Lack of Basic Skills in Michigan

As revealed by these five strategies, the cost imposed on Michigan business and higher education institutions by students who graduate from high school without having learned basic skills could be anywhere from $311 million to $1.15 billion per year. The $311 million estimate is almost certainly too low. It does not include any costs for lost productivity and it probably understates the number of people lacking skills. On the other hand, the $1.15 billion estimate may not be a sufficiently conservative estimate. It assumes a 3-percent real rate of return on investments in remedial education, which may be higher (or lower) than the actual return. The other three estimates are clustered around $500 million. Those estimates are conservative and consider any return on remedial education investments to be "a wash." We believe that the most reasonable estimate of how much the lack of basic skills costs Michigan each year lies somewhere near the average of all five estimates: $601 million (see Chart 1, below).