Last year I suggested that all schools, and not just private schools as now, be funded on the basis of the average socieconomic status of their parents. In today’s Weekend Australian, Julia Gillard is reported as suggesting this as well.
It’s not quite clear, though, what her version would entail. My proposal would have meant that government schools (though I would have privatised their management) serving affluent parents would no longer be free. While this would remove the inequity of rich people sending their kids to state schools getting greater educational subsidies than poor people sending their kids to private schools, needless to say ending the right to have your kids educated fully at the taxpayers’ expense would be very controversial. It’s the kind of idea think-tanks come up with, not Deputy Prime Ministers.
So presumably Gillard means that every school gets a base level of funding, but that schools serving low SES parents get more. So her version would have a much narrower range of subsidies than I was envisaging (from $0 for the richest areas to more than now for the poorest), and greater total cost to taxpayers.
To the extent that currently ‘over-funded’ government schools in affluent areas lost out, it would speed the shift to the private system. I don’t think the public school lobby is going to like the implications of what Gillard is suggesting. But it will be tricky for them to handle. ‘Equity’ is one of their cloaks of respectability, and it will be hard for them to argue against more money for poor schools.
Update: Gillard clarifies that money won’t be taken away from schools in affluent areas, and mentions an alternative index that would help identify students in particular educational need.
Andrew Norton 
Andrew – doesn’t the SES funding model still rank schools based on the socio-economic data of the locality of each respective school, rather than socio-economic data of the families actually sending children to each school? If this is still the case, the model is flawed and needs something of an overhaul. There is also some question as to whether the model takes into considerations the various facilities and assets different schools have at their disposal.
I understand the rationale for consolidating government and non-government schools under the one funding umbrella, but if the model used to determine funding under that single umbrella is somewhat dodgy, I don’t think it’s a good step forward.
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Guy – No, it is based on coding parents’ addresses to their census district, and using ABS calculations of the socieconomic status of those areas.
It was specifically designed to avoid direct assessment of facilities and assets, because the old system that did use that created a perverse incentive not to raise private funds (because these would reduce grants) and instead rely on state support.
There has been some criticism that the elite boarding schools get too much money because their kids come from affluent families in country areas that are in general poor and get a low SES rank from the ABS. (There is a separate issue of whether the overall subsidy rate for the schools with upper SES rankings is too high, but if so that is not a fault with the underlying model.)
The only real alternative within this broad concept is to use ATO individualised income data, which would be much more administratively complex, raises privacy issues (schools can see ABS data, but should not have access to parental income data), and arguably including occupation and education in the index enriches the data, since the kids of parents low on education and occupation indexes are likely to be more difficult to educate, regardless of how much money their parents are declaring to the ATO.
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I suspect this “equity” furphy is going to stink out public debate just as “working families” has. I voted for these coves, but am already screaming “please find another script-writer!” Did anybody catch Gillard the other night on her “higher education revolution?” It was all “mission statments, diversity” the whole vapid nine years.
Either way it seems this SES idea is a first step on the road to vouchers, which has to be a plus.
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Ah – I didn’t quite have my understanding right, but the metric used still has significant potential to distort.
Take for example (let’s say) selective schools like North Sydney Boys/Girls High. Students from these schools literally come from all over the Sydney metropolitan area, so the ranking I assume would be a mish-mash of averages from random census areas across the Sydney metro. In this scenario the ranking provided by the SES formula would surely be so diluted to be practically meaningless?
What about a system whereby the schools annually submitted the TFNs of their students’ parents to the ATO, and the ATO actually then used this information to calculate any income-related “score” based on income? In that way, schools and the education department could remain at an arm’s length from detailed income data.
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Guy – No, I think the North Sydney example shows the benefits of the system. It’s in an affluent area, so it would do poorly in funding on a local geography index, but possibly its students are in fact from relatively poor areas and have greater need than is evident from the school’s surrounds. I don’t see that a diversity of poor areas is a problem, it is just a matter of averaging.
