The Wages of Failure: New Evidence on School Retention and Long-Run Outcomes

By estimating differences in long-run education and labor market outcomes for cohorts of students exposed to differing state-level primary school retention rates, this article estimates the effects of retention on all students in a cohort, retained and promoted. We find that a 1 standard deviation increase in early grade retention is associated with a 0.7 percent increase in mean male hourly wages. Further, the observed positive wage effect is not limited to the lower tail of the wage distribution but appears to persist throughout the distribution. Though there is an extensive literature attempting to estimate the effect of retention on the retained, this analysis offers what may be the first estimates of average long-run impacts of retention on all students.