Productivity Losses Caused by School Closures in the U.S. Will Lead to a 3.6% Decrease in GDP by 2050, According to a New Study

A new U.S. study provides insight into the long-term economic effects of school closures, showing that the costs of lockdowns will be felt long after they’ve ended. Researchers at the University of Pennsylvania’s Wharton School believe that productivity losses caused by school closures during lockdowns will lead to a 3.6% decrease in GDP and a 3.5% decrease in hourly wages by 2050, “relative to the counterfactual where there had been no disruption to learning”. Here are the key findings.

Studies have found that remote education reduces learning outcomes for students and infer that current students are likely to earn less in future wages as a result of lower labour productivity. Labour productivity is an integral component of the production of goods, services, and wealth in an economy. Current cohorts of students with reduced education and lower productivity will be a drag on the future GDP of the United States for decades in the future…

Table 1 shows projected economic effects of school closures relative to a counterfactual where learning was never disrupted by the pandemic. As the cohorts of affected students enter the workforce, average labour productivity decreases relative to the counterfactual. However, less productive workers are a small proportion of the economy’s labour supply and younger workers tend to be less productive, so the aggregate effect is muted initially, with labour productivity decreasing by 0.6% in 2030 relative to the counterfactual scenario. As the affected cohorts age, making up a larger proportion of the workforce and approaching their peak earning years, the relative drop in labour productivity increases to 2.4% in 2040 and 3.3% in 2050.

…Note that current primary schoolers will be aged 34 to 40 in 2050, so the drop in their productivity will continue to affect the economy for many years afterwards.

In an effort to stave off the damage caused by the loss of education, the researchers recommend that the next school year should be extended by one month. They project that this would lower the reduction in GDP from 3.6% to 3.1%.

Extending the 2021-22 school year by one month would cost about $75 billion nationally but would limit the reduction in GDP to 3.1%. This smaller reduction in GDP produces a net present value gain of $1.2 trillion over the next three decades, equal to about a $16 return for each $1 invested in extending the 2021-22 school year.

In Britain, where the impact of school closures is likely to be just as bad for the economy, the Chair of the Education Select Committee says that extending school days is “a serious solution for the Government to consider“. Others, including the Education Policy Institute, have proposed that some pupils should repeat the last school year completely.

The Wharton School study is worth reading in full.

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