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Education, not tax cuts, is how you build a strong economy that helps everyone

Posted on August 22, 2013

The states with the best-educated workers also tend to have the highest median wages.

That simply put powerful bottom-line conclusion comes from a new paper by the Economic Policy Institute, released today, which shows the best way for Louisiana to grow its economy and create the kind of high-paying jobs that can support a family is by investing more in education.

Higher education has taken the brunt of Louisiana's budget cuts.

In A Well Educated Workforce is Key to State Prosperity, Noah Berger and Peter Fisher find a strong link between the educational attainment of state workforces and both productivity and median wages. Expanding access to high quality education will create more economic opportunity for Louisianans and do more to strengthen Louisiana’s overall economy than anything else. The chart below tells the story:

Higher educational attainment means higher wages.

The paper was published by EPI for the Economic Analysis and Research Network (EARN), a network of 61 state and local economic think tanks and 25 national partners. Berger is president of the Massachusetts Budget and Policy Center and Fisher is the research director for the Iowa Policy Project.

The authors also looked for a correlation between median wages and a state’s overall level of taxation, to test the theory, often espoused by conservatives, that the best way to lift a state’s economy is by keeping taxes as low as possible. But in contrast to the strong correlation between wages and education, there is no similar link between taxes and wages. As the authors conclude, “Cutting taxes to capture private investment from other states is a race-to-the-bottom state economic development strategy that undermines the ability to invest in education.

Lower taxes did not equate to higher wages

While this paper looked at the country as a whole, it should strike a particularly sharp note with Louisiana policymakers. Over the last five years they have allowed education – particularly colleges and universities – to bear the brunt of the state’s budget cuts, which in turn resulted partly from a series of reckless tax cuts.

How bad are the cuts? As the Legislative Fiscal Office reported last month, state support for public higher education has been cut by 66 percent since the 2009 fiscal year, with tuition up 74 percent over that same time frame. The current-year budget is also being propped up by $340 million in “one-time” revenues that aren’t guaranteed to be available next year.

As the Fiscal Office report shows, the overall state general fund – the money legislators have the most control over through taxes and fees — has shrunk by a little more than $1 billion ($1,021 million) since the 2008-09 fiscal year. It turns out that’s almost the exact amount that’s been cut from higher education over the same time ($1,028 million). In other words, higher education – the most proven way to raise wages and lift families into the middle class – has born the entire brunt of the drop-off in state revenues.

And while many states have cut education spending in the wake of the Great Recession, no one has cut as deeply as Louisiana. The Pelican State was one of only six states to cut funding for higher education in the FY 14 budget year, according to a July report from the American Association of State Colleges and Universities. Louisiana’s 17 percent cut was the deepest in the country.

Instead of siphoning funds out of public education and into voucher programs, Louisiana could greatly improve its educational attainment levels by: working to slow the growth of college tuition, increasing financial aid, investing in quality K-12 education and offering universal preschool programs.

In the meantime, Louisiana should move away from its race-to-the-bottom policy of lavishing money on corporate subsidies, which can create jobs in the short term but do little to lift the long-term prospects for workers.

Read the full EPI report here.

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