The costs of school failure Industrial countries George Psacharopoulos

- 1 - Education startups World Bank European Union 1962 timidly 1990 aggressively 1998 timidly 2006 aggressively

George Psacharopoulos European Investment Bank More education projects since 2000 Education and health in the Industry Department Understaffed

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

George Psacharopoulos 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” “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”.

George Psacharopoulos 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)

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

George Psacharopoulos 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”.

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

George Psacharopoulos Taxonomy of school failure definitions

George Psacharopoulos EU “school failure” average 2006: 15% actual 2010 : 10% EU target

George Psacharopoulos Early school leavers by 2010 benchmark state (%)

George Psacharopoulos Extent of the problem

George Psacharopoulos Critique  Quality of education ignored  Equity ignored  General equilibrium largely ignored  Non-linearities ignored  Behavioural elasticities ignored

George Psacharopoulos Terms of reference  Literature review  Methodology outline  Critique  Feasibility of an EU study

George Psacharopoulos 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

George Psacharopoulos Direct and indirect paths of the effect of education

George Psacharopoulos 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

George Psacharopoulos 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

George Psacharopoulos Fiscal elements of school failure  Lower tax revenues  Higher unemployment and welfare payments  Higher public health expenditures  Higher police expenditure  Higher criminal justice expenditure

George Psacharopoulos Evidence Partial effects:  Correlational: Plenty  Causal: Scarce Full cost-benefit:  Two US studies  One Australian study

George Psacharopoulos Raw education “effects” – EU averages

George Psacharopoulos Marginal effects of one extra year of schooling (%)

George Psacharopoulos Health status by level of education, Netherlands (%)

George Psacharopoulos The monetary benefits of one half of the reference group gaining academic level 1 qualifications

George Psacharopoulos Marginal effect of one year of education on health

George Psacharopoulos Marginal effects of a one year increase in schooling (%)

George Psacharopoulos Predicted probabilities of health and happiness by level of education, Netherlands (%)

George Psacharopoulos Average incarceration rates by level of education, USA (%)

George Psacharopoulos Social benefits of crime reduction by increasing high school completion rate by one percent

George Psacharopoulos Marginal labor market effects of one extra year of schooling (%)

George Psacharopoulos Benefits of equal graduation for blacks and whites

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

George Psacharopoulos 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

George Psacharopoulos 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

George Psacharopoulos An EU study feasible? It is feasible, although it would be:  Time consuming Can Europe wait?  Expensive Who can afford it?!

George Psacharopoulos 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?

George Psacharopoulos Heckman’s grand summary Preschool Returns 10% Age School Job training 6 25

George Psacharopoulos Education centralization and PISA score

George Psacharopoulos European university problems ·Heidelberg and Sorbonne?? ·Museum pieces

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

George Psacharopoulos Outlook Further university development/quality divide: - Anglo-Saxon pluralistic finance style - Old European state finance style

George Psacharopoulos A major contradiction  Lisbon’s competitiveness and  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?

George Psacharopoulos EU university circa 2010 Italian University circa 1350