Print
Return to online version

August 25, 2010

Sometimes "Investment" Is Just an Expense

Justin Katz

In a recent article, John Kostrzewa describes a study (partially funded by RI's Poverty Institute) by Jeffrey Thompson, Assistant Research Professor at the Political Economy Research Institute at the University of Massachusetts-Amherst. As it happens, circumstances lately have put me in a position to agree with some of the professor's conclusions, particularly those decrying one-company-narrow special deals described as "economic development." But this part is some of the same-old-same-old:

On education, Thompson argues that investing in education attracts business, raises gross state product, increases employment in metropolitan areas and raises personal income. He claims that every million dollars spent by Rhode Islanders on education creates between 26 and 33 jobs for teachers, aids, custodians, nurses, professors, bus drivers and others.

I agree that education is a key to developing the talent, skills and entrepreneurs on which to build a knowledge-based economy and fill the needs of traditional companies. But I shudder at the idea of simply spending more money without controlling or targeting where it's going, and measuring improvement.

The first point to make is that monetary investment isn't proving to be the shortcoming in Rhode Island education and will not translate into any benefits beyond the direct funding of school-related jobs. As Kostrzewa writes:

Already, Rhode Island ranks among the top 10 states nationwide for per capita spending on primary and secondary education. Yet national test scores show Rhode Island stuck in the middle of the pack, and lagging behind its neighboring states in New England. Also, Rhode Island’s dropout rate of about 30 percent is one of the highest in the country.

And all of that money has to come from somewhere, ultimately from consumer spending that creates jobs indirectly and direct business activity, which creates jobs almost by definition. That brings us back to the point that I always make in this context: Even if we succeed in educating the fabled Workforce of the Future, unless we have jobs into which that workforce can move — because education doesn't necessarily mean entrepreneurialism — that workforce will move to another state that does, taking our investment in academics with it.

I'd argue that the key reforms — basically, increasing accountability, refocusing education on students and their parents, and tying revenue to success, rather than government whim — would cost less and improve outcomes. In other words, we could leave money in the economy for investment in job creation and simultaneously improve our children's marketability as employees.