In American towns, school systems are the backbone. Strong schools attract affluent residents. Affluent residents boost land values and median incomes. Higher land values and median incomes means higher tax revenue. Higher tax revenue means more money for schools. More money for schools means strong schools, and that means more affluent residents. It’s a virtuous circle:
What kills American towns are low income residents. Low income residents lower the amount of tax revenue local schools have per student, damaging school performance. As the schools decline, the affluent residents dry up, and that hits land values and median income, eroding tax revenue and further damaging the schools. Towns get into death spirals, where declining schools and collapsing prosperity feed off each other. Today I want to talk about how towns get thrown off this cycle, and how higher local minimum wage laws can keep them on track.