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September 12, 2003

The (Indirect) Costs of Crummy Schools


There’s a curious divide I cross every day going to work. As I drive from Ventura County, where I live, to Los Angeles County, where my business is located, housing costs fall. And they fall dramatically—as in multiple hundreds of thousands of dollars. The reason why? I travel from the Los Virgenes School District, generally considered the best public school district in the Los Angeles metropolitan area, to the Los Angeles Unified Public School District, generally considered one of the worst.

This had led me to remark, from time to time, in letters to Los Angeles politicians, that if they really wanted to do something nice for their constituents, they would improve the public schools. Trust me, even those constituents without school-age children would notice, big time. (A measure of my political clout, or lack thereof, has been the utter absence of activity on the part of said politicians in this direction. I also get a lot of mail asking me for campaign donations from these same deadbeat politicians. All in all, a sort of a lose-lose situation.)

News that the real estate consequences of good or bad public schools are not a merely local phenomena, and that those consequences have had a terrific impact on the whole notion of what it means to be middle class, came from a column in the New York Times by Jeff Madrick, “The No-Frills Middle Class.” (You can read this column, now in the NYT archives, if you’re willing to shell out here.)

In this column Mr. Madrick reviews a book by a mother-daughter team Elizabeth Warren and Amelia Warren Tyagi, “The Two Income Trap.” The book discusses the growing debt load on middle class families and disproves the notion that a lot of profligate consumer spending is going on. Per Mr. Madrick:

The authors find that despite the popular notions about overconsumption, a typical family spends less on clothing today, discounted for inflation, than in the early 1970's. Similarly, it spends less on large appliances and on food, including going out to restaurants. As for vacation homes, the data suggest that 3.2 percent of families had them in 1973, and that 4 percent do now.

So what is the main culprit--or at least, along with increasing health care costs, one of the main culprits?

…what families spend a lot more on, the authors calculate, is a house in a safe neighborhood with a good school — about 70 percent more a year, discounted for inflation, for the typical family of four. The scarcity of good schooling has created a bidding war that drives up house prices in first-rate school districts. [emphasis added]

This same phenomenon is observable at the higher education level, as well. Mr. Madrick calculates that the costs of higher education have consistently outpaced increases in family income for the past thirty years. These tuition increases have neatly paralleled the availability of Federally subsidized student loans in a textbook example of why subsidies can end up hurting the people they are supposed to help—knowing that the tuition loans are available, universities have felt free to spend with a much freer hand. The faculties and staffs of American universities are terribly glad that you’re willing to go into debt to allow them to take home more lavish paychecks, they really are.

What are the recommendations of Ms. Warren (a professor at Harvard Law School) and of Ms. Tyagi (a management consultant)?

They call for vouchers for the total cost of public education; tuition freezes at colleges rather than more federal financing; and tax breaks for all savings.

Mr. Madrick, being a columnist for the New York Times, isn’t crazy about these ideas, but he probably wouldn’t have his job if he was. Personally, I think the ideas of the dynamic duo are quite sound.

Middle-class parents of the world unite (to reform education); you have nothing to lose but your credit card debt!



P.S. I noticed that the call for tuition freezes at colleges isn’t the lonely, lunatic-fringe notion that you might think. A few days after Mr. Madrick’s column, I spotted a story, also in the New York Times, (which you can read here) about a draft proposal floated by two House Republican leaders to impose something very like what Ms. Warren and Ms. Tyagi have proposed. Representative Howard P. McKeon (R-California), and Representative John A. Boehner, (R-Ohio), who is chairman of the House Committee on Education and the Workforce have proposed a bill to sanction colleges that raise tuition at rates substantially above the Consumer Price Index over several years. As a report written by Mr. Boehner explains:

Decades of uncontrolled cost increases are pushing the dream of a college degree further out of reach for needy students.

And they are emptying the pockets of middle class families as well. I guess we should get used to lumping higher education in with agro-business as industries with all four feet in the public trough, huh?

posted by Friedrich at September 12, 2003


The reason college tuition has risen so rapidly over the past thirty years is because it is so heavily subsidized, through grants, financial aid, and low-interest loans. When everybody gets a subsidy (and nowadays everyone does), the market swallows the subsidy whole -- and we all end up a little worse for the interference.

I've grown convinced that offering vouchers to needy families is the only way we can give failing public schools an incentive to improve. But if vouchers or subsidies are offered to everyone -- if private education is considered a "right" for all Americans -- we'll see a replay of what's happening at private universities.

