Education Interrupted: Temporary Learning Losses, Lifetime Earnings Losses

>> Erik Hanushek: I want to talk about pandemic losses and what nine points means.

Some of you, not all of you, but many of you, experienced the pandemic in one way or another of being shut out of schools, having various hybrid instruction or remote instruction. It turns out that that's costly.

There's just no doubt that the standard way of going to school is better than the hybrid way, is better than the remote way. I don't think I have to tell most of you that in terms of what you learned, but that's what shows up in the data. So we can look at losses on the NAEP, the national assessment of educational progress, which is a test that's given to a random sample of people in the US at grades four and eight and sometimes at grade 12.

And it's given every two to four years on different subjects. But we really have math and reading over time. So that last spring we had a post pandemic score, not really post pandemic because the pandemic was still being filled in the schools. But we could compare that to scores of comparable people, same grades, same random sample, before the pandemic.

And that's what we're gonna call learning loss. It's not that people become stupider with learning loss, it's that the learning is not at the same pace that it was before the pandemic. So what I want to do is do two things. I wanna look at the impact of that on individual earnings.

According to the pictures we had before, we saw that US rewards skills more than almost every other country. What's the impact of these learning losses on average for the US? And then we'll go back and try to figure out the total impact through the implications for economic growth.

Because what's the pandemic mean? Well, if nothing happens, we have a cohort of students who become a cohort of workers who work through the system and they have lower skills than they would have without the pandemic. So we're considering what happens to the skills of the population? But we saw before that skills of the population is closely related to growth rates of the country.

And for at least the economists in this room, it's no surprise that growth rates are what count. That's why we're richer than our parents and why the standard of living improves, is because of economic growth rates. And they have a big impact. So let's see what it means for looking at the economic losses from the pandemic.

First, on average, that nine points translates into 5.6% lower lifetime earnings. Think of this like a lifetime income tax surcharge of 6% if nothing happens, if we have the losses that we've measured by NAEP scores, we expect five to 6% lower earnings on average for everybody. And the other thing we knew is that the pandemic had disproportionate impacts on disadvantaged kids.

Parents were having to go out and work, as opposed to more advantaged kids had parents home helping in general, that parents found ways to support them. And by the way, I should mention that since some of you were involved in this and you don't want to see a number that says you're going to be 6% less well off in the future.

About 10% of the population appears to have done better during the pandemic than they would have without the pandemic for one reason or another. Having parents at home, having other support, or just not getting a lot out of school one way or another. So I presume that all of you are in that 10%.

So breathe easily now, okay? That's part of the picture. The other part is the national loss through lower growth has a present value of $28 trillion. Now, this is a number that has about the same meaning as nine points on NAEP, right? What's a trillion dollars? Okay, well, our GDP today is about $26 trillion.

So it's like shutting down the economy for a year. Present value, I should mention. Economic growth has its implications out in the future. I mean, what's the impact of growth, difference in the skills of the kids in school today on the economy? Well, today it's zero, right? Because everybody's still in school and aren't a substantial part of the labor market.

But the impacts grow over time. Now, let me give you a different way of looking at this. You all, since the beginning of the pandemic, have been reading sort of regular news articles about the effect on unemployment, the effect on business closures, restaurants, going out of business, and so forth.

The best estimates of the total cost of sort of business cycle cost from the pandemic are about $2 trillion, roughly a 15th of the cost from the educational problems that were generated. You all remember the great recession of 2008. The best estimates of that are there's about $5 trillion of the total economic cost.

So something like a sixth of the cost of the learning losses, okay? So the final thing is that unless we do something, unless the schools get better, we expect these learning losses to be permanent. If we just go back to the quality of schools we had in 2020, we expect, on average, 6% individual losses and $28 trillion because, well, we have evidence from other places where there have been lots of closures.

My favorite bit of evidence is actually for Germany. Germany, at one point in the past, some of the individual states, Lander and Germany, had a school year that began in January instead of in the fall. And one year they decided, well, we're gonna get with the rest of the world.

We're gonna synchronize the school year. And they did that by having short school years. Well, you can take that cohort of kids that were in school during the short school years, and you can trace them throughout their working life, their careers. And you can see that group of people having lower economic outcomes than the group immediately before them and the group immediately after them.

Think of the python eating an orange. You watch the orange go through and you can just see the losses that occur. So the only thing we can do here, if we want to handle this problem, is to try to make the schools better. And so that we're getting close, by the way, to the title I put up, I talked about post pandemic teacher shortages.

You have to go a little bit farther, and we'll get to that point in a minute. But let's look at this. The first thing, by the way, is that not all states suffered the same loss geographically, there were large differences. Here's every state in the world. In the world, every state in the US ranked by the percentage of loss in future incomes that individuals will suffer based upon the learning losses.

Now, I made this so small that I only benefit the people in the front row. I think of reading your individual states, but we can give you that. But it starts on the left hand side that Utah did much better than the rest of the nation in terms of lower learning losses.

And so students during the cohort era in Utah would only expect to lose a little less than 2% income. But then you get over to Delaware and Oklahoma, where the losses appear to look like 9% of income for the average student in Delaware and Oklahoma, which simply reflects the fact that they had bigger losses on average than other states.

So later on, we can put this slide up and you can find your own state in there. And that has implications, by the way, for state incomes in the future. Put it the other way, this is sort of the percentage loss in aggregate income. It's like the loss in growth rates from individual states because states grow also in accordance with the skills of their population.

The best way to look at this, I presume, is the fact that we array it by the dollar value, dollar present value. We sort of brought all the numbers back to today at a 3% discount rate, technically. And you find that on the far left hand side, California loses $1.3 trillion in present value.

You find that there's not much loss in terms of Wyoming and Alaska on the right hand side. And why is that? Nobody lives there and there's no economy underneath that. So that's what's really driving that. And so this is really a combination of how big was the learning loss in each state and how big is the economy, which multiplies the learning loss by the size of the economy.

So it's a big deal for individual states that they are graduating a cohort of students with less learning than they would have other before the pandemic. So what's going on to deal with this? It's sort of a sad story. I find the current situation not very encouraging. If you look around, it appears that many schools are currently struggling just the getting back into stride where they were in January of 2020 or March of 2020 when schools closed.

There's been a lot of money put in Federal government put in $190 billion to schools. Now, not much of that was used to deal with learning loss. There was a lot more spent on air conditioning schools and other facilities that didn't have much to do with learning. The two prime strategies are more time either lengthening the school day, adding some Saturday instruction, or providing some summer school for some, or providing tutoring in various ways.

Now, the important thing is two. One is if these programs are voluntary, like you can come in on Saturday or come to a couple extra days, you find that they just widen the gaps, achievement gaps, because more advantaged kids always take up the added schooling. Less advantaged kids don't.

LA, Los Angeles had a plan to have four extra days of schooling, two at the very beginning of the school year. I mean, of the Christmas break, the holiday break, and then two at the end. At the beginning of the break, they had like 4% of the students of LA came to those extra two days.

But even if it's done faithfully in the best, according to the best research we have, it's not enough to make up for that nine point loss or that 6% income hit.