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How school closures are hurting students' future earnings

Yahoo Finance's Kristin Myers joins Zack Guzman to discuss the financial impact of school closures and how it will impact students' financial future

Video Transcript

ZACK GUZMAN: As we've been discussing, we've seen cases of coronavirus rise here across the country. And that spike has caused some school districts to reverse the decision to get back into the classroom. Boston would be example of that. New York seems to be one of the rare examples of students actually attending the classroom, as we continue to keep track of the positivity rate that could change those plans.

But a new report from the Penn-- Wharton Budget Model is digging into the cost of not having students go back into the classroom in how it's affecting future earnings for a lot of these K through 12 students and the numbers, the dollars here that are lost. It's quite shocking. For more on that, I want to bring on Yahoo Finance's Kristin Myers who has the details. Kristin.

KRISTIN MYERS: Hey, Zack. Yeah, so as you're mentioning, the Penn Wharton Budget Model essentially tried to figure out what is the trade off in these policies around school closures? As you mentioned, we are starting to see schools close all around the country, as numbers have started to really spike in September. So there's over 56 million primary and secondary students in the United States. So that's essentially everyone K through 12.

And what they found was that the trade-off, Zack, is the future earnings of all of those children that they're going to be making, of course, once they graduate high school and actually enter the workforce, because for every month that a student is not in school, they're not learning the material that they need to learn. They're not taking the test that they need to take. And they're being impacted all the way down the line into adulthood.

And so what, essentially, they decided to do this modeling out. And so just where we are now. So as of October 1, remember, schools closed back in the spring of 2020. They also closed in many school districts also in the month of September, as we saw those case counts really start to rise. So they found that just from by October 1 that essentially students in grades 1 through 12-- so all the way up to high school seniors-- had lost between $43,057 already.

That was already wiped off of their future earnings. That's roughly 4% to 5% on the wages that they would earn over their lifetime. In total, across all students-- I mentioned over 56 million primary and secondary students, the United States-- that's $2.8 trillion that in future wage earnings already just lost up until October 1. But as you mentioned, we are seeing schools continue to close.

And so for every month that a student that is not in school, K through 12-- grades K through 12, they essentially are going to be losing anywhere from $12,000 to $15,000 of their future earnings. So the clock is really ticking here, and that number is going to seriously start to increase.

Now, if schools stay closed through January, which almost I think many people once thought was unthinkable, but as we see these case counts rise, they could lose up to $100,000 from their future earnings. That's an additional $2 trillion is that. And that's just through January. The numbers, as mentioned, continue to increase over time.

I want to quickly just mention for you, on the flip side, everyone saying, listen, there's an economic cost, of course, to keeping-- you know, you have-- keeping the schools closed has an economic cost. Keeping them open also has an economic cost. That is in the coronavirus case counts. Roughly, hospitalization death, loss of productivity costs roughly $40,000 per case. Penn Wharton Budget Model found that right now, economically, closing schools is actually the better economic decision than keeping those schools open, Zack.

ZACK GUZMAN: Yeah, it's interesting. I mean, they also know that these are not just conservative estimates. These are actually on the higher side, because, obviously, you know, you're not skipping school completely. There's still a virtual education coming through here but noting it's still not great in this report and saying that it could improve over time. So we'll see how their numbers might change.

But Kristin, I mean, to that point, the other thing that's not really completely, I think, you'll hear it from parents saying, look, you know you can focus on future earnings of the kids. But also not being able to put your kids in school as a parent is causing a lot of stress and strain on heads of household here, try to figure out how to make work happen as well. I mean, that's another element to all this to be considered too.

KRISTIN MYERS: So that's a great point, Zack. And it's actually a cost that is predominantly borne by women. We've talked about this before. 1/4 of women are actually saying that they are not going back to work, because they have to take care of their children-- help their children do those virtual learnings. They don't have daycare options.

So 25% of women alone are saying, we can't go back to work. That's 25% of women that are not out there making a wage, earning a salary, and able to put that money back into the economy, Zack. So you're absolutely correct. This is not just a cost that is going to be borne by those students in terms of their future earnings.

It is absolutely also being borne by their parents who are losing wages, frankly, because they are unable to go to work and the way that they would or should, because they have to stay home and take care of their children or pay attention to their children and help them go to school and learn everything that we learned in middle school and high school, which I forgotten a lot of it. But I know I remember it was incredibly important.