Your ATO proposal would still involve all parents giving schools their TFN – at least in higher education this handing over of the number is tightly controlled by statute, so more sensitive than addresses but not impossible. I am not totally rejecting this as an option, but apart from privacy I see the following faults:
1) If schools cannot know the SES status of parents, they lose an incentive to take kids from poor backgrounds, discouraging the social mixing that the public school lobby claims is good (I don’t disagree that there could be benefits from it, but object to it being done coercively)
2) Individual income measures could produce undesirable anomalies if one or a small number of parents throw out the averages with exceptionally high incomes; the SES method which apparently averages about 250 households in urban areas reduces this.
3) As noted above, the current index includes education and occupation of parents, which compared to ATO income-only data are likely to be more powerful indicators of educational as opposed to financial need (parent’s occupation is a better predictor of university entry than parent’s income, for example).
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Hmm… well I agree with your point about North Sydney, but I’m still somewhat sceptical that the matter of averaging you mention does not have a distorting effect in some cases.
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Andrew, you privatisers consistently just ignore, not answer, the old argument that “services that are only for the poor will soon be poor services”. It’s an argument that experience bears out as true, because it is elementary positive political economy . Means-tested Medicare would soon descend to the same state as means-tested dental care.
For a few things – early (at least) education is IMO one of them – the equity and long run efficiency (ie a lot of wasted talent) effects of poor services are so adverse that they simply swamp the sort of short-run equity (ie “choice”) and allocative efficiency benefits you claim.
This is a point that was well understood when compulsory education was introduced. Indeed, free universal education was an essential component of the “melting pot” idea of absorbing migration in both the US and Australia.
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DD – But one thing that surprises me about the public school lobby is that the most common defence of public schooling – the education of the poor – actually highlights the worst failure of public education. Under my system, all poor schools would get their funding increased and there would be more competition in the school sector. I fail to see how combining these two can make the poor worse off than now.
As for the melting pot idea, discussed indirectly in several recent posts, where is the evidence that the US is more ethnically and religously cohesive than Australia, which has a much higher share of private schooling? While I can see the theory behind this argument (while valuing ‘social cohesion’ much less than others), the empirical evidence is lacking.
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Well it rather depends on your counterfactual, doesn’t it? My fear is that a highly privatised and segregated school system would fail the children of the poor rather more than our current system, which is itself hardly a model of integration. You should read Dickens and imagine many thousands of Dotheboys Halls.
As for the US, the big, big failure there is the way public schools are funded locally from property taxes – that’s why ghettos get lousy schools and Beverley Hills High is so well funded. A voucher system there would be even more dependent on local funding.
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I’ll offer a 3rd opinion on the last two comments, being that there is in fact very little relationship between the distribution of private/public schools and the efficacy of the school system as a whole (and hence I don’t believe a comparison between Medicare versus public schooling is worthwhile — especially because the public healthcare system in Australia is pretty reasonable). Therefore a higher ratio of kids going to private schools won’t disadvantage public schools much but nor will it do much to improve private schools either. Try correlating any of the results of the big international surveys and examine this (the biggest factors are overall dollars and culture). You can have pretty good almost fully public system (e.g., Finland) and pretty good public/private mixes (e.g., Australia).
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“arguably including occupation and education in the index enriches the data”
Well, I certainly can remember filling out large questionnaires for my daughter’s schools (at the behest of the Federal Government, we were told), which collected plenty of information that would allow a fair assessment of our household’s SES. It seems to me that this data is already collected and stored somewhere, presumably with school identifier attached.
SES assessment from parental education and occupation is, in my view, likely to be more reliable than ATO (or any other) data on income, which like postcode will give rise to a number of ‘false negatives’ (ie rich families identifed as poor).
In any case, income is to some extent a result of people’s choices and not all that easy to compare across households. Just take the case of two households with family taxable income of $80,000. One is a middle class single-income family in a ‘nice’ suburbs, where Mum (or if you prefer Dad) has given up paid work in order, among other things, to devote herself to improving her children’s educational outcomes. The other is a dual-income working class household in an outer suburban location.
