Competing for Brains

The quality of education in many European countries is dismal. By now it is clear that throwing money at education is no solution and that state monopolies are ineffective. If you want to improve the decaying European educational systems, argues the European Economic Advisory Group in its latest report, open schools to competition and increase parental choice

A recent survey in The Economist asserts that German schools are very good at separating pupils into insiders and outsiders, rather than at promoting talent and brains. Its assessment is quickly confirmed by a visiting UN inspector, Vernor Muñoz, who says he feels that the “German educational system is not geared at being all-embracing, but rather at sorting [pupils] out.”  Today, German universities top the leagues only in one count: the age of its students at graduation, 26 on average.

These assessments follow the findings of some PISA studies, conducted by the OECD, which were a rap in the knuckles not only for Germany, but for several other European countries as well. Clearly, the EU’s educational policy needs to be overhauled, in particular if it aims at becoming the world’s leading knowledge-based economy by 2010. It is not surprising that the just-released EEAG Report on the European Economy 2006* deemed it necessary to devote an entire chapter to delving into Europe’s educational malaise.

Better still, it provides some well thought-out solutions to the present conundrum: soaring costs as both enrolment rates and the length of studies trend upward and per-pupil costs grow as fast as GDP per capita, while the only thing there is to show for it is a widespread perception that standards and achievements are plummeting.

What to do, then? Some argue that in order to solve these issues more should be spent on facilities, more teachers hired to reduce class size, and perhaps more staff employed to take care of discipline and other non-curricular aspects. Others insist that educational systems can be made a lot more efficient by relying on competition and free parental choice. On top of that, it has been shown that throwing money at the problem is not necessarily the best solution: the US does worse than the Slovak Republic, for instance, which has a far smaller education budget.

A good way to go about looking for ways to improve the system is to see what the evidence says.

The fact that the large disparities evident in reading, mathematics, and science achievement occur among economically and demographically comparable countries suggests that the way schools are organised does matter. By contrast, the amount of resources devoted to education does not seem to exert a large impact, as demonstrated by econometric studies conducted at the microeconomic level. Contrary to a widely held assumption, there is hardly any evidence that reducing class size has any impact on achievement. These findings are confirmed by event studies such as those of the unsuccessful French “Zone d’Education Prioritaire” experience.
 
On the other hand, a growing body of empirical studies suggests that enhancing competition both among students to get into good schools and among schools to attract the good students does have positive effects on achievement. Competition re-allocates resources from the worse to the best schools by allowing parents to choose and by realigning resources so that the successful schools can grow to accommodate increased demand.

In order to avoid the risk of educational systems becoming non-egalitarian, an income-adjusted voucher system to attend private schools could prove to be useful. The beauty of competition is that pupils who continue to attend public schools also benefit, because these schools are spurred by competition from their private counterparts to raise their standards. Further useful mechanisms suggested by the EEAG Report are increased parental choice and management decentralised down to the school level.

Globalisation makes educational reform more urgent than ever, as in industrialised countries the workers most at risk from competition from low-wage countries are the low-skilled ones. No only is an educated workforce a valuable asset at times of rapid technological change, but the rate of secondary enrolment has been shown to be one of the most significant determinants of differences in GDP per capita across countries.

If the EU does not improve its educational systems, it can forget about becoming the leading knowledge-based economy by 2010. It will be lucky if it manages to avoid being overtaken by China and India before then.

*Report on the European Economy 2006, Chapter 4, by the European Economic Advisory Group at CESifo. EEAG comprises eight renowned economists from eight European countries. Further info at www.cesifo-group.de/eeag