SPRINGFIELD, in MASSACHUSETTS, might seem an improbable setting for an education miracle. The city with a population of 155,000 along the Connecticut river has a median household income half the state average; violent crime is common. Yet graduation rates at the city’s high schools are surging. Between 2007 and 2022 the share of pupils at the Springfield High School of Science and Technology who earned a diploma in four years jumped from 50% to 94%; at neighbouring Roger Putnam Vocational Technical Academy it nearly doubled to 96%.
Alas, such gains are not showing up in other academic indicators. At Springfield High scores on the SAT, a college-admissions test, have tumbled by 15% over the same period. Measures of English and maths proficiency are down, too. The pass rate on advanced-placement exams has fallen to just 12% compared with a national average of 60%.
The trend at Springfield High is all too common. Between 2007 and 2020 the average graduation rate at public high schools in America leapt from 74% to 87%. During this period pupils notched up gains in course credits and grade-point averages. Yet SAT scores fell (see chart 1). Results from the latest Programme for International Student Assessment (PISA), an international test of 15-year-olds, show that maths and reading literacy are flat or down. An analysis by The Economist suggests that schools are lowering academic standards in order to enable more pupils to graduate. And the trend is hurting low-performing pupils the most.
America has fretted about academic standards at its public schools for decades. In 1983 the Department of Education released a landmark report, “A Nation At Risk”, which warned of a “rising tide of mediocrity” in the country’s schools. The response was swift. Within five years 45 states had raised graduation requirements; and more than two dozen had introduced other reforms, including more comprehensive curriculums and higher salaries for teachers. Some states also started requiring graduates to pass “minimum-competency” exams, standardised tests introduced in the 1970s that evaluated pupils’ ability to do eighth- or ninth-grade level English and maths.
But as graduation requirements were toughened up, coursework was watered down. A survey conducted in 1996 by Public Agenda, a policy research group, found that just half of public high-school students felt that they were being challenged academically. Another survey in 2001 found that only a quarter of pupils thought that their teachers had high expectations of them. Even the federal government acknowledged again that academic standards were falling short. A report by the Department of Education found that more than a tenth of maths coursework taken by the class of 2005 consisted of primary- and middle-school-level material. Only a third of algebra 1 students and a fifth of geometry students received “rigorous” instruction.
Grading got easier, too. The best evidence for this comes from comparisons of classroom grades with performance on state exams taken at the end of the school year. A study by Seth Gershenson of American University found that between 2005 and 2016, 36% of North Carolina public-school students who received Bs in their algebra 1 courses failed their end-of-course exams. Pupils with Cs failed 71% of the time. Another study, by Chris Clark of Georgia College & State University, analysed maths courses at Georgia public high schools in 2007 and yielded similar results. “Some schools and school systems appear to be inflating course grades,” Mr Clark concluded, “while others appear to hold their students to higher standards.”
Such evidence suggests that academic standards at American high schools are too low. But are they getting worse? To answer this, The Economist assembled data on graduation rates and standardised test scores at 3,000 high schools across six states—Colorado, Georgia, Illinois, Massachusetts, Michigan and North Carolina—for school years from 2007 to 2022.
Doing the maths
We found that four-year graduation rates in our sample increased during this period, even as test scores fell. Gains were greatest in high schools with the lowest test scores. In 2007 schools with scores on the sat or act, another college-admissions exam, in the bottom tenth of our sample graduated half of their pupils; in 2022 they graduated two-thirds. As low-performing schools have passed more pupils, the relationship between test scores and graduation rates has weakened (see chart 2).
Just how far has the academic bar been lowered? To quantify this, we conducted a regression analysis of graduation rates between 2007 and 2022 that controlled for average ACT or SAT scores, dropout rates and school year. If academic standards were consistent over time, we would expect no underlying trend in graduation rates from year to year. Instead, we found that graduation rates drifted upward, even after controlling for changes in test scores and dropout rates.
Our analysis suggests that high schools are graduating thousands of students who, not long ago, might not have made the grade. Some states have lowered the bar more than others. In Illinois graduation rates are about one percentage point higher than we would expect based on academic performance alone; in North Carolina they are nearly eight points higher. Overall, we found that public high schools in our sample are inflating graduation rates by roughly four percentage points compared with 15 years earlier.