Posted by: Tim Hulsey on September 12, 2003 3:52 PM

Tim has a very good point, I must say. And I would also point out the key reason why school districts differ so much across Friedrich's short drive from home to work: local funding of schools. This is a recipe for both virtuous and vicious cycles, where good schools attract middle-class parents who bid up house prices which increases property taxes which go back into the schools which make the schools better which attracts even richer parents etc etc on the one hand -- or, on the other, bad schools driving property prices down and decreasing the property taxes going to the schools making them even worse etc etc on the other. If schools were funded at the state rather than the local level, we wouldn't have this problem. But I'm sure the voters of Ventura county wouldn't want their tax dollars spent on no-hopers in LA.

Posted by: Felix on September 12, 2003 4:47 PM


There is considerable state funding of education in California already. But aside from that, do you have any hard data to suggest that the amount of money spent on schools is the independent variable here? I've seen lots of studies that suggest that the independent variable seems to be parental priorities--as in, where parents take schooling seriously, so will their kids.

In any event, I think the quality of schools gives people a lot of leverage to change this situation, as more successful schools will be rapidly reinforced with as much budget as the schools can spend.

Posted by: Friedrich von Blowhard on September 12, 2003 5:27 PM

This new program to freeze tuition and use vouchers was just announced in the last 10 days:

"...more than 220 other private colleges and universities across America are participating in the Independent 529 Plan, a new prepaid college tuition plan tailored specifically for private colleges. Independent 529 begins accepting contributions from the general public today and becomes the newest college tuition program under Section 529 of the Internal Revenue Code.

The program enables purchasers to lock in current tuition rates for future use at any of the participating institutions. Under the Plan, individuals will purchase tuition certificates that can be used for future tuition at any participating institution, assuming they meet the academic standards to gain admission to that institution. "It's like buying a shopping certificate for use at any of the stores at a mall," says Doug Brown, president and CEO of Tuition Plan Consortium, the Albuquerque, New Mexico-based nonprofit group that will oversee the Plan."

Posted by: annette on September 12, 2003 9:25 PM

Friedrich -- I'm not sure I understand or accept your hypothesis that there is exactly one independent variable, which either is or isn't funding. There are lots of variables which go into the quality of a school, and certainly quality of the parents is one of them. But your idea of "reinforcing" outperforming schools with more money seems silly to me: it only exacerbates the virtuous/vicious cycles I talked about. And although there is indeed state funding of schools in California, the best schools still get most of their funding locally – and there is absolutely zero redistribution or subsidy flowing from rich districts with small class sizes to poor districts with large class sizes.

Parents who take schooling seriously need to spend enormous amounts of money to send their children to good schools, since house prices in those neighborhoods are much higher than in areas where the schools are crap. The marginal extra cost of a mortgage in those areas essentially becomes a school fee for parents who will do anything for the sake of their kids' education (which is, actually, most middle-class parents). A good public school system should be good for everyone, not just for those who can afford to live in a certain neighborhood. And for that to happen, property taxes in Ventura and Palo Alto are going to have to start flowing to Los Angeles County and other similarly underperforming regions. Or do you think it's coincidence that the best-performing school districts also have the highest property tax revenues?

Posted by: Felix on September 13, 2003 12:01 AM

All right, let's grant that reinforcing good schools will exacerbate inequities in educational funding. Wouldn't giving additional money to underachieving schools create a powerful incentive for widespread systemic failure? Government would in effect be saying, "To him who hath not, it shall be given; to him who hath, it shall be taken away."

Of course, there's a rough correlation between per-pupil funding and educational quality, but we don't know whether one causes the other or not. We certainly have noteworthy exceptions which seem to disprove the rule: Some cash-strapped schools are educating their students quite well, while some wealthy schools are having trouble.

Granted, wealthy schools in trouble don't stay wealthy for long. That's because wealthy schools in wealthy neighborhoods are usually attended by wealthy kids with wealthy parents. For these people, school choice just isn't a big deal. If a public school isn't doing its job, the parents either put their kids in a private school, or move to a neighborhood with better public schools. They have the money, they love their kids, and so they do it.

But this is also why cash-strapped schools that succeed don't stay poor for long: Wealthier parents start moving themselves and their kids in. A targeted voucher program would offer less wealthy parents this same opportunity to choose a school for their children, thus giving all schools a clear market incentive to improve.

