graduate to college or work.

My colleagues and I examined our student body at ACE Leadership and we found that conservatively one third of our graduates would fit the definition of “Opportunity Youth.”  In other words, if it wasn’t for us they wouldn’t be in school or working in the future.  We then estimated the economic impact of our work and projected the impact of the sister schools that are yet to come (Health Leadership begins operations in August of 2013 and Technology Leadership begins in August 2015).

Ultimately, the LHSN is designed to serve roughly 2,000 a year students and the schools will graduate roughly 500 students per-year when they are fully developed.  The number of “Opportunity Youth” graduating should be about 165 per year.  Below is our estimate of the impact we will have if these young people become gainfully employed: 

Fiscal Impact                                   Impact for

Graduates                                  (social services)                                                  Cohort

165                 X                     $2,300,000 per graduate                   =           $379,500,000

165                 X                     $6,200,000 per graduate                   =           $1,230,000,000

These numbers are jarring, but they become spectacular when we think about them over time.  If we project the 10 year savings in tax dollars it climbs to 600 million and the growth in productivity is more than $10 billion.

It’s strange to think in such a long time frame.  We really don’t know what the future holds but we do know a couple of very important things:

  • The jobs of tomorrow are likely not going to be the jobs we have now and young person’s adaptability is their ticket to their (and our) prosperity.
  • The poor are becoming increasingly immobile.  The chance that young people will make it out of poverty is getting less and less likely and when you’re poor you are likely to stay put.  In other words, people who have skills and knowledge can leave to pursue the best job possible while the poor are here to stay.

These two facts lead me to say that investing in “Opportunity Youth” is our best chance to change their lives and the health of our community.  It’s not a sure bet, but it’s one we can’t afford to pass up.  Just think about what else we could do with that $379 million in tax dollars and what else they could do with the $1.2 billion in income.