The costs of school failure Industrial countries

1. The costs of school failureIndustrial countries George Psacharopoulos

2. Education startups • World BankEuropean Union • 1962 timidly • 1990 aggressively • 1998 timidly • 2006 aggressively

3. European Investment Bank • More education projects since 2000 • Education and health in the Industry Department • Understaffed

4. European Commission • Regulates the size of and weight of (nearly) everything • ….but…. • No say on country education policies

5. Commission statements • 2000 • “By 2010 the European Union should become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth, with more and better jobs, accompanied by greater social cohesion”. • 2006 • “Education and training are critical factors to develop the EU’s long-term potential for competitiveness as well as for social cohesion”. • “Investments in education and training produce high returns which substantially outweigh the costs…. [Such investments]… should be targeted on areas where economic returns and social outcomes are high”.

6. Failing education • - “Europe is failing its students” (The Economist) • - “Antiquated education systems are failing a new generation” • (Newsweek) • - “Germany’s school system fails …..”(The Economist) • - “Policy to blame for failure of schools….” (The Independent)

7. Alternative failure labels • USA:Inadequate education • UK:Did not obtain vocational qualifications • Spain:“Fracaso escolar”, no school leaving • certificate at age 16

8. EU education failure definition • “The number of 18 to 24 year olds • with only lower-secondary level education • who are not in further education and training”.

9. EU education benchmark • “The proportion of early school leavers • should be not be more than 10% • by 2010”

10. Taxonomy of school failure definitions

11. EU “school failure” average • 2006: 15% actual • 2010 : 10% EU target

12. Early school leavers by 2010 benchmark state (%)

13. Extent of the problem

14. Critique • Quality of education ignored • Equity ignored • General equilibrium largely ignored • Non-linearities ignored • Behavioural elasticities ignored

15. Terms of reference • Literature review • Methodology outline • Critique • Feasibility of an EU study

16. Cost components • Private: Labor market related • Fiscal: Taxes and welfare payments • Wider social: Health, crime, civic • Intergenerational: Backward and forward • Equity: Outcomes distribution by SES

17. Direct and indirect paths of the effect of education

18. Private elements of school failure • Higher unemployment duration • Lower initial and lifetime earnings • Lower own health status • Higher own discount rate • Less risk aversion • Less lifelong learning participation • Lower quality children • Higher unemployment incidence • Lower lifetime satisfaction

19. Social elements of school failure • Lower positive spill over effects on co-workers • Lower rate of economic growth • Lower intergenerational effects on children and parents • Lower public health status • Higher unemployment • Lower social cohesion • Increased criminality

20. Fiscal elements of school failure • Lower tax revenues • Higher unemployment and welfare payments • Higher public health expenditures • Higher police expenditure • Higher criminal justice expenditure

21. Evidence Partial effects: • Correlational: Plenty • Causal: Scarce Full cost-benefit: • Two US studies • One Australian study

22. Raw education “effects” – EU averages

23. Marginal effects of one extra year of schooling (%)

24. Health status by level of education, Netherlands (%)

25. The monetary benefits of one half of the reference group gaining academic level 1 qualifications

26. Marginal effect of one year of education on health

27. Marginal effects of a one year increase in schooling (%)

28. Predicted probabilities of health and happiness by level of education, Netherlands (%)

29. Average incarceration rates by level of education, USA (%)

30. Social benefits of crime reduction by increasing high school completion rate by one percent

31. Marginal labor market effects of one extra year of schooling (%)

32. Benefits of equal graduation for blacks and whites

33. Costs and benefits of closing the high school gap between non-Hispanic whites and minorities ($b)

34. US study highlights • $192 billion extra income and tax • $58 billion health cost savings • $1.4 billion/year in reduced crime costs • 9.2 years longer life expectancy • Benefit-cost ratio: About 3

35. Aggregate benefits per high school graduate • Present value of higher income, better health, lower criminality and lower welfare support at age 20: • For average school graduate $209,100 • For black males $268,500

36. An EU study feasible? • It is feasible, although it would be: • Time consuming Can Europe wait? • Expensive Who can afford it?!

37. Issues • Just adopt US findings? • What if EU differs from the US? • Scope of existing data? • Raising new data? • Identify country-specific reasons for early leaving/low learning?

38. Heckman’s grandsummary Preschool School Returns 10% Job training Age 25 6

39. Education centralization and PISA score

40. European university problems • Heidelberg and Sorbonne?? • Museum pieces

41. Private share of tertiary education financing 100% United States Australia, Japan United Kingdom, Spain . Most of continental Europe 0%

42. Outlook • Further university development/quality divide: • - Anglo-Saxon pluralistic finance style • - Old European state finance style

43. A major contradiction • Lisbon’s competitivenessand • State education monopoly • No common education policy (Treaty of Rome) • Need ECOFIN equivalent in education? • 2010 targets already missed. • Lisbon, Bologna “nice”, but….. • Lifelong financing?

44. EU university circa 2010Italian University circa 1350