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Education financing

Who should pay, and why?

BY Peter-John Gordon

Tuesday, September 17, 2019

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Education funding is among the most emotional of public policy issues. The discussion is usually about the extent of State funding for education, with the extremes being no State involvement on the one hand and 'free education' (100 per cent government funding) on the other. Why is it so difficult to have a discussion on the 'best way' to fund education? This is because we delve into the discussion without first establishing what the objectives are. Without agreed objectives, different people, without realising it, argue for different things. The best way can only be determined in relation to set objectives. The best way, or any alternative to it, is a method of achieving objectives, not an objective in and of itself.

I come to this debate with the stated objective being to provide the highest quality of education to the largest number of individuals. There are basically three different models:

a) the State pays nothing and the entire education cost is borne privately, which in most cases can be seen as the student and/or his/her family paying 100 per cent of the education cost;

b) free education, that is the State pays 100 per cent of the education cost; and

c) the education cost is shared between the State and private sources (usually the student and/or his/her family).

To determine the best way each of these modalities must be examined to see which delivers the highest quality of education to the largest number. Unfortunately, for some there is an ideological fixation with free education, and once that is in place there is no interest in examining its outcomes against alternatives. For them, free education is not a means to an end but the end in and of itself.

Social scientists like to test policy changes in experiments before universal implementation. However, a controlled experiment does not always scale up satisfactorily to the whole population. In Kenya, there was an experiment which hired teachers on contracts rather than as regular public servants. The result was a significant improvement in educational outcomes. When the programme was scaled up to include all teachers, there was no discernible improvement in educational outcomes. The contract teachers became unionised with a return to pre-experiment behaviour. Similarly, there was an experiment in Tennessee in which class sizes were reduced. Educational outcomes increased during the experiment. Implementing the policy everywhere resulted in an increased demand for teachers. This increased teaching options for teachers, many of whom left the struggling schools where they were most needed for more affluent schools which had less challenges. Scaling up of this experiment did not lead to an improvement of educational outcomes.

There are many people who were the recipients of 'free education' at the university level in the 1970s who are clamouring for a return to 100 per cent State funding at the tertiary level. In the 1970s the number of people receiving a tertiary education was very small compared to the number today. Free education, 1970s style, is not scalable. The State would be unable to pay the tuition fees for the large number of tertiary students today and guarantee a comparable quality of education.

The Gleaner, in its editorial of July 3, 2019 entitled 'Debating university education', stated that at The University of the West Indies “up to 40 per cent of prospective students who were offered places don't take them up”. This statement suggests that there is 40 per cent excess capacity at The UWI for incoming students. This is not the case. The only way to increase the incoming class by 40 per cent would be to increase the number of lecture rooms, lecturers, laboratory spaces, etc.

Education bestows not only a private benefit but a social benefit; that is, the society is better off with more educated people. Individuals take only the private benefit and the private cost into account when deciding how much education to buy, particularly at the tertiary level. The market, left to itself, would end up with too few educated people, which means too few educated people to drive development, etc. Having students pay 100 per cent of the education cost is, therefore, not desirable from a social point of view. The option of individuals paying the full cost of their education would not deliver the highest quality education for the largest amount of people.

At the secondary level we have a natural experiment. Prior to 2007, and between 2011 and 2016, there was a policy of cost sharing, whereby high school students were required to pay fees. Those students who were unable to pay their fees had these fees paid by the Government. No student was barred from school for non-payment of fees. The older (traditional) high schools had compliance rates in excess of 90 per cent. The compliance rate was much lower in the newer high schools. This policy was changed under the Jamaica Labour Party (JLP) Administration 2007 to 2011, and again after 2016. In 2016 the removal of compulsory fees was replaced by voluntary contributions and an increased subvention from the Government to each high school. Many of the newer high schools, which had very low compliance rates, ended up with more money from the policy shift because of the increased subvention. The older high schools experienced a fall in parental contributions from in excess of 90 per cent to as low as 40 per cent. This resulted in these schools having less money to spend. The shift in policy now sees that schools are more equal in funding, but older schools are able to deliver less than they could before. Since neither older nor newer high schools had adequate funding to start with, a better policy would have been to increase the subvention while leaving the cost sharing in place. The number of high school students remain the same under cost sharing and free education, what changes is quality.

Quality is directly proportional to the amount of resources (library, sciences labs, etc). Some argue that free education delivered relief for families. This, however, is a different objective from delivering the highest quality of education to the largest number of people. I would argue that better quality education for the children of these families would result in much higher levels of welfare for them over time.

Since a Government has no money of its own, but the ability to move money from one set of citizens to another, there are welfare considerations when it exercises this power. Many Jamaicans have sacrificed by putting up with under-resourced services in order to pay the educational cost for students who they don't know, with the expectation that these students will contribute to the development of the society and repay their investments. With as many as 60 per cent of tertiary graduates migrating, the question needs to be answered: Why should 100 per cent of the educational costs of students be paid for by people who will never benefit from their education? Individuals at the tertiary level must therefore pay a significant portion of their educational cost. In order for this to happen individuals must be able to borrow student loans. Those who do not have an immediate family member who has benefited from tertiary education may not be in a position to accurately access the benefits of this education, and therefore make appropriate decisions about borrowing (another market failure). A scholarship to the first in a family to access tertiary education would correct this market failure, thus helping other family members to make rational decisions about borrowing. It is popular to celebrate the lowering of interest rates on student loans; however, while the current recipients of such loans benefit, if these rates fall too low, future generations will have less of the original money available to finance their education. Cost sharing would lead to a higher quality at the secondary and tertiary levels, and more students at the tertiary level.

Dr Peter-John Gordon is a lecturer in the Department of Economics at The University of the West Indies. Send comments to the Observer or peterjohn.gordon@uwimona.edu.jm.


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