The Economics of Education

John Sheehan

• Editore: Routledge
• Anno: 2012
• ISBN:
  9781136667169
• Edizione: 1
• Argomento: Education
• Categoria: Education General

This book is a survey of the principal aspects of the economics of education, such as the demand for education as consumption and as an investment, good education and economic growth, education and manpower needs, and the finance of education. In some cases in recent years, economic theory has been applied to educational problems in order to gain an insight into the workings of the educational system. The result has been a certain amount of confusion and distrust among teachers and educationists: confusion because some theoretical aspects are not easily understood and distrust of the economist's intrusion into educational policy-making. This book overcomes these problems by making minimal demands on prior knowledge of economics and by emphasizing the limitations of economic analysis applied to policy matters.

CHAPTER 1

Resources in Education

The educational system, like any economic activity, uses a certain proportion of society’s scarce resources. These resources could be used elsewhere; expenditure on school buildings entails forgoing house and office building, expenditure on teachers’ salaries represents employment opportunities forgone in some other branch of the economy. It is not intended here to calculate the total economic cost of education however; that is a very complex issue. What is intended is simply to give a general view of the size and place of educational activity in relation to the economy as a whole.

Educational spending expressed as a proportion of National Income or Gross National Product¹ is a fairly well-known and widely used approach to doing this. Expenditure on education in both developing and developed countries has usually been between 3 and 5 per cent of National Income in recent years. Table 1.1 gives a very general summary.

These figures understate the importance of education in so far as they exclude privately financed expenditure, but private expenditure is relatively small, generally less than 10 per cent of the total. It is not possible to obtain comprehensive data on expenditures for other years, but the trend in almost every country is the same and is in line with the data in Table 1.1. The proportion of National Income spent on education has increased continuously almost everywhere since the Second World War. For example in both the UK and the USA education accounted for a little over 2

per cent of national income in 1950/1, and for about 5

per cent by 1966/7. In some less developed countries (for example Mexico and India) the percentage rose from less than one per cent to over 2

per cent during the same period,² and for other less developed countries (especially in Africa) the proportion of National Income spent on education in the late 1960s had risen to over 5 per cent. Further analysis of national data reveals two main trends:

TABLE 1.1 Public Educational Expenditure in Relation to National Income 1960 and 1965

(All figures %)

	1960	1965
Africa	3.0	4.3
N. America	3.9	4.1
S. America	3.1	4.0
Asia	3.3	4.0
Europe (incl. USSR)	4.2	5.3
Oceania	3.7	4.4

SOURCE F. Edding and D. Berstecher, International Developments in Expenditure, 1950–65, Paris: UNESCO, 1967.

NOTE Based on data from 90 countries in 1960 and 89 in 1965.

(1) The trend already noted for education to absorb a rising share of national income and expenditure over time, which is common to countries at all stages of development and with different economic systems.

(2) The overall similarity of expenditure proportions between developed and less developed economies at any given time.³ This is notable because enrolment rates (i.e. the percentages of various age groups in full-time education) differ enormously and would lead one to expect much higher expenditure/national income proportions in developed countries especially as these have such high enrolments at the more expensive second and third levels. Furthermore differences in age-structure of populations are not enough to explain this result.

What of the share of education in national income in the long term? Is the post-1945 phenomenon of a rising share something special, or is it part of a larger process? The information available to answer this is not very reliable or comprehensive, and is confined almost entirely to developed countries,⁴ from the early twentieth century onwards. The long-term trend seems to be for education to claim a rising percentage of national income, although the trend is punctuated by wars and by severe economic depressions. During war-time resources are diverted to more immediately urgent uses, and during depressions income and product or commercial activity tends to fall in relation to activities such as education. Consequently there was a rise in the proportion of national expenditure on education during the depressed 1930s followed by a sharp fall during and immediately preceding the war years of 1939–45. A summary of available data is given in Table 1.2.

Figures for earlier years would in many cases show the rapid rise in education’s importance which dates from legislation to encourage the spread of popular education. The continuing rise in education’s share of total spending is partly because early legislation for mass-education has been supplemented in most countries by raising the minimum school leaving age several times and by the encouragement of increased enrolment in ‘voluntary’ education. Also, there is reason to believe that the increased education of parents has an effect on the educational aspirations and attainments of their children so that any large changes will have repercussions for generations to come.