Sceptics will point out that the test-taking population is significantly different today than it was 15 years ago, and that this may be making test scores look worse than they actually are. “If more and more students are sitting for these tests,” says Thomas Dee of Stanford University, “the composition changes over time in ways that probably bias scores downward.” Such “compositional effects” do not appear to explain our results, however. The share of students taking the ACT or SAT in our sample actually fell from 78% in 2007 to 68% in 2022. This would suggest that, if anything, our estimates of graduation-rate inflation may be too low, rather than too high.
You might expect policymakers to be scrambling to shore up academic standards. In fact, they are doing the opposite. In May last year New Jersey’s board of education voted to lower the passing score on the state’s high-school graduation test, saying the current standards had “adverse impacts” on students. In November Oregon education officials scrapped its “essential skills” graduation exams in maths, reading and writing. At least four more states—Florida, Massachusetts, New Jersey and New York—are considering doing away with their own exit exams. In January Alaska’s board of education voted to lower proficiency standards for the state’s reading and maths exams.
The trend towards weakening standards can be blamed in part on No Child Left Behind, an education-reform law passed in 2002. It required states to track the share of students graduating in four years and set annual targets for improvement. Schools that failed to hit their targets faced sanctions, including possible closure. Although such policies were well-intentioned, they had perverse outcomes. To keep graduation rates up, teachers devised creative ways of raising grades: allowing students to retake exams, removing penalties for late assignments, adjusting grading scales. “We’re doing what I call ‘grading gymnastics’,” says Eric Welch, a social-studies teacher in Fairfax County, Virginia. “There’s a lot of pressure to hit the metric, regardless of how you do it,” explains Peter VanWylen, a data consultant and former teacher in Memphis, Tennessee. “Nobody wants to lose their job and so there’s this pressure to get the number where it needs to be.”
Other concerns are also at work. “The push for educational equity, and in particular racial equity, has been used in a lot of places to push against higher standards for high-school graduation,” says Morgan Polikoff of the University of Southern California. When New Jersey debated new testing benchmarks last year, one board-of-education member argued that a higher standard would be “unfair” to black and Latino students in urban districts. Oregon’s decision to drop its graduation exam in November was based in part on a report by the education department which concluded that the test produced “inequitable outcomes” for “historically marginalised” groups.
Must try harder
Lowering standards, it is thought, can help narrow such achievement gaps. Yet it may have the opposite effect. A recent working paper by Brooks Bowden, Viviana Rodriguez and Zach Weingarten of the Universities of Pennsylvania and Texas at San Antonio analyses how a more lenient grading policy introduced by North Carolina public high schools in 2014 affected effort and academic performance. The authors found that after schools implemented the new grading scale, which led to more As and fewer Fs, students with low test scores showed up to class less often and put in less effort. The attendance of high-scoring students did not change. Although the policy led to slightly higher graduation rates, it also contributed to wider gaps in GPAs and standardised test scores between high- and low-achieving students.
This suggests that policies that lower the bar may harm the very students they are meant to help. “I don’t think we’re helping anybody by handing out higher grades or giving out graduation certificates,” says Dr Bowden, one of the authors of the study. Better instead to set expectations high, reckons Dr Polikoff. “People rise to the expectations you set.” ■
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The columns of Royal Exchange are dressed for Christmas, at Bank in the City of London, the capital’s financial district, on 20th November 2024, in London, England.
Richard Baker | In Pictures | Getty Images
LONDON — U.K. inflation rose to 2.6% in November, the Office for National Statistics said Wednesday, marking the second straight monthly increase in the headline figure.
The reading was in line with the forecast of economists polled by Reuters, and climbed from 2.3% in October.
Core inflation, excluding energy, food, alcohol and tobacco, came in at 3.5%, just under a Reuters forecast of 3.6%.
Headline price rises hit a three-and-a-half year low of 1.7% in September, but was expected to tick higher in the following months, partly due to an increase in the regulator-set energy price cap this winter.
“This upwards trajectory looks set to continue over the next few months,” Joe Nellis, economic adviser at accountancy MHA, said in emailed comments on Wednesday, citing the energy market and “the long-term pressure of a tight domestic labor market.”
