One of Maine’s most pressing problems is our high school dropout rate. Every child who fails to complete high school or obtain a general equivalency diploma virtually guarantees him or herself a life of poverty, a career of struggling from one dead-end job to another, always subject to layoffs and searching for ways to make ends meet.

Traditionally, we have addressed this problem with tired old nostrums from Poor Richard’s Almanac about keeping one’s nose to the grindstone and a penny saved is a penny earned. How about a different approach, one more attuned to our age of instant gratification?

A high school diploma is a winning lottery ticket. Get your diploma, and you collect $115,000. But instead of a lump-sum payment, this one pays $8,000 per year for 30 years.

That’s roughly the difference in annual earnings between a high school dropout and a high school graduate.

The present value or lump-sum payment of this “ticket,” the reverse mortgage if you will, of staying in school for a few more years, is more than $100,000.

With this sort of payoff, we would be smart to slip would-be dropouts’ friends a few bucks each week to apply a bit of peer pressure to keep them in school.

Every day we urge people to spend a few bucks indulging their dreams of riches by taking a chance on winning Megabucks. Why not spend some of that money urging kids to take a chance on a sure thing?

And how about extending this idea to college?

A bachelor’s degree – even after paying $40,000 in school expenses – is another winning ticket.

A college graduate earns about $30,000 per year more than a high school dropout.

Even after adjusting for staying in high school two years longer and paying for four years of college while a dropout pal is busy working, the college graduate comes out way ahead.

Seen from the perspective of instant gratification, a college degree is equivalent to a visit from the Publishers Clearinghouse Prize Patrol, who put a match to your education loans and present you with a check for $286,000 right after you fling your cap in the air.

True, you would have to take the winnings in annual payments, and you’d have to work to get them. But that’s the point – college grads can work and earn a living in ways their dropout pals can’t.

For an uneducated former classmate to match the earnings of a college graduate over the next 20 years, he or she would need a trust fund of $286,000 invested in a risk-free bond.

In effect, the knowledge and skills you give yourself by staying in school and learning are worth nearly $300,000. They are your human capital.

And what about doubling down again and going for graduate or professional school?

Even adjusting for the higher tuition for two more years of graduate education, the delay is a winner.

The average graduate of a post-bachelor’s program can expect earnings that exceed those of a high school dropout by about $46,000 per year.

In this case, trading eight years of the earnings available to a high school dropout for the expense and effort of an education is equivalent to a $380,000 winning lottery ticket.

Pick a particular occupation with higher potential earnings – an engineer, a physician, even an economist – and the winnings are greater still.

Whether the lure of a lottery win proves a better motivator than Benjamin Franklin’s homey praise for the virtues of frugality and diligence is really neither here nor there.

They both simply illustrate the importance of human capital, a form of capital far more important and widespread than the physical capital embodied in our buildings and machinery.

Each year our hundreds of cities and towns spend hundreds of thousands of dollars measuring that capital, down to the penny. And we have appeals boards where owners and assessors bicker over those measurements. Why? Because it’s the primary way we pay for our schools.

And what do we know about the capital – human capital – those schools produce each year; how much it is; what type it is; where it is; how it changes from year to year; all the things we spend loads of time knowing about physical capital? Precious little.

 

Charles Lawton is senior economist for Planning Decisions, a public policy research firm. He can be reached at:

[email protected]