The Reasons for Education’s Rising Share

The statistics and considerations already referred to provide a very inadequate explanation of the increasing relative economic importance of education as a user of resources. And they say nothing at all about the absolute quantity of education supplied and demanded at different times in different countries. Further discussion of these issues almost inevitably raises problems of measuring educational costs and productivity, and of analysing the qualitative and quantitative aspects of educational activity. Many of these problems are dealt with in later chapters; the remainder of the present chapter is devoted to some of the explanations of the large rise in educational expenditures in relation to economic activity generally, especially during the post Second World War years when it has been so pronounced.

In both developed and developing countries, there have been certain pronounced and fairly universal economic trends during the past twenty-five years. Total national income has risen continuously almost everywhere, both in money and in real terms. The growth of real income and product, while substantial, has been less than that of money income due to fairly continuous inflation. Therefore, in accounting for an increasing share of an increasing national income, total educational expenditure has tended to increase substantially in absolute as well as relative terms, in almost every country for which there are data available.⁵

TABLE 1.2 Share of Education in National Income, UK, USA, Germany, Japan 1909/10-1969

(All figures %)

Years	UK	USA	Germany	Japan
1909–13	—	2.3	2.8	—
1925–7	2.1	3.7	3.5	—
1930–1	2.3	4.9	4.1	3.9
1935	2.4	4.6	3.6	3.5
1940–1	20	4.4	3.2	2.2
1945	1.7	2.3	—	1.9
1950	2.7	4.0	3.2	4.8
1955	2.8	5.1	3.5	5.7
1960	3.7	6.2	3.8	5.4
1965	4.1	—	—	—
1969	5.4	—	—	—

SOURCES UK : J. Vaizey and J. Sheehan, Resources for Education, London: Allen and Unwin, 1968; Statistics of Education 1970, London: HMSO, 1970. USA, Japan, Germany: F. Edding, ‘Expenditure on Education, Statistics and Comments’, in The Economics of Education, E. A. G. Robinson and J. E. Vaizey (eds.), London: Macmillan, 1966.

NOTES The UK figures exclude Capital Expenditure. The inclusion of such expenditure would magnify the fall in the figures for the 1940–5 period, as well as the increase for the subsequent period.

For some of the earlier periods data is not available for comparable years. Consequently figures for years lying within indicated intervals have to be used.

Real income and product per head of population has also shown a widespread and sustained rise during the past twenty-five years, although in some less developed countries rapid population growth has tended largely to offset the gains of aggregate economic growth; and real education expenditure per capita has generally risen faster than total national income and expenditure per capita. It is more interesting however to compare the increase in real educational expenditure with the increase in the school-age population and with the numbers actually enrolled. Comparison of expenditure and school-age population is difficult for several reasons. Population data from censuses may not be broken down into age groups corresponding to school age groups, and adjustment may be necessary.⁶ Also, the expansion of the scope of education may change the school-age range over time, and participation in both ‘compulsory’ and ‘voluntary’⁷ education may change over time, making comparisons difficult without a complex weighting system. Therefore it is easier and more useful to analyse educational expenditure in relation to enrolments directly, and to deal with the question of participation (i.e. the relation between enrolments and population or age-cohorts) separately.

There is considerable evidence⁸ that real expenditure per enrolled pupil has risen in many countries. Real expenditure in this context means money expenditure deflated by appropriate price indices for various inputs (teachers, books, buildings, etc.) which are used in education; thus the amount of resources provided per pupil has generally increased. Education is a comparatively labour-intensive activity (between 60 and 90 per cent of current expenditure at the first and second level goes on teachers’ salaries alone). It is also by nature a technologically static activity. This is hard to demonstrate rigorously but the point is clear enough if one compares education with manufacturing and services industries where innovation ha...

Indice dei contenuti

• Front Cover
• Title Page
• Copyright
• Contents
• Introduction
• 1 Resources in Education
• 2 The Demand for Education
• 3 Private Returns to Investment in Education
• 4 Social Returns to Investment in Education
• 5 Further Aspects of Rate of Return Analysis
• 6 Education and Economic Growth
• 7 Educational Policy and Planning
• 8 Education and Manpower
• 9 Education and the Labour Market
• 10 Teacher Supply and Demand
• 11 Educational Finance
• 12 Educational Efficiency and Productivity
• Suggested Further Reading
• Index