Transcript

Tim Sablik: I'm Tim Sablik, an economics writer. Today I'm joined by Santiago Pinto, a senior policy economist in the Richmond Fed's Research Department. Before joining the Bank in 2012, Santiago taught economics at West Virginia University for 10 years. His research focuses on urban and regional economics, public economics, and state and local public finance.

Today we'll be talking about the potential long-term consequences of disruptions to K-12 education as a result of the COVID-19 pandemic. Thanks for joining me, Santiago.

Santiago Pinto: Hey Tim, I'm so happy to be talking to you.

Sablik: A lot of your research has been focused on applied microeconomics topics. How did you end up getting interested in the topic of our conversation today about the economics of education?

Pinto: In the U.S., the way the education system works is really fascinating. You have the school districts and they are financed by property taxes. That determines the quality of the schools, and that determines where people decide to locate. And that, at the end, determines spatial and regional differences across locations. So that's where I got more into the area of education.

There's a particular field of education — they are all engaged and involved in trying to evaluate policies, trying to figure out what is the cause and effect of a policy, for instance, in educational outcomes. And that is a fascinating area.

It's not that you can really experiment with people, so in that area people use a lot of what are called quasi-natural experiments to study how different changes in policies affect a treatment group and compare that to a control group. That's another area that I worked in before I had some specialization in econometrics.

Sablik: I guess one of those natural experiments you could consider would be all the spillover effects of a recession.

You mention that you came through this through state and local public finances, and obviously recessions can have a big impact on those finances. How do those spill out into education?

Pinto: Deep recessions like the one we are experiencing right now — they cast long shadows on state and local tax revenues.

If you look at the Great Recession, from 2007 to 2010, the taxes collected by state and local government fell almost 5 percent, which is quite a lot. And they actually didn't recover until 2013. When state and local governments experience such decreases in tax revenue, they are forced to reduce spending. And we know that funding of education relies on state and local governments.

What researchers have been trying to do, looking at the behavior of what happened in previous recessions, they're trying to see what has been the implications of those declines in revenues. I'm sure that there will be a huge amount of research coming out from this natural experiment [to] see what are the possible effects. For the time being, we are relying on what happened in the past, which is not exactly the perfect match.

For instance, if we look at the past, and especially the Great Recession, one way in which local governments face declining resources is by reducing their payroll. They do that by layoffs, furloughs or hiring freezes. If you look at employment at the local level, it fell down in the Great Recession and did not recover until 2019.

Sablik: That's specifically employment for teachers?

Pinto: Actually, 60 percent of local government employment [is] education jobs. When you look specifically at the evolution of local education jobs, they went down in 2008 and never recovered to pre-recession levels.

If you look at the same data right now, you see there is a huge decline. Not only [has] the problem been [a greater decline in employment] than that in the Great Recession, but also [the decline has been] more abrupt and more sudden. But also this has to do with the people — the teachers and administrative people — that support education in any particular way. The budget to education will go down [during a recession].

For instance, in the Great Recession, spending per student declined in 2009. Spending per student declined around $500 until 2013, and they only recovered in 2016. So when we expect something similar to happen right now, we expect this to happen not only in the short run, but also perhaps extended for a few more years.

Sablik: Is there any research on how these spending cuts in education translate to effects on students?

Pinto: Definitely. The research shows that these education disruptions matter — they matter a lot.

For instance, the research that was based on data from the Great Recession finds that cohorts that were exposed to the cuts during the Great Recession had worse educational outcomes. Also, those cuts contributed to increasing the test-score gap between black and white students [and] decreased the college-going rate. All these studies offer quantitative results in terms of what are the expected declines that we can observe for a specific amount of decline in spending.

Another aspect to consider is that those entering the job market during a recession, they tend to accept lower paying jobs and they also tend to accept jobs that are not really good matches for them or for their employers. That will also tend to increase employee turnover. This will all imply they will have a flow of earnings in the future that will be lower than the ones of those that graduate under better economic conditions.

Sablik: I think we've seen in some past recessions because of those effects, often a lot of students who would be graduating in a recession choose to continue their schooling until the economic conditions look better. The situation we're in right now is a bit different with a lot of schools going online because of the COVID-19 pandemic.

What are some of the other impacts that we might expect to see that will look a little different from past recessions?

Pinto: When people are trying to use the Great Recession to understand what's going to happen here, we can definitely use those results, but there are a lot of other things happening right now.

One of the main differences is that now we have students experiencing not only less instruction time due to school closures, [they] have to suddenly shift from face-to-face instruction to online instruction at all levels of education. These extended school closures we observed mostly in the spring semester of 2020. Research has found that when students miss class hours and miss instruction, that will affect negatively their development of cognitive skills that will also lower their performance in standardized testing. Eventually, that will have a negative impact on future earnings.

Some back-of-the-envelope calculations that I did based on this research, for instance, a 12-week school closure — something along the lines that we experienced in the spring semester — will reduce test scores in math by 9 percent of a standard deviation. This is an outcome that will be even worse for people from low-income families.

There's an interesting strand of literature that tries to quantify what is the learning loss that typically takes place during the summer. That literature finds that students tend to lose about a month of learning over the summer, on average. This kind of research can also be used to try to see what are the implications of school closures. If we extrapolate these findings to the current situation, students will return in fall 2020 to their classes with 63 to 68 percent of the learning gains in reading relative to a typical school year and with 35 to 50 percent of the learning gains in math.

Not only that, this is an average effect. There are kids that will be doing better because [they] were part of a higher distribution of skills, so these are students that are really self-motivated and will read a lot and stuff like that during the summer. They ended up gaining.

Sablik: Right.

You also mentioned that those effects are different for students depending on their household situation or household income. So, students in higher-income households can better weather a disruption to education than students in lower-income households?

Pinto: Sure. The impact of the school closures is likely to be more devastating in areas where we have already lower learning outcomes, high dropout rates, and low resilience to overall shocks. Now that there's a pandemic, it's obviously now threatening to make these outcomes even worse.

These school closures disproportionately hurt vulnerable and disadvantaged students, not only who rely on education but also who rely on schools for a range of other social services that include health and nutrition. Definitely this is something that likely intensifies future poverty and also increases future fiscal pressure for local governments down the line.

But also something that you were mentioning — this sudden move from face-to-face to online instruction or virtual learning. This is another thing that contributes to increasing the discrepancies in education achievement among different groups of households or students. The research states that in general … online learning cannot fully replace face-to-face classroom instruction. This problem is more severe for students from disadvantaged backgrounds. Again, understanding that some of these discrepancies include, for instance, the amount of time parents can devote to teaching, what are the parents' skills, and the financial resources that households can allocate to support the learning process.

There's also a lot of research that explains some of the discrepancies in education achievement is the access to broadband and technology in general. It's well known as the digital divide. It looks like some work indicates that students that have access at home to internet, they tend to perform better in reading, math and science tests.

Sablik: Disruptions in early childhood education, in particular, seem to be very important for long-run outcomes in life.

Pinto: Early childhood education is considered a critical time — at this time we lay the groundwork for children's academic careers. Early childhood education is critical to future economic outcomes.

Researchers have looked at the impact of high-quality preschool and Head Start programs. They have shown that there are long-term benefits with higher graduation rates, lower incarceration rates, and higher earnings for those students who have participated in these programs. One important aspect is that, while all students tend to benefit from early childhood education or from investment in preschool and those kind of things, the most gains are often shown for poor and disadvantaged students.

This is a concept that is quite widely used in economics that has to do with the notion of dynamic complementarities in education. The returns from getting educated [that occur] later in life increase as you invest more at the early stages. One thing we can infer from this literature is that the opposite also takes place. When there is a developmental shortfall at an early stage, that may constrain the benefits of education later in life. We'll see here happening during this crisis — we'll see that we are missing that window of opportunity that is hard to recover later on.

The research on childhood education is not very optimistic on how policies implemented later in life can offset the deficit that would have accumulated at the early stages in life. Again, this window of opportunity is really very valuable. If we miss it, we will really expect to have some implications in the long run.

Sablik: Right.

It seems — at least, so far — these disruptions seem likely to widen gaps that already existed, the socioeconomic gaps in educational attainment.

Do you have any takeaways from your research on this topic that you think policymakers and educators should be thinking about as we move through this whole pandemic experience?

Pinto: First of all, we know that state and local governments play a critical role in funding and delivering K-12 education in the U.S. They are limited in terms of how much they can smooth their expenditures when their revenue collapses. They have to satisfy their balanced budget rules [so they] have to respond by reducing their provision of essential services, including education.

This is linked to the investment in early childhood education, but also for the other types of spending in schools and education. Some investment can be postponed — we can, perhaps, repair a street tomorrow and there may be some costs and some benefits from doing that. In the case of education, if we miss this opportunity, that will definitely have some long-term implications with significant long-term values.

The main concern is that these adverse effects tend to fall even more strongly on students from disadvantaged families, and this may increase persistent educational achievement gaps. Maybe you have heard recently a lot of people talking about the "K"-shaped recovery. People now notice the great disparity in how individuals are being affected by the pandemic and the recovery — some are thriving while others have been devastated.

Sablik: That all sounds pretty bad. Are there any silver linings?

Pinto: This pandemic has forced the community, parents, families and schools to work with each other in very productive ways and try to come up with solutions — how to overcome all these difficulties imposed by the pandemic. I hope that these kinds of interaction continue.

This pandemic gives us an opportunity for us to reflect about how we will educate our future generations. For instance, what is the role of digital technology in future education? We need to define what our new normal for learning should be. I thought this was going to happen 20 years from now, 30 years from now. The pandemic has put us on a spot that we now need to think about how to deal with those things, and I hope that something good will come out of this.

Sablik: I hope so, too.

Thanks very much for taking the time to talk with me. It was a great conversation.

Pinto: Appreciate it. Thank you very much, Tim.