In California, dropping out of high school means more than just lower incomes for those who leave school. It means a lower income for the entire state, and a greater financial burden on all California residents.

A research report released by the California Dropout Research Project in August 2007 includes numerous calculations of available data that confirm the state’s dropout rate is taking a significant toll on the state’s economy.

The authors used the census data available for California residents who were 20 years old in 2005, which included about 554,000 people. Of the group, 120,000 failed to complete high school. The authors concluded that this single group of dropouts will ultimately cost California approximately $46 billion.

“Each year we fail to graduate 120,000 students in California, we’re incurring these huge social costs, and most of those costs are actually bourn by all of us,” Russell Rumberger, director of the California Dropout Research Project said.

The most significant impact they’re having is reducing tax revenue to the state, Henry Levin, one study’s authors, and an economist at Columbia University said.

High School dropouts are more likely to be unemployed, and on average earn less than those with high school diplomas. Since taxes paid to the state are determined by a person’s income, high school dropouts’ contributions are much smaller than those of educated residents.

And the future job market for low-skilled labor in California is unlikely to improve, Levin said, even when the economy begins to move out of the current recession. This is especially true in a state where a large segment of the low-skilled labor force is employed by farms and agricultural businesses.

Farms typically invest in a lot of new equipment and machinery in times of economic recovery, to replace the equipment that had become obsolescent during the poor economy, when they were unable to afford the investment. The new machinery will be labor-saving resulting in a reduced need for farm workers, and therefore a rise in unemployment among low-skilled workers in California, Levin said.

Dropouts are also more likely to rely on social assistance, such as Medicaid, which is partly funded by residents’ taxes. The more financial assistance the state is providing to residents therefore, the more likely California taxes will increase.

Additionally, dropouts are more likely to commit crimes, which costs Californians as well, Rumberger said. Everyone ends up paying more in taxes for law enforcement, and the criminals’ incarceration.

And of course, higher crime rates in the state lower the quality of life, Rumberger said.

“We all suffer because we can become victims of crime,” he said.

Dropouts’ increased crime rates and economic burden on the state can be cyclical, the report’s co-author Clive Belfield, an economist at Queens College said.

“Low income causes crime, and criminal activity acts as a barrier to employment,” he said.

Rucker Johnson, a professor at the University of California Berkeley’s Goldman School of Public Policy said that too often public policy is remedial, attempting to solve the problems that are caused by poor education, rather than addressing the problem at its roots. One deterrent to investments in dropout prevention may be that it’s difficult to know if and when the investments will pay off. Such investments are necessary however, Rucker said, to reduce government expenditures in the long term.

“Benefits accrue much later in life a lot of times,” he said. “We need to think of it as an investment that has a stream of benefits over the life course.”

Levin said his report supports this assertion.

“We have shown that even with the high costs of reducing dropouts, the benefits of doing so exceed the costs by a wide margin,” he said.

Visit the California Dropout Research Project to read the full reports.