Making children repeat third grade because of a reading test lowers their earnings as young adults, according to a new study of a Texas retention policy. At age 26, students who were held back earned $3,477 less a year, a drop of 19 percent.
The study, titled “Early Grade Retention Harms Adult Earnings,” was written by Jiee Zhong. It was published in American Economic Journal: Applied Economics in its October 2026 issue.
A test score cutoff as a natural experiment
Texas used a reading test to decide which third graders moved on and which repeated the year. Zhong used that rule to estimate the causal effect of being held back.
The method is a fuzzy regression discontinuity design. It compares children who scored just below the cutoff with children who scored just above it. Those two groups are very similar, except that the ones below the line were much more likely to be retained, so differences in how their lives turned out can be credited to the retention itself. The design is called fuzzy because falling below the cutoff raised the chance of being held back without guaranteeing it.
Better test scores, worse outcomes
Repeating the grade did bring a short-term gain: test scores improved for a while. Almost everything else moved the wrong way.
Retained students were absent from school more often, showed more violent behavior and were involved in more juvenile crime. They were also less likely to graduate from high school.
By age 26 the gap had reached the labor market, with annual earnings 19 percent lower than those of comparable students who were promoted.
Higher education showed a mixed picture. Retained students were more likely to enroll in community college and less likely to attend a public university, but neither estimate was statistically significant.
Why it matters
Several US states have adopted third-grade reading rules that hold back children who fall short on a test. The findings suggest that the temporary bump in test scores can come at a lasting cost in schooling, behavior and pay.
The abstract does not give the number of students, the years covered or how the effects differed between groups of children, so those details cannot be judged from it.
Study Details:
- Title: Early Grade Retention Harms Adult Earnings
- Authors: Jiee Zhong
- Journal: American Economic Journal: Applied Economics, Vol. 18, No. 4, pages 276-308
- Publication Date: October 2026
- DOI: 10.1257/app.20230121