Posted by: Tim Hulsey on September 13, 2003 1:44 AM

The interesting question, to me, is not whether funding levels affect school quality, for I have little doubt they do. The more interesting question is how they affect school quality. My suggestion: teacher salaries. In California, teacher salaries (especially for early-career) stink, which tends to attract the least accomplished and capable college students to the profession. But more than that, there are massive disparities in teacher pay, which in my estimation is largely responsible for inequalities in school quality. Better pay = better teachers = better schools.

And on a political level, efforts at leveling the playing field are likely to encounter resistance over issues of local control and autonomy. For instance, suppose California guaranteed a minimum per pupil funding in all districts by redistributing tax revenue, etc. I suspect that many conscientious parents in well-to-do areas would not oppose this in principle. But they also may react by arguing that such redistribution prevents them from willingly giving their kids they best education they can buy. I.e., if parents want to pay more (in the form of costlier mortgages in high-cost, high-quality school areas), then why should the state prevent them from doing so? Yes, there are private schools, but they are not as big a part of the scene in CA as they are in many parts of the country.

Posted by: MIchael C on September 13, 2003 12:23 PM

Felix and Michael C:

Ahem. Correlation is not causation. Whatever role funding plays in schools, it is no magic wand; equal funding will not magically provide equal scholastic outcomes. Student motivation is largely (kids being kids) a function of parental/societal motivation. Kids going to schools where all the parents owe their position in society to their education are going to get the picture that education is a sort of "do or die" matter, while kids going to schools where the parents are not educated and not even sure what the outcome would be if they were educated are going to imbibe a different attitude. If this type of social-deterministic differential is to be overcome, it will have to be by superior schooling (and by a certain amount of in-school thought control about the paramount importance of education.) But investing in such superior schooling will pay off many times over, hence it is rational to do, even for people who aren't highly motivated by the thought of doing right for the kids. Since this type of superior schooling will require a massive culture change on the part of the education industry, some people--like the mother-daughter team who wrote the book--obviously despair and opt for vouchers. But if we don't go the voucher route, clearly we have to take back control of the schools and rethink what goes on there. Education is too important to be left to the educators and their public-sector unions intent on profiting from their position as a governmentally protected monopoly supplier.

Posted by: Friedrich von Blowhard on September 13, 2003 12:44 PM

Knock me over with a feather, I think I actually agree with Friedrich here! Yes, Friedrich -- the urgent need right now is to take schools where the parents are not educated, and make them much better. Now, you obviously can't do that by rewarding the most successful schools, because the most successful schools are the ones where the parents are educated. Can we agree on that much, at least?

Posted by: Felix on September 13, 2003 4:24 PM

No, I don't think we can. At least I can't.

How does one "improve" an underperforming school? And by what standards does one judge?

For decades, educators have been trying to convince children and parents that education really is a life-or-death matter. In a few cases this approach has worked, but by and large it hasn't. (Mostly it just stresses out the kids.)

The question is whether we should hold low-income children in failing public schools until all their parents see the light en masse and the school system improves, or whether we should offer low-income parents alternatives to that system. It seems that school choice would help the greater number of children in the short term and the long term: Parents who value their children's education and don't think they're being served, will have the chance to do something about the situation, while parents who don't value their children's education will no longer be able to cite social disadvantage as an incentive to apathy or failure.

Posted by: Tim Hulsey on September 13, 2003 6:18 PM

There is no more hideous housing project in Manhattan than Stuyvesant Town, yet no one calls it "the projects" because there's no graffiti, the elevators work, and you can walk through it at night without looking over your shoulder. It's the residents who make "the projects," and it's the students, I suspect, who make the school. A real education is available, dirt-cheap, to anyone who wishes to acquire one.

Posted by: Aaron Haspel on September 15, 2003 11:26 AM

Aaron, can you explain? I don't understand. Are you saying that one devout student can make a good school? If that one student wishes to acquire a real education dirt cheap, what should she do? We assume that moving to an expensive neighborhood is financially out of the question and in any case begs the question.

Posted by: Felix on September 16, 2003 10:32 AM

Sure. I'm saying that better students indicate better parents, which in turn indicate better facilities, but I suspect the facilities themselves are a passenger, not a causual variable. One devout student doesn't make a good school; a lot of them certainly do.

To the impoverished student who wishes to acquire an education I suggest the public library. None of the well-educated people I know got theirs at school.

Posted by: Aaron Haspel on September 17, 2003 12:16 PM

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