Persistent inflation in the services sector, the dominant part of the U.K. economy, has led money markets to price in almost no chance of an interest rate cut during the Bank of England’s final meeting of the year on Thursday. Those bets were solidified earlier this week when the ONS reported that regular wage growth strengthened to 5.2% over the August-October period, up from 4.9% over July-September.
The November data showed services inflation was unchanged at 5%.
The U.S. Federal Reserve is widely expected to trim rates by a quarter point at its own meeting on Wednesday, taking total cuts of the year to a full percentage point. Some skepticism lingers over whether it should take this step, given inflationary pressures.
This is a breaking news story and will be updated shortly.
Federal Reserve Chair Jerome Powell speaks during a news conference following the November 6-7, 2024, Federal Open Market Committee meeting at William McChesney Martin Jr. Federal Reserve Board Building, in Washington, DC, November 7, 2024.
Andrew Caballero-Reynolds | AFP | Getty Images
Inflation is stubbornly above target, the economy is growing at about a 3% pace and the labor market is holding strong. Put it all together and it sounds like a perfect recipe for the Federal Reserve to raise interest rates or at least to stay put.
That’s not what is likely to happen, however, when the Federal Open Market Committee, the central bank’s rate-setting entity, announces its policy decision Wednesday.
Instead, futures market traders are pricing in a near-certainty that the FOMC actually will lower its benchmark overnight borrowing rate by a quarter percentage point, or 25 basis points. That would take it down to a target range of 4.25%-4.5%.
Even with the high level of market anticipation, it could be a decision that comes under an unusual level of scrutiny. A CNBC survey found that while 93% of respondents said they expect a cut, only 63% said it is the right thing to do.
“I’d be inclined to say ‘no cut,'” former Kansas City Fed President Esther George said Tuesday during a CNBC “Squawk Box” interview. “Let’s wait and see how the data comes in. Twenty-five basis points usually doesn’t make or break where we are, but I do think it is a time to signal to markets and to the public that they have not taken their eye off the ball of inflation.”
Inflation indeed remains a nettlesome problem for policymakers.
While the annual rate has come down substantially from its 40-year peak in mid-2022, it has been mired around the 2.5%-3% range for much of 2024. The Fed targets inflation at 2%.
The Commerce Department is expected to report Friday that the personal consumption expenditures price index, the Fed’s preferred inflation gauge, ticked higher in November to 2.5%, or 2.9% on the core reading that excludes food and energy.
Justifying a rate cut in that environment will require some deft communication from Chair Jerome Powell and the committee. Former Boston Fed President Eric Rosengren also recently told CNBC that he would not cut at this meeting.
“They’re very clear about what their target is, and as we’re watching inflation data come in, we’re seeing that it’s not continuing to decelerate in the same manner that it had earlier,” George said. “So that, I think, is a reason to be cautious and to really think about how much of this easing of policy is required to keep the economy on track.”
Fed officials who have spoken in favor of cutting say that policy doesn’t need to be as restrictive in the current environment and they don’t want to risk damaging the labor market.
Chance of a ‘hawkish cut’
If the Fed follows through on the cut, it will mark a full percentage point lopped off the federal funds rate since September.
While that’s a considerable amount of easing in a short period of time, Fed officials have tools at their disposal to let the markets know that future cuts won’t come so easily.
One of those tools is the dot-plot matrix of individual members’ expectations for rates over the next few years. That will be updated Wednesday along with the rest of the Summary of Economic Projections that will include informal outlooks for inflation, unemployment and gross domestic product.
Another is the use of guidance in the post-meeting statement to indicate where the committee sees policy headed. Finally, Powell can use his news conference to provide further clues.
It’s the Powell parley with the media that markets will be watching most closely, followed by the dot plot. Powell recently said the Fed “can afford to be a little more cautious” about how quickly it eases amid what he characterized as a “strong” economy.
“We’ll see them leaning into the direction of travel, to begin the process of moving up their inflation forecast,” said Vincent Reinhardt, BNY Mellon chief economist and former director of the Division of Monetary Affairs at the Fed, where he served 24 years. “The dots [will] drift up a little bit, and [there will be] a big preoccupation at the press conference with the idea of skipping meetings. So it’ll turn out to be a hawkish cut in that regard.”
