Words of caution on education spending

The Jakarta Post , Jakarta | Sat, 09/15/2007 2:40 PM | Opinion

Elwin Tobing, California

The demand to increase the education expenditure to 20 percent of the government budget is understandable. After all, government spending on education is pivotal to education development. Since education plays a critical role in creating human capital, which contributes to productivity, such investment will help advance economic development.

But let us be clear here. The impacts of education expenditure on the quality of education and on the economy are not as straight forward as what people might think.

First, higher education expenditure does not always lead to better quality of education. A recent study shows that substantial increases in educational spending over the last 30 years have not led to improvements in the educational achievement of pupils in many OECD (Organization for Economic Cooperation and Development) countries.

And an example from the U.S. is also interesting. With last year's average of US$8,393 per student, Washington DC has the highest spending per student in the U.S. and more than twice as high as Utah, at $3,969 per student. Yet, students in Washington scored last on every standardized national test they have ever taken, while students in Utah scored close to the top every time.

The impact of education expenditure on economic development is not that clear, either. Using data from 130 countries, the writer finds that the relationship between public spending on education and economic growth, as an indicator of economic development, is relatively weak. In other words, countries with relatively high public expenditure on education do not necessary enjoy high economic growth.

During the last decade, the governments in Saudi Arabia and Kenya spent about 26 percent and 25 percent of their budgets on education, yet economic growth rates in both countries were only 0.7 percent and 0.6 percent, respectively.

This is in contrast to Albania and India where the governments spent about 8 percent and 12 percent of their budgets on education, and yet their economies grew by an average of 5.8 percent and 4.8 percent, respectively.

This does not mean education is not important for economic development. For instance, if one chooses years of schooling instead of expenditure on education as an indicator of education development, its impact on economic growth is important. This only suggests that taking education expenditure at face value as a critical indicator that will advance economic development is not a wise idea.

Second, the allocation of education spending does matter. As found by Ruth Judson in a recent study using data from 69 countries, inefficient allocations gain little from their investment in education.

So, should the spending be allocated mostly to primary (elementary), secondary or post-secondary (college/university) levels?

In 2005, about 47 percent of national education spending was allocated to primary education, 42 percent to secondary education and 11 percent to tertiary education. A simple rule-of-thumb is that for an economy in its early development stage, focusing on basic education for a sufficiently long duration is the only way to provide sustainability for further education. Reasonably, the effectiveness of investment in higher education depends on how much investment in primary education is allocated.

However, too much money invested on elementary education would leave an enormous problem for the development of higher education. It is not surprising that the limited amount of money allocated to post-secondary education has been considered as the main culprit for the low quality of our education and research at universities. Since by only acquiring sufficient human capital through higher education can economic development be sustainable, the balance of allocations is crucial.

On the other hand, if too much money is invested in higher education without sufficient investment in lower levels of education, there will be only a few students who are both ready and demonstrably able to benefit from that higher education. Here, equity of education becomes an issue.

One of the major concerns of the quality of schooling in Indonesia is related to the low qualifications of the teachers. For primary and junior secondary levels, only about 55 percent and 73 percent of the teachers have the minimum qualifications required by the National Education Ministry. But for the most part, the quality of teachers at elementary and secondary levels depends on the quality of the teaching and learning process at higher education institutions. In the long run, the opposite direction might work as well.

Third, the quality of public schooling is not necessary better than that of private schooling.

Like in most developing countries, our education is largely publicly provided. As public funds are limited, there is a growing need for the greater participation of the private sector, especially at the secondary level. In addition, the development of education is not merely the concern of the government.

The community at large, including businesspeople, should actively participate in the improvement of our education either by contributing ideas, supplying books, providing assistance in improving school libraries, etc. At the same time, schools, especially at the post-secondary level, should proactively stimulate community contribution.

Fourth, education is not a quick fix to our economic development. Consequences of any changes we introduce today, whether in the form of higher expenditure or other educational provisions, will emerge only several decades later. For instance, an improvement in secondary education will typically affect only new entrants to the labor force at least a decade later. And these new entrants would affect the economy two decades afterward as they would constitute a major fraction of the labor force.

The debate surrounding how to improve education should not always be framed in terms of education expenditure. With education expenditure about 18 percent of the government budget, and given the average for almost 150 countries is about 15 percent, the level of education spending is not, by any means, significantly below what the government could probably afford to allocate.

The problem with our education is beyond expenditure. To a large extent, we have degraded, if not devalued, it as people are more interested in getting diplomas than equipping themselves with knowledge through hard work and honesty. Today, many teachers at all levels of education are not really interested in teaching, a significant number of students are not genuinely interested in seeking and accumulating knowledge, and society does not really value education as a life-long process.

Unless we really learn how to be learning people and a learning society, increased spending on education perhaps will not help improve the quality of our education.

So, before talking about money, we better first change our mindset about education.

The writer holds a PhD in Economics and is currently a faculty member at California State University, Fullerton, in the U.S., where he teaches Economic Development and Public Policy.

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