OECDitis

The ALP came down with a bout of OECDitis yesterday, a condition that afflicts many politicians and commentators when they offer arguments assuming that whatever on average happens in other OECD countries Australia should do as well. The virus yesterday was the 2007 edition of the OECD’s statistical compendium, Education at a Glance (at 451 pages, it is very long glance).

The problem, according to the ALP, is that:

* Australia is the third worst of all OECD countries – ahead of only Korea and the United States — on public education spending as a proportion of total education spending;
* Public investment in preschool has languished at just 0.1 per cent of GDP, the equal lowest of all OECD countries with Korea; and
* Public investment in tertiary education has fallen by four per cent at the same time the average OECD investment increased by 49 per cent with Australia being the only country to record a drop in public investment.

Third worst of all OECD countries on public spending as a proportion of all education spending? Perhaps I have missed something, but how exactly does public spending produce better outcomes than the same amount from a private source? Given the far-from-impressive performance of public education relative to private education here as elsewhere, perhaps this point should have read third best.

In a modern version of the cultural cringe, those suffering from OECDitis never seem to consider the possibility that other countries might have it wrong and that they have something to learn from us rather than the other way around. After all, increased private contribution to higher education has from the government’s perspective – and from the perspective of taxapayers – been a big success. There have been no obvious negative effects on higher education – demand still exceeds supply, low SES enrolments have improved, student satisfaction is at the highest levels since surveys began, and as Education at a Glance noted (and The Age reported) unemployment rates for graduates aged 25-29 are the lowest in the world and Australia enrols proportionately more international students than any other country.

What this shows, I think, is that the public expenditure HECS replaced had no educational effects. It was simply a wealth transfer from taxpayers to students. The fact that other OECD countries continue with this practice reflects poorly on them rather than us.

Update: Crikey has a more severe case of OECDitis than the ALP. You have to be a subscriber to see it all, but hardly any of the figures they cite are output indicators. As Rajat points out in comments below, this approach is big on symbolic commitments. Whether the inputs achieve anything, or do so efficiently, hardly matters.

13 thoughts on “OECDitis

  1. “There have been no obvious negative effects on higher education”
    I’m sure the changes over the past decade or so have been for a lot of reasons, but are you kidding on this one? The idea that there are no conflicts of values between cashed starved universities and private funds is a fairly large stretch of the imagination. The obvious example of this in the tertiary sector is degree inflation. Everyone gets good marks, everyone gets their degree, everyone is happy on self-report scales, and then people wonder why the consumer with no voice (i.e., the employers) want more and more qualifications.
    Another probable consequence at the other end of the spectrum is the deteriation of public education in the middle of the educational spectrum. If you don’t spend anything at the start of childrens lives, then you end up with more problem kids in the middle, who inevitably go to public schools. Thus parents that don’t want their children to bump into these kids have a higher reason to send their children to private schools to avoid the bad kids. Those without money just have to suffer.
    I’m not saying here that private spending is a bad thing (far from it — I think its a good thing), but there almost certainly negative consequences of it — especially if it is simply accompanied by a decrease in public spending, as has been the case in higher ed.

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  2. Leopold – Indeed, many people argue that we are ‘undertaxed’ by OECD standards, and the Treasurer tries to convince us that we are not highly taxed because we have the second-lowest tax burden as a proportion of GDP in the OECD.

    Conrad – You can argue about aggregate funding (which is as much a function of price control as government funding levels), but within that for the Commonwealth-supported students my point is that whether it is HECS or subsidy it makes no difference – universities are paid per student either way.

    Unfortunately – as I have had to tell several disappointed journalists who thought they had a good story idea – there is no data on average grades over time that tells us whether grade inflation is going on (it’s an issue in the US, but interestingly mainly at Ivy League universities which have no money concerns at all). But we do have data on pass rates, which have been flat at about 86% since records begin in 1992.

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  3. I always assume that government funding is a sign of failure. So having the third worst level of funding in the OECD is a sign of success. I should also point to Glyn Davis’ op-ed in The Age. If the highpoint of Whitlamesque extravagance is equivalent to $9 billion and the Commonwealth gives $6.5 billion and HECS another $2 billion, then the fuss is about $500 million. Now lets add in other sources of income. Unis have never had it better – but now have to work for their money in a competitive environment.

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  4. Fully agree Andrew. I thought it was quite interesting (though moot) how The Age reported that “Only the US, Japan and Korea charged students more for a public university degree.” Hello, these are all rich and successful countries with plenty of engineers and whatever else you want. Clearly only Western European OECD countries matter. The answer to your question of why this news was presented so negatively can be answered in part by The Age’s own headline to the story: “Australia only developed country to cut spending”. Public spending is the only spending that counts. Similar to your point about arts funding, the left sees public spending as acknowledging value to society; private spending is only good for frittering away on luxuries and status-seeking.

