Equity Is an Economic Imperative

For decades, traditional public finance has held that equity and efficiency are zero sum—that more of one means less of the other. According to this logic, allocating public resources requires hard choices: By sharing resources equitably, we create inefficiencies that reduce the total number of resources. But what if investments in equity actually result in more resources? Our recent work at the Georgetown University Center on Education and the Workforce (CEW) suggests that when we invest in postsecondary equity, we are not pouring society’s resources into a “leaky bucket.” Instead, we are making a smart investment in our country’s financial health with demonstrable financial returns.

I’ll share our evidence shortly, but first, some background: The equity versus efficiency debate was heavily influenced by economist Arthur Okun’s 1975 book, Equality and Efficiency: The Big Tradeoff. Okun’s explanation for the trade-off is that uplift for disadvantaged groups is costly, and that public financing systems are like a leaky bucket, in which the costs of administration reduce the size of the investment.

Economist Rebecca Blank later countered this assessment. In her 2002 paper “Can Equity and Efficiency Complement Each Other?,” Blank concluded that Okun’s claims were overstated because he based his formulation on a single-period return. In fact, she showed that a multiperiod return (common in many investment models) would allow the initial investment to produce a positive result.

The implications of this debate extend far beyond the ivory tower. High levels of skepticism about postsecondary education and strong backlash against diversity, equity, and inclusion (DEI) initiatives have led to significant policy changes, including diminished public investments in educational equity. Demands for accountability have further narrowed what counts as justification for such investments, prompting decision-makers to focus only on the bottom line: Do dollars spent on expanding educational opportunity produce a positive return on investment?

The short answer is yes. In fact, the returns can be staggering.

In our 2024 report, Learning and Earning by Degrees, we demonstrated that the real attainment gains that occurred in the US from 2010 to 2020 will eventually generate up to $14.2 trillion in monetary gains, even after adjusting for investment costs. An educated workforce is an engine that propels economic growth.

In a subsequent analysis, we showed that the nation is on track to face a shortage of 5.25 million workers with postsecondary education by 2032 (including 4.6 million with at least a bachelor’s degree). Where will those workers come from? Our best bet is from the populations with the most room to grow in terms of degree attainment—the first-generation, low-income, and otherwise marginalized groups who have historically faced high barriers to educational attainment.

The economic imperative to expand educational opportunity is palpable. Employers are crying out for talent, while at least 500,000 college-ready students graduate from high school every year but never complete a college credential. Additional investments are needed to ensure that many more students are able to gain the education and training the American workforce requires.

DEI may be a political and social maelstrom, but the US will not achieve peak economic performance without efforts to uplift all its people.

At the state level, College Futures Foundation recently asked what the economic impact would be if California achieved its goal of raising the share of adults in the state with a postsecondary credential to 70 percent. The foundation was brave enough to insist this goal should be the target for all demographic groups rather than the average across groups, and CEW partnered with College Futures to estimate the impact of such an ambitious “no group left behind” strategy. Adjusting for education costs carried by the state and opportunity costs shouldered by students, we calculated that achieving the goal would generate $4.4 trillion in net monetary gains over the next 50 years, improving graduates’ lives and strengthening the California economy.

Reaching this aspirational goal would not be without cost or struggle. In purely monetary terms, the state would need to invest roughly an additional $200 billion to achieve it, while students would have to shoulder the combined burdens of school, life, and work while learning. But consider the payoffs: The monetary gains would outpace costs in less than 10 years and translate into additional economic growth thereafter (Figure 1).

In light of the numbers, policy decisions based on the view that equity and efficiency are mutually exclusive put the country at a clear economic disadvantage. If we view equity as ultimately benefiting all of us, we can begin to expand opportunity and unlock the human talent we need to realize the nation’s full economic potential. The first step in developing the talent pipeline is to stop overlooking the talent we have. The second step is to acknowledge that investing in economic opportunity for all is just good business sense—and it’s an imperative to ensure our country’s economic future.

While some may find the utilitarian argument for investing in postsecondary equity most compelling, we must not forget that equity is a moral imperative as well—representing a belief in fairness, which undergirds the American idea that education, at its very best, should be the great equalizer.