Is expanding access to higher education worth the price?

by Dirk van Damme

Head of the Innovation and Measuring Progress division, Directorate for Education and Skills

As Education at a Glance 2014  found, education systems continue to expand and levels of educational attainment continue to rise throughout the world. Across OECD countries in 2012, 32% of 25-64 year-olds – over 220 million individuals – held a tertiary degree. Among young adults, the proportion is even higher: 40%. Never before have so many people attained that level of education. Just 12 years earlier, only 22% of 25-64 year-olds had a tertiary education. The tertiary attainment rate among 25-34 year-olds grew by an average of 3.4% per year between 2000 and 2012, and in most countries, it is not likely to slow down anytime soon.

Such a rapid increase in both participation  and completion rates for tertiary studies puts a huge stress on countries’ education systems and governments’ capacity to support tertiary educational institutions. Indicators on expenditure show that between 2000 and 2011 countries had to allocate a higher percentage of national wealth (measured as a proportion of GDP) to tertiary education: from 1.3% to 1.6%. In general, this increase allowed countries not only to compensate for the increasing numbers of students, but also to increase, however slightly, expenditure per student. Between 2008 and 2011, in the midst of the global economic crisis, expenditure per students increased by 2.5% on average across OECD countries.

Obviously, some countries could not follow this pattern: during the same period, 11 countries had to cut expenditure per student. Others tried to avoid putting the increasing cost of tertiary education on public budgets by boosting the share of private spending, for example by raising tuition fees. Between 2000 and 2011, the share of public expenditure on tertiary education fell from 75.3% of total spending to 69.2%. Whatever the source of funding, societies had to boost their investments in tertiary education.

But, in the end, are the additional expenses of families and taxpayers, the time and energy of students and families, and the efforts of universities to adapt their educational processes worth it? Some commentators doubt it; they point to the risk of over-schooling, of skills mismatches, of high-qualified workers stealing the jobs of mid- and low-qualified adults. Some governments want to contain the increasing numbers of students and build the case for a more selective tertiary education system. Others argue that the economic transformation in most OECD countries points towards an increased demand of the kind of skills that universities tend to supply, and that countries had better be prepared by producing a highly qualified workforce for the next decades. It is not easy to settle this debate, and realities differ across countries. But Education at a Glance provides a range of data that can inform the debate.

One way of looking at this is to compare the wage premium for tertiary educated individuals across countries and relate this to the level of tertiary attainment. The wage premium is not a perfect measure of the demand for tertiary-educated workers, since it is also influenced by the overall wage inequality in a country. Not all countries are alike in the way the market rewards highly educated people. For example, the wage premium tends to be relatively high in the more open and market-oriented economies like the United States or the United Kingdom. In contrast, more egalitarian Nordic countries have a compressed wage structure where the relative wage premium for higher educational attainment is lower.

But despite these differences, we still can investigate the overall relationship between the two indicators. Does the share of tertiary-educated people affect the wage premium for young tertiary- educated workers who are just entering the labour market? Are countries that have allowed their tertiary education systems to expand at a rapid pace, and have thrown huge numbers of tertiary-educated people onto the labour market, jeopardising the economic return of investment in a tertiary qualification for younger workers? If the labour market were to be saturated with highly schooled individuals, one would expect relatively small earnings differences between tertiary- and upper secondary-educated workers. The chart above plots countries against the tertiary attainment rate among adults and the current wage premium for tertiary-educated 25-34 year-olds.

The few countries in the lower left quadrant have relatively low rates of tertiary attainment and they also demonstrate a relatively low wage premium. In the case of Greece, it is clear that the economy is in such bad shape that the comparative scarcity of highly qualified workers does not lead to better pay. In the upper right quadrant we find countries that have high educational attainment rates and that also reward those people well, mainly because of their relatively wide distribution of wages.

In the upper left part of the chart we see countries that have seen huge increases in tertiary attainment and that might face the risk of relative overschooling. But several of these countries are welfare state-type economies with relatively low wage inequalities, and where the wage premium of tertiary education is comparatively low anyway. In the lower right section we find countries that are more hesitant to increase the share of highly educated people in the working population, but pay them well. Over time, these countries might be faced with an undersupply of highly educated people should the economy continue to develop a demand for them.

Overall, the pattern suggests that having more highly educated adults in the labour force might reduce access to higher wages for younger, tertiary-educated adults who are just entering the labour market. But the relationship is not particularly strong, and is heavily influenced by the outliers. Institutional arrangements in national labour markets also affect countries’ position on the chart. Countries have their unique ways of preparing a highly skilled workforce for the future economy. Some favour a strict approach, producing just the amount of skills the market requires now. Others try to fuel innovation and productivity by oversupplying the economy with higher-level skills. Many others refrain from steering demand for education at all; their education systems simply respond to demand. At this point, it is impossible to say who is right and who is wrong.