To me the problem with treating both these households the same on the basis of income is not much different to the problem of treating the grazier’s and the farmhand’s children the same on the basis of postcode.
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“… the public healthcare system in Australia is pretty reasonable”
Indeed it is, conrad – because it’s not means tested. That’s my point.
The state of the poor’s teeth in Australia, on the other hand …
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On the narrower issue of funding by average parental SES status, I tend to agree with backroom girl. Reported current income is a very unreliable measure of economic wellbeing, let alone any wider needs the kids have. And aggregating in this way (rather than looking at the status of each kid and summing the funding needs) is also too crude.
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bg – When did you have to fill all that information in? I know there was an evaluation process prior to the SES model being introduced, but my understanding was that in the long-term the census was to be used to be minimally intrusive on parents (we would have needed an exercise like the one you mention to ensure the census produced a reasonable proxy SES rating).
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We filled in a set of forms in 2006 and/or 2007, which together will the usual questions about next of kin and who else to contact in an emergency, collected data on parental education and occupation (and other things that also might be useful such as country of birth and first languages, etc though I didn’t pay all that much attention to all of that). This was for a government high school in inner Melbourne.
I think I remember that the form said that the education and occupation questions were being asked on behalf of the Federal Government, but I could be wrong about that.
But in the end, I guess the point I’m making is that if you want to target parental SES it is best to target that directly (and as accurately as possible), because when people see wealthy private schools getting heaps of extra money under some ‘proxy’ SES formula they just know that something smells.
And while the postcode-based formula probably works OK for schools with a large proportion of truly low-SES kids, it can also go astray in that area. I remember a story in Canberra a few years back, when a new ‘alternative’ school, many of whose parents were generally quite low income, got a pretty poor funding deal under the current formula
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These privacy issues can be handled. Residents in aged care centres pay fees which vary according to their income. The income information is strictly between the resident and Centrelink. The aged care centre never finds out.
The tax office knows the parents’ income. The education department just has to ask the tax office, what is the median income of the following people? and then work out how much each school gets. Using median income takes care of anomalies like a few extremely high incomes.
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bg – Thanks for that info. I was not aware of this being carried out for government schools – I have only seen SES information extrapolated from ABS data sets that ask questions about school attended.
Spiros – Privacy concerns can be dealt with, though in this case where we want schools to recruit from low-income households privacy is a disadvantage. The bigger problem remains that while income may measure capacity to pay, it does not measure likely costs.
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If people with low incomes want their issue to attend a private school, presumably with financial assistance like a scholarship from the school, then they will just have to disclose their income to the school.
It’s not that big a deal, and besides, beggars can’t be choosers.
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DD,
The public health care system for hospitals is pretty much means tested — who would use it when they have private health insurance that they essentially have to have after a certain income (I never have in my life time — even though I presume I could have waited for the public version when I needed it)? In addition, the place where we don’t usually use private health services even if insured (or at least the government pays for it making it defacto public) is for GPs, and guess what type of doctor is becoming more and more difficult to see?
In any case, this is another example where I wouldn’t mind seeing the data — I have no idea about it (unlike schools) — but given that people complain about public hospitals in almost every country (including in places where they are mainly public), its not clear to me that only public system are neccesarily better. I know people always point to the US here, but thats only a single country.
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Isn’t the medicare levy backdoor means testing? You get penalised via the tax system for not having health insurance if you can afford it. I don’t think your argument holds water DD.
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Well, IMO the medicare levy surcharge, along with the health insurance subsidy, will indeed weaken Medicare in the long run, and probably already has. But it’s a very weak means test – I have health insurance, but I still claim Medicare rebates for most services as well as the health insurance cover (I won’t comment on the obvious administrative inefficiency of this two-track system …).
BTW conrad, plenty of people with health insurance choose to go public for a variety of reasons – the big public hospitals are often simply better set up for really serious (read “expensive and unprofitable”) illnesses, and you don’t face most out-of-pocket expenses.
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