What about Trump?
Powell is almost certain to be asked about how policy might position in regard to fiscal policy under President-elect Donald Trump.
Thus far, the chair and his colleagues have brushed aside questions about the impact Trump’s initiatives could have on monetary policy, citing uncertainty over what is just talk now and what will become reality later. Some economists think the incoming president’s plans for aggressive tariffs, tax cuts and mass deportations could aggravate inflation even more.
“Obviously the Fed’s in a bind,” Reinhart said. “We used to call it the trapeze artist problem. If you’re a trapeze artist, you don’t leave your platform to swing out until you’re sure your partner is swung out. For the central bank, they can’t really change their forecast in response to what they believe will happen in the political economy until they’re pretty sure there’ll be those changes in the political economy.”
“A big preoccupation at the press conference is going to the idea of skipping meetings,” he added. “So it’ll turn out to be, I think, a hawkish easing in that regard. As [Trump’s] policies are actually put in place, then they may move the forecast by more.”
Other actions on tap
Most Wall Street forecasters see Fed officials raising their expectations for inflation and reducing the expectations for rate cuts in 2025.
When the dot plot was last updated in September, officials indicated the equivalent of four quarter-point cuts next year. Markets already have lowered their own expectations for easing, with an expected path of two cuts in 2025 following the move this week, according to the CME Group’s FedWatch measure.
The outlook also is for the Fed to skip the January meeting. Wall Street is expecting little to no change in the post-meeting statement.
Officials also are likely to raise their estimate for the “neutral” rate of interest that neither boosts nor restricts growth. That level had been around 2.5% for years — a 2% inflation rate plus 0.5% at the “natural” level of interest — but has crept up in recent months and could cross 3% at this week’s update.
Finally, the committee may adjust the interest it pays on its overnight repo operations by 0.05 percentage point in response to the fed funds rate drifting to near the bottom of its target range. The “ON RPP” rate acts as a floor for the funds rate and is currently at 4.55% while the effective funds rate is 4.58%. Minutes from the November FOMC meeting indicated officials were considering a “technical adjustment” to the rate.
A briefcase filled with Iranian rial banknotes sits on display at a currency exchange market on Ferdowsi street in Tehran, Iran, on Saturday, Jan. 6, 2018.
Ali Mohammadi | Bloomberg | Getty Images
Iran is confronting its worst set of crises in years, facing a spiraling economy along with a series of unprecedented geopolitical and military blows to its power in the Middle East.
Over the weekend, Iran’s currency, the rial, hit a record low of 756,000 to the dollar, according to Reuters. Since September, the embattled currency has suffered the ripple effects of devastating hits to Iran’s proxies, including Lebanon’s Hezbollah and Palestinian militant group Hamas, as well as the November election of Donald Trump to the U.S. presidency.
With the fall of Syrian President Bashar al-Assad amid a shock offensive by rebel groups, Tehran lost its most important ally in the Middle East. Assad, who is accused of war crimes against his own people, fled to Russia and left a highly fractured country behind him.
“The fall of Assad has existential implications for the Islamic Republic,” Behnam ben Taleblu, a senior fellow at the Foundation for Defense of Democracies in Washington, told CNBC. “Lest we forget, the regime ahs spent well over a decade in treasure, blood, and reputation to save a regime which ultimately folded in less than two weeks.”
The currency’s fall exposes the extent of the hardship faced by ordinary Iranians, who struggle to afford everyday goods and suffer high inflation and unemployment after years of heavy Western sanctions compounded by domestic corruption and economic mismanagement.
Trump has pledged to take a hard line on Iran and will be re-entering the White House roughly six years after unilaterally pulling the U.S. out of the Iranian nuclear deal and re-imposing sweeping sanctions on the country.
Iranian President Masoud Pezeshkian has expressed his government’s willingness to negotiate and revive the deal, officially known as the Joint Comprehensive Plan of Action, which lifted some sanctions on Iran in exchange for curbs to its nuclear program. But the attempted outreach comes at a time when the International Atomic Energy Agency says Tehran is enriching uranium at record levels, reaching 60% purity — a short technical step from the weapons-grade purity level of 90%.