Calculating the Cost of High School Dropouts

‏Analyzing the total costs to the national economy of highschool dropouts
Many teenagers who drop out of high school are unable to reintegrate into educational institutions. They are not drafted into the Israeli military and are left on the margins of society without a profession or an ability to make a living. Some of them become a burden on welfare services and others slide into delinquency and crime.
In addition to its many personal and societal implications, this phenomenon also involves broad economic issues arising from the economic cost of treating these youths during their lifetimes and the costs incurred by the state because of their criminal actions.
The purposes of this research included quantifying the high school dropout phenomena, estimating its costs to the national economy on the one hand and estimating the benefits and the savings the state would achieve by preventing the dropout phenomenon at an early stage.

The research included quantifying and segmenting the dropout population according to age groups. Three aspects of the costs to the national economy were analyzed:
  • Direct budgetary costs of programs for treating high school dropouts;
  • Indirect costs to the national economy: mainly the costs of crime;
  • Alternatives costs: the loss of potential product for the economy due to dropouts not being part of the work force.
The research yielded several outcomes:
  • Mapping of the dropout rates;
  • Mapping of employment rates among dropouts;
  • Estimating the direct and indirect costs to the economy as a result of high school dropouts. The total cost for dropouts at age 16 was estimated at NIS 3.2 billion and the average cost to the economy of a single dropout over the course of his or her lifetime was estimated at NIS 450,000;
  • Quantifying the net benefit to the economy of preventing youths from dropping out of school: the marginal utility of investing NIS 50,000 in an at-risk 16 year old, which would prevent his or her decline into crime and return the youth into society, was estimated at NIS 1.7 million (in present terms), over the course of his or her lifetime. 
This research was used by the Dualis Social Investment Fund as a basis for fundraising efforts for preventing youths from dropping out of high school.

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