Calculating the costs of school closures, reopenings

The Penn Wharton Budget Model released a report this week that estimates a cost of $12,000 to $15,000 per month in future wage earnings for students enrolled in K-12 schools closed by the pandemic.

Empty school hallway

While schools around the country grapple with if or when to close during the pandemic, the conversation can often be weighed down by ideology and, understandably, heavy emotions. 

To better equip schools and policymakers, the Penn Wharton Budget Model (PWBM) responded by releasing new estimates on the cost of school closures on future wage earnings and, moreover, the cost of a COVID-19 infection per adult. The intent of the report, says Director of Computational Dynamics Efraim Berkovich, is to give these parties quantitative information to work with in decision-making.

“The goal is not to say, ‘This is the definitive tradeoff’; it’s to elevate the conversation to the level of, ‘Let’s start to look at numbers and if you disagree with numbers let’s figure out why,’” says Berkovich. 

PWBM models indicate a loss of $12,000 to $15,000 in future wage earnings for K-12 students, per month that schools are closed. This already tallies to a $2.8 trillion collective loss of future earnings for that group since the pandemic started, or four to five percent of lifetime wage earnings for students in grades 1-12. (For context, U.S. GDP is around $20.5 trillion.) Those figures will escalate with each passing month of school closures. 

The report also, notably, recognizes some evidence that students in primary schools will disproportionately lose out in future wage earnings. This is largely attributed to older students’ abilities to adjust to distance learning and technology, plus the more fundamental lessons of reading and math taught during primary years of education. 

“Anecdotally, if you’ve seen a second grader try to sit in a Zoom meeting for two hours, it’s an exercise of torture,” says Berkovich. “We try to account for some of that.”

Predictions about future wage earnings lean on historical patterns and do not attempt to predict for future world events or new technologies that would impact future wage earnings.

These projections on wage earnings are meant to be used alongside ongoing reports from the PWBM that estimate the cost per COVID-19 infection, which accounts for loss of life, medical costs, and productivity costs. For September, that cost per infection is $38,315—a drop from approximately $51,000 in August and a larger decline from a peak of $329,942 in March. 

But that large leap since March also needs put in context, Berkovich clarifies.

“In March, it may have been the case that closing the schools was the right choice because the cost of a new infection was so high,” he explains. “But the idea is that you should be monitoring what’s going on because now we are better at treating COVID and reducing mortality. It’s not as bad as it was, and the cost of a new infection is about 10 times lower.

“[COVID] is still terrible and not a disease I want anyone to have, but you have to judge it in a risk-adjusted manner. Now [the cost per case] is not as bad as it was, so we should be thinking about reducing some of these losses.”

For the loss of future wages data, a 3.5 discount rate was applied to account for the changing value of the dollar, and the team looked to the Social Security Administration’s  for a standard. Ultimately, their discount rate was on the conservative end of that standard, Berkovich says. 

These estimates ultimately work in tandem to produce the PWBM’s threshold of 0.355 new expected infections per student kept in school. If reopening is expected to produce more infections in the community than this threshold, then schools should remain closed. Other thresholds for reopening decisions have not been transparently explained by most policy-making organizations, he says. 

The 0.355 tradeoff threshold reflects both the potential for financial losses and the cost of loss of life. While the 0.355 figure is, he stresses, “a ballpark based on assumptions,” it is a starting point for conversation in local communities that will inevitably present with unique variables to their decision-making. 

“The way this would work is this requires vigilance on the part of the people operating the schools, and we don’t know how many new infections a school reopening actually generates,” Berkovich says. “It’s localized and specific. Even with that, this is a new disease, with new policies for how you open—[with considerations of] are students wearing masks, how separated are they, is there good ventilation.”

The suggestion is that schools pay attention to what is happening in their immediate and neighboring community schools and hospitals, and update policies based on elements like the rate of infection and mortalities. 

The PWBM is a nonpartisan research-based initiative that provides accurate, accessible, and transparent economic analysis of public policy’s fiscal impact. The team of economists and analysts is led by Faculty Director Kent Smetters