Links:

Education at a Glance 2014: OECD Indicators 

• Download the publication
• Download the highlights
• Read free online
• Explore a selection of core indicators from Education at a Glance 2014 using the Education GPS

Chart source: OECD Education at a Glance 2014: Indicators A1; A6  

Cutting education expenditure

by Dirk Van Damme
Head of the Innovation and Measuring Progress division, Directorate for Education and Skills

Education systems, for the greatest part funded by the public purse, have a symbiotic relationship with economic tides: they blossom in booming years, they suffer in recessions. Educational needs however behave exactly in the opposite way: they expand when the economy shrinks. The recent recession, probably the biggest many of us have seen in our lifetimes, again provides ample evidence for this. And the relationship is now even more pronounced than ever before. Education and skills have moved into the centre of economic life, as economies become increasingly knowledge- and skills-based. Unemployment clearly separates the educational haves and have-nots, with the unskilled paying the price for the recession. As a result, people want to invest more in education, stay longer in schools, and postpone their entry into the labour market, because work doesn’t offer much of an alternative. Also governments promote education and training as a strategy to drive people out of unemployment.

Thus demand increases, but do schools receive the public resources to meet this demand? The latest issue of Education Indicators in Focus builds on the available evidence on public expenditure in education for the first three years of the crisis (2008, 2009 and 2010) to shed light on spending trends and the first clear signs of widespread cuts.

In the first year after the collapse of Lehmann Brothers, which instigated the financial crisis in 2008, not much happened. Probably, this is partly due to the intrinsic slowness of public budgets and of the education system in itself. But in the first year, the financial crisis was not yet a fiscal crisis in most countries. And some governments initiated huge stimulus programmes to avert the social impact of the crisis, and also education often took profit from such initiatives. In other countries the rise in educational expenditure, noticeable during the pre-crisis boom, just continued.

Things changed from 2009 onwards, when in around one third of OECD countries public expenditure on education dropped. The downturn in the real economy triggered a fiscal crisis, aggravated in countries with already huge levels of public debt. From 2010 onwards the fiscal situation further deteriorated in quite a number of countries. Governments were forced to launch austerity and fiscal consolidation policies. Between 2008 and 2010 education budgets continued to increase in constant prices in most countries, but their relative share of total public expenditure started to fall in exactly half of the countries. Education no longer was as high on the priority ranking in public spending as it was in the years 2000-2008.

Of course, education takes a large share of public expenditure: 13.1% of all public expenditure on average across OECD countries in 2005. So, to exempt education from public expenditure cuts takes a lot of political courage. And because of its size relatively even minor measures immediately result in huge nominal savings. So, it is a tempting scenario for any finance minister. Many also share the belief that there is a lot of internal elasticity or even inefficiency in the system, which can be reduced by increasing budgetary pressure.

In any case, the salaries of teachers – by far taking the largest share of public expenditure – were immediately affected: on average across OECD countries, teachers’ salaries decreased by 2% in real terms between 2009 and 2011. After years of salary gains in most countries, this might seem a rather marginal drop. But the value of it is real and, no doubt, the downward trend will continue in the following years. Seen against the higher demand, but also taking into account the political ambitions to improve the quality of education by investing in teachers, this is a significant sign.

For more information
On this topic, visit:
Education Indicators in Focus: www.oecd.org/education/indicators
On the OECD’s education indicators, visit:
Education at a Glance 2013: OECD Indicators: www.oecd.org/edu/eag.htm
Chart source: OECD Education at a Glance 2013: Indicator B4 (www.oecd.org/edu/eag.htm)

How much do teachers cost?

by Eric Charbonnier and Etienne Albiser
Analysts, Directorate for Education and Skills

Can increasing the salaries of teachers lead to better learning outcomes? Does reducing class size have a positive effect on learning outcomes? Given the current background of tight public budgets, governments seeking to ensure value for money must ask themselves these questions before increasing the salary cost of teacher per student, as teachers account for a major part of education expenditure.

The latest edition of Education Indicators in Focus highlights that the salary cost of teacher per student is a combination of four factors: teachers’ salary, class size, the number of teaching hours in front of a classroom and the number of hours of instruction received by students.

Countries that have similar levels of expenditure on education do not necessarily have similar educational policies and practices. A given level of expenditure may result from a different combination of these factors. One country may pay higher salaries to teachers while another may have smaller class sizes and thus more teachers to pay.

Between 2000 and 2010, increases in the salary cost of teacher per student were mainly influenced by changes in teachers’ salaries and class size
 With the exception of France and Italy, the salary cost of teacher per student at the primary and lower secondary levels increased between 2000 and 2010, and on average it increased by one-third and one-quarter, respectively (for countries for which data is available). In the majority of cases, this increase was due to an increase in the level of teacher compensation (16% at the primary level and 14% at the lower secondary level). The largest salary increases (more than 50%, in constant prices) were seen in the Czech Republic, Estonia and Turkey.

During the same period, class size decreased, by 14% (primary) and 7% (lower secondary), but this was often the result of changing demographics and not of a change in education policies.

Little change in instruction time and teaching time
With the exception of a few countries, there was little or no change with respect to the two other variables (instruction time and teaching time) during the same period. This may be due to the political sensitivity of reforms in these areas. At the primary level, teaching time increased most significantly in the Czech Republic (200 hours) and instruction time increased the most in Iceland (by nearly 200 hours).

The higher the level of education, the higher the salary cost of teacher per student, with great disparities between countries
Spending on education rises sharply with the level of education. The OECD average salary cost of teachers is USD 2 307 per primary student, USD 2 856 per lower secondary student and USD 3 301 per upper secondary student. In some countries, the differences between the different levels of education is quite small (in Chile and Hungary it is less than USD 50) while in others it is quite important (exceeding USD 2 000 in the Flemish Community in Belgium).

In general, teachers of higher levels of education earn more money than teachers at lower levels. In addition, teaching time generally decrease as the level of education increases (meaning that more teachers are necessary to teach the same number of students).

Wrapping up
Reforms relating to these four factors have an impact on education expenditure and may also affect learning outcomes. However, the link between expenditure and outcomes is not straightforward. PISA results show that between 2000-2009, the performance of 15-years olds did not vary significantly in the majority of countries, regardless of the changes we have seen in instruction time, teaching time, class size and teacher compensation. What is more, changes relating to pedagogy may have an impact on outcomes without necessarily having an impact on expenditure.

The bottom line is that in the past ten years, increasing teachers’ salaries and reducing class size have not led to better learning outcomes in the majority of countries. This raises the question: has all of the additional money been well spent?

For more information
On this topic, visit:
Education Indicators in Focus: www.oecd.org/education/indicators
On the OECD’s education indicators, visit:
Education at a Glance 2012: OECD Indicators: www.oecd.org/edu/eag2012
Chart source: OECD Education at a Glance 2012:  Indicator B7 (www.oecd.org/edu/eag2012)

All that money can’t buy

by Marilyn Achiron
Editor, Directorate for Education 
                                                    

We can now add something else to the growing list of things money alone can’t buy: love, happiness–and strong performance in PISA. Results from PISA 2009 show that there is a threshold beyond which a country’s wealth is unrelated to its overall score in PISA.

Among moderately wealthy economies whose per capita GDP is up to around USD 20 000 (Estonia, Hungary, the Slovak Republic and the partner country Croatia, for example), the greater the country’s wealth, the higher its mean score on the PISA reading test. But PISA results indicate that above this threshold of USD 20 000 in per capita GDP, national wealth is no longer a good predictor of a country’s mean performance in PISA. And the amount these high-income countries devote to education also appears to have little relation to their overall performance in PISA. PISA looked at cumulative expenditure on education–the total dollar amount spent on educating a student from the age of 6 to the age of 15–and found that, after a threshold of about USD 35 000 per student, expenditure is unrelated to performance. For example, countries that spend more than USD 100 000 per student from the age of 6 to 15, such as Luxembourg, Norway, Switzerland and the United States, show similar levels of performance as countries that spend less than half that amount per student, such as Estonia, Hungary and Poland. Meanwhile, New Zealand, a top performer in PISA, spends a lower-than-average amount per student from the age of 6 to 15.

So what is it that makes a country a strong performer in PISA? Its decisions on how it spends the money that it does invest in education. PISA results show that the strongest performers among high-income countries and economies tend to invest more in teachers. For example, lower secondary teachers in Korea and the partner economy of Hong Kong-China, two high-performing systems in the PISA reading tests, earn more than twice the per capita GDP in their respective countries. The countries that perform well in PISA tend to attract the best students into the teaching profession by offering them higher salaries and greater professional status. They also tend to prioritise investment in teachers over smaller classes.

Successful PISA countries also invest something else in their education systems: high expectations for all of their students. Schools and teachers in these systems do not allow struggling students to fail; they do not make them repeat a grade, they do not transfer them to other schools, nor do they group students into different classes based on ability. Regardless of a country’s or economy’s wealth, school systems that commit themselves, both in resources and in policies, to ensuring that all students succeed perform better in PISA than systems that tend to separate out poor performers or students with behavioural problems or special needs.

So when it comes to money and education, the question isn’t how much? but rather for what?

For more information:
on PISA: www.pisa.oecd.org
PISA in Focus N°13: Does money buy strong performance in PISA?
Full set of PISA in Focus: www.oecd.org/pisa/infocus
Video Series: Strong Performers and Successful Reformers in Education

Video: Singapore: Building a strong and effective teaching force
From the series of videos on Strong Performers and Successful Reformers in Education, produced jointly by the OECD and the Pearson Foundation