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  5. Sinclair – That figure cited in The Age, which was my calculation, is very conservative if we are looking at impact on teaching. Two reasons:

    1) I cannot identify disentangle teaching and research in the 1970s data, so I counted both teaching and research income for both. At least over the last decade, growth has been stronger in competitive research grant revenue than teaching revenue.

    2) I used the CPI to turn all the figures into $2005. However, the main expense for universities is staff salaries, and like salaries generally these have increased by more than the CPI. I could use the ABS labour price index going back to 1997, but I’m not sure there is any index I could use that both goes back to the mid-1970s and would produce a better result than the CPI.

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  6. Andrew, you probably want to check the reliability of the sources, but a quick flick through the web shows that this site provides a nice summary. As you’ll notice the private universities have inflated more than the public ones, although the trend for both is up (of course, its hard to know what public really means — they are as desperate for cash as private ones). So its a problem across the specturm in the US.

    http://www.gradeinflation.com/

    Grade inflation is certainly a problem in Australia — I think 1st class grades for honors years now approaches 50% in my area. There is also quality deteriation, where things work a lot like prisoners dilemma situation — if enough students complain about something, something will get done about it, no matter how stupid. For example, if I don’t tell students how to format tables, they complain (no jokes). Do I either get a low rating, or do I tell them how to format the Table? That’s of course just an anecdote, but these things are common, and most people are not going to cause bother for themselves when penalties are involved.

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  7. Conrad – As I noted, the grade inflation across the Ivy League casts doubt on your theory as to why it happens. These institutions have so much money that they pay many of the students to attend, rather than the other way around.

    And given the lack of data in Australia on grades, it is hard for students to play the game of going where their marks will be best. The only incentive universities have is to fail fewer students, and the data shows that is not happening.

    Of course students have always pressed for higher grades, and to some extent academics have always given in for a variety of reasons. Maybe it is getting worse, but if so it is not clear that the cause is at a system level.

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  8. I have to admit that I suffer from OECDitis from time to time myself – that is, I have an irresistible urge to see how Australia compares with other countries on a variety of things. But I’m really more interested in understanding how the differences arise than in wishing we could be more like other countries.

    My favourite recent example of OECDitis was the Australia Fair document (accessible from the ACOSS website) that purported to be a comprehensive international comparison of Australia’s performance on a wide variety of “essentials”, which ranged from things like Fair Education, Health and Housing to Fair Community, Environment and Reconciliation.

    ACOSS is certainly firmly in the camp that believes that if we are spending less than the OECD average on anything we should increase our expenditure, even if data on outcomes show that we are doing quite well. For example, the report acknowleges that life expectancy in Australia is among the highest in the world, but laments the fact that, as with education, the public proportion of health funding is lower here than the OECD average.

    The thing I am aware of from having dealt with OECD stats over a number of years is that very rarely are they actually comparing apples with apples. While I’m sure that the OECD does what it can to standardise its cross-country statistics, this will always be imperfect, especially since so many of Australia’s institutions are fundamentally different to those found in Europe.

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  9. The argument was about the amount of money. Your own figures show a decline of $500 million only. Did they include state funding (about that amount anyway)? So even if teaching funding has declined, “There have been no obvious negative effects on higher education …”. On your other point, it seems that universities have allowed their costs to grow at a faster rate than their (public) revenues. This is not a problem. Universities have to develop private sources of income and manage their affairs responsibly like everyone else. Some, it appears, can do this.

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  10. Sinclair – As you know, I agree that declining public funding is not inherently a problem. But I think arbitrary policies – which are a mix of price control and real cuts to government spending – which push down effective per student spending – are misguided. Students should be able to buy things such as better facilities, smaller classes, superior staff etc.

    My point in comments above was that the $500 million figure (Commonwealth only), which translates to about a 5% cut in CPI-adjusted terms to total spending per student, probably understates the real decline in resources available to undergraduate education. Maybe that is a good thing, but the judgment call on spending levels should not be made in Canberra.

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  11. The real things of interest here to me in this report are on early education. A large mass of data clearly points to this as being the area where societies get the biggest marginal bang for their buck, whether private or public bucks. Compared with that higher education finance is a second order issue.

    And in early education you can’t really argue that we do very well, whether measured by inputs or outcomes – the OECDitis argument you make doesn’t carry much strength in this particular area whatever its merits elsewhere.

    Given that we have, for better or worse, an unequal income distribution by OECD standards then if we just leave it all to private bucks we are very likely to have large inequalities of inputs for individuals (not as extreme as the Yanks, but bad enough). So there is a stronger case for public expenditure here to maintain equality of opportunity (with the concomitant economic gains) than there would be in a society which had greater equality of